Illinois regulators have little power to stop hospital closures. Lawmakers are stepping in.

When West Suburban Medical Center abruptly closed its doors temporarily last month, saying it had run out of cash to pay staff, there was little warning for thousands of patients and hundreds of employees.

Illinois regulators tasked with overseeing hospitals had little power to stop it. They also might not be able to keep open some of the dozens of other safety net hospitals around the state that mostly treat low-income and immigrant communities amid federal changes next year that could drastically reduce how much money medical centers get paid.

But two Democratic state lawmakers are proposing legislation to help the state better prepare. Bills from state Sen. Laura Fine and state Rep. Robyn Gabel would require all hospitals to file plans with the state in case they close or scale back services to make sure patients don’t fall through the cracks. For-profit hospitals owned by investors, like West Suburban, also would have to give the state a deeper look into their finances. Now, that’s largely shielded from the public.

“The state, with legislation like this, is really stepping up to make sure that our hospital system is strong and that people are able to get the care that they need … so we are really ready for whatever happens in the future,” said Fine, who represents the northern suburbs and is sponsoring the Senate bill.

The proposed legislation was filed in February. Fine said she doesn’t know if it would have prevented West Suburban’s closure, “but it would have prepared us for it, and a plan would have been in place once that process started.”

When the Oak Park hospital suddenly closed, several lawmakers called for better state oversight, especially considering the millions of taxpayer dollars hospitals receive to treat patients and pay for operations.

“We do need to have a warning system,” said Democratic state Rep. Norma Hernandez, whose district includes West Suburban and Westlake Hospital, which closed in 2019. “What they’re doing now, it should be illegal because it’s so harmful.”

She recommends tracking public dollars hospitals receive to understand how they’re spent, such as if they’re paying their bills on time.

Dr. Manoj Prasad, West Suburban’s owner and CEO of Resilience Healthcare, said he told state officials for months that he needed support and more money. But he owes more than $100 million to the state and vendors. A financial consultant reviewed the hospital’s finances, but it’s not complete, a state spokeswoman said, alleging the hospital hadn’t provided full transparency into its finances and operations.

Prasad followed the law when he suspended services at West Suburban. He said it’s temporary. He had 30 days to notify the state and local lawmakers after suspending services and explain why. Now he must provide updates every 30 days.

Dr. Linda Rae Murray, a retired local physician, understands how little power the state has to regulate hospitals. She was on the Illinois Health Facilities and Services Review Board, which regulates the health care industry, when Mercy Hospital on the Near South Side planned to shutter during the pandemic, before getting bought for $1. It’s now called Insight Hospital and Medical Center.

The board voted against Mercy’s closure, but had to approve the new owner. All it required was the new owner filling out paperwork correctly. Murray said she was so frustrated by the board’s broader policies and procedures that she left when her term was up.

She understands the frustration over West Suburban’s sudden closure. People have deep ties to their community hospital, and it’s often the biggest employer in the area.

But, Murray said, “I don’t understand how anyone can expect any state facility board or any other function of state government to force a hospital to stay open if, in fact, the hospital is losing money.”

She has an idea for how the state could toughen up: require hospitals to keep reserves for emergencies, like making payroll, and keep a closer eye on the quality of care provided.

Inspectors visited West Suburban several times over patient care issues before the hospital closed. Prasad closed his other hospital, Weiss Memorial in Uptown on Chicago’s North Side, last August.

Bill would make all hospitals develop a ‘financial resolution plan’

Fine’s proposed legislation, which Gabel mirrors in the state House, would require all hospitals licensed by the state to submit a “financial resolution plan” in the event of “material financial distress.”

The plans would include everything from who owns the hospital, to how to safely transfer patients to other hospitals if their owners temporarily suspend services or close. Hospitals would need to identify potential gaps in services they would create, and what would happen to their employees and medical trainees.

Hospitals that don’t comply would be fined no more than $500 a week, or just over $25,000 a year.

For for-profit hospitals, there would be even more requirements: audited financial statements and monthly balance sheets, among other documents, filed with the state every quarter that could provide clues into whether those medical centers are struggling. If they don’t comply, the Illinois Department of Healthcare and Family Services, which oversees Medicaid public health insurance for people who are low-income or have a disability, could cut off funding.

The majority of hospitals in Illinois are nonprofits, according to KFF, a health policy and research organization. Their finances are easier to find than a for-profit, from public tax returns filed with the government, to hospitals posting audited financial statements online.

Prasad said it would be too expensive to file audits each quarter. But he said it’s fair for the state to want to look deeper.

Fine hopes her legislation doesn’t get watered down during negotiations with the Illinois Health and Hospital Association, a powerful lobbyist for almost every hospital in the state and others.

A.J. Wilhelmi, president and CEO of the IHA, said some of the information that would be required is already reported to the state, such as how many licensed beds hospitals have.

“If the goal here is to have a better understanding of hospitals that are struggling so that there can be continuity of care in the event that service lines or hospitals close, let’s have that conversation,” Wilhelmi said. “But I think broadening that scope to the entire hospital community is challenging.”

Spokespeople for HFS and the Illinois public health department did not provide comment about the proposed legislation.

Sun-Times reporter Kaitlin Washburn contributed.

Kristen Schorsch covers public health for WBEZ.