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Westlake Hospital owners file bankruptcy, put hold on Melrose Park lawsuits

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By Jonathan Bilyk | Aug 8, 2019

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Faced with a possible court order forcing them to keep open a hospital they claim is hemorrhaging money, the owners of Melrose Park’s Westlake Hospital have asked a federal bankruptcy court to take oversight of the owners’ long-running efforts to wind down operations at the hospital, and take it out from under the Cook County courts, for now.

On Aug. 6, the corporate entity known as Westlake Property Holdings LLC filed for Chapter 7 bankruptcy protection in Delaware federal bankruptcy court. The corporation, which holds the assets and carries the liabilities for Westlake Hospital, is part of a group of such entities established and held by Pipeline Health to operate its various hospitals and other health care facilities.

The bankruptcy petition was followed by related filings in Cook County Circuit Court, informing the judges hearing litigation related to Westlake Hospital of the bankruptcy filing, which Pipeline noted, should pause the attempt by the village of Melrose Park and the Cook County State’s Attorney’s Office to use the courts to force Pipeline to continue operating Westlake.

The bankruptcy filing would not affect Pipeline Health overall, or any of its other hospitals.

As part of the filing, Pipeline asked the federal bankruptcy judge to appoint a trustee to take oversight of operations at Westlake, until at least Aug. 13. At that point, the trustee would be empowered to decide whether to continue operations at the hospital for a time or begin the process of closing the hospital. That process would include transferring the patients remaining at the hospital, ensuring staff are paid and securing the hospital’s drugs and medical records.

“… The Debtors (Pipeline) had no choice but to seek Chapter 7 bankruptcy relief,” Pipeline wrote in their motion requesting the appointment of the trustee. “Absent such relief, the Debtors would be required to stay open, but financially unable to pay their obligations to their creditors, including their employees.

“The Hospital believed that, under such conditions, it would only be a matter of time until patient safety was compromised.”

According to the bankruptcy petition, the hospital’s financials are in shambles, with assets of $1 million to $10 million, balanced against liabilities of $10 million to $50 million. Further, in the bankruptcy petition and accompanying filings, Pipeline said Westlake Hospital continues to lose $2.5 million per month or more, as only 20% of the hospital’s beds were full.

Pipeline said the hospital’s finances have taken several significant blows over recent months, which it blamed on reduced funding from the state and federal governments.

Pipeline said it had sought a buyer for the hospital, but had failed to attract a financially qualified suitor.

“The Debtors were contacted by a number of parties who said that they were interested in potentially acquiring the Hospital, however on Aug. 1, the Debtors were informed by the last of the interested parties that he could not pursue the transaction because of a lack of financing.”

On Aug. 6, the bankruptcy court appointed a trustee, who was empowered to transfer patients to other hospitals, “retain employees as long as necessary and/or terminate employees in accordance with the Chapter 7 Trustee’s business judgment,” secure the hospital and its holdings and “terminate such utilities as the Chapter 7 Trustee determines are no longer necessary.”

For months, the hospital’s owners and Melrose Park’s village government have been embroiled in a protracted court fight over the fate of the hospital.

Melrose Park filed suit in Cook County court in March to block Pipeline Health from closing Westlake, asserting Pipeline had broken Illinois law when it moved to close the hospital shortly after acquiring it along with other suburban hospitals in January.

Melrose Park asserts the hospital is essential to public health in the region. The village says the hospital is key to providing access to health care and mental and behavioral health services for low income individuals and families living in and around Melrose Park. The village claims Pipeline promised to keep the hospital open and functioning at prior service levels.

To aid its legal fight, the village hired lawyers from the firm of Edelson P.C., of Chicago. The village has agreed to pay the lawyers from any revenue generated by a tax increment financing district, which is funded from property taxes paid by the for-profit hospital.

After the village filed suit, Pipeline won approval from the Illinois Health Facilities Services and Review Board to close the hospital. However, Melrose Park and its lawyers from Edelson filed another lawsuit to challenge that action, this time joined by Cook County State’s Attorney Kim Foxx. Among the allegations, the village and Foxx argued the board’s vote should be considered void because two of the board members who voted on the closure request on April 30 had only been appointed to the board by Gov. JB Pritzker, but not approved by the Illinois State Senate.

Seemingly in response to the votes cast by the two would-be Review Board members, Pritzker retracted their appointments.

In Cook County court, a judge granted the injunction requested by the village and the state’s attorney, forcing Pipeline to keep Westlake open, even though Westlake said the hospital was losing millions of dollars a month and could not long continue functioning under such conditions.

In prior rulings, Cook County Circuit Judge Anna M. Loftus has expressed discomfort at the notion of running a hospital through court orders, saying “the judicial system is ill-qualified to run a hospital.”

Opponents of the Westlake closure have not yet responded to the bankruptcy in court. However, in published statements, they blamed Pipeline for Westlake’s ruinous finances and said they intend to use “any and all legal options” to force Pipeline to keep Westlake open.

Pipeline has been represented in Cook County court by the firm of Riley, Safer, Holmes & Cancila, of Chicago, and in the bankruptcy by the firm of Morris James LLP, of Wilmington, Del.

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Organizations in this Story

Edelson, PCMorris James LLPVillage of Melrose ParkU.S. Bankruptcy Court for the District of DelawareRiley, Safer, Holmes & CancilaCircuit Court of Cook CountyPipeline Health Systems

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