CHICAGO (CN) – A Chicago suburb claims in court that a group of private equity investors lied to it about keeping an area hospital serving the community’s most vulnerable patients open to push their purchase of the facility through.
Pipeline Health System, a California-based health care network, purchased three Chicagoland hospitals for $70 million in January from Texas-based Tenet Healthcare, including Westlake Hospital in the village of Melrose Park, Illinois.
TWG Partners, a company owned by former President Barack Obama’s friend Eric Whitaker, was also involved in the deal. Whitaker joined Pipeline full-time after the purchase.
According to a lawsuit Melrose Park filed Thursday in Cook County Circuit Court, the investors claimed in an ownership change application submitted to the Illinois Health Facilities and Services Review Board that they would keep Westlake open with no changes to its services.
Whitaker also allegedly made comments in public and to news sources about the investors’ intentions of keeping the hospital running and improving its services for the community.
Melrose Park, represented by attorney Ari Scharg with the Chicago firm Edelson, claims the group of investors even requested that a redevelopment agreement with the hospital to help with maintenance projects be assigned to them, specifically promising Mayor Ronald Serpico that Westlake would remain open.
“Just two weeks after the transaction was consummated, the defendants backtracked on all of their promises and announced that they intended to close down Westlake by June 2019,” the lawsuit states.
This was their plan all along, according to the village.
“Defendants jointly planned to acquire Westlake, shutter the hospital and sell off the assets for profit. In order to accomplish this scheme, defendants lied to [Melrose Park], the review board and members of the community about their true intentions for Westlake, to prevent anyone from interfering,” the 23-page complaint states.
Melrose Park says Westlake “plays a critical role in the provision of medical services to community members,” and is the only area hospital that provides obstetrics, long-term psychiatric care and substance abuse treatment. This is especially important for low-income residents, the village argues.
The “safety net” hospital, which employees over 600 people, provided free medical care to over 2,500 people between 2015 and 2018, according to the complaint.
“Defendants knew that their fraudulent scheme would harm and injure the village of Melrose Park, its residents, hundreds of Westlake employees, and the tens of thousands of patients who rely on the hospital for medical care and services,” the lawsuit states.
According to the Chicago Tribune, Pipeline said it would not consider selling the hospital as the company would lose too much money in the process. Services are planned to be consolidated with West Suburban Hospital in nearby Oak Park.
“As we looked at the financials, the losses had accelerated tremendously and it was beyond what we had projected,” Whitaker told the Tribune. “To the extent that we would have to pour a lot of capital into Westlake, it really would have endangered the other two hospitals we had as part of the purchase.”
Melrose Park argues in its lawsuit that the reasons listed in the investors’ application to close the hospital, such as additional operational costs and the hospital losing money over the last few years, were facts they knew from the start.
The village is suing Pipeline and the other investment companies for fraudulent misrepresentation, civil conspiracy and public nuisance, among other counts.
Pipeline, which also owns four hospitals in Los Angeles and one in Dallas, said in a statement that Melrose Park’s lawsuit is “defamatory and false.”
“Pipeline Health’s plans are to invest in the patients, not buildings. As will be discussed in the regulatory process, the proper forum for this debate, Westlake Hospital has been deprived of state funding for years, is losing millions of dollars each month and draining resources from primary care as well as from West Suburban and Weiss Hospitals,” the company said.