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Mercy Hospital & Medical Center Files For Bankruptcy After Plans To Close Were Blocked By State Board

CHICAGO (CBS) -- Mercy Hospital & Medical Center has filed for Chapter 11 bankruptcy amid its plans to close that have run into objections from the State of Illinois.

The hospital in the Bronzeville neighborhood announced plans to close in July. But in December, the Illinois Health Facilities and Services Review Board voted to rule that could not close.

In a bankruptcy filing issued Wednesday, the boards of directors for the Mercy Health System and Trinity Health said they had previously approved a "transformation plan" in which the hospital would close. As the filing described it, the closure plan "included the discontinuation of inpatient acute care services at Mercy and the wind-down of Mercy as a licensed full-service acute care hospital."

The hospital blamed a decline in patients resulting in an excess inpatient bed capacity, increased competition from local health systems, the movement of care to outpatient settings, and health care needs shifting to outpatient settings.

"Mercy has attempted to effectuate its contemplated clinical transformation plan but has been unable to do so as originally envisioned and management does not anticipate being able to do so in the future," the filing said.

Now, the quality of care at Mercy has been a concern as doctors and other staff are leaving, and operating costs have risen $7 million a month. Thus, the hospital boards have decided a bankruptcy filing is in the hospital's best interests.

In a statement Wednesday evening, Mercy Hospital said the bankruptcy filing follows an "orderly wind-down plan" that has been in place for months. The hospital plans to keep its basic emergency treatment services, diagnostic imaging, and care coordination services going until the opening of a new Mercy Care Center to replace the hospital sometime this year.

Other than basic emergency services, Mercy plans to close on May 31. The hospital closure is also on the agenda for the Illinois Health Facilities and Services Review Board again on March 16, Mercy said.

In December, CBS 2 Investigator Megan Hickey reported that despite the order that Mercy could not close, staff members said plans to do so were still in the works.

Mercy is Chicago's oldest hospital, and doctors and nurses there serve a population that's been especially hard hit by COVID-19. The closest hospital is three miles away.

As CBS 2's Jermont Terry reported, there have been plenty of protests and cries to keep the 285-bed hospital up and running. Back in December, we talked to doctors who said morale was low inside. A veteran doctor at Mercy, Dr. John Cudecki, had been fighting to keep it open.

"There's too many people that rely on the hospital. There's a pandemic," Cudecki said in December. "It's not a good time to close."

State Rep. Lamont Robinson Jr. (D-Chicago) said in December that he and the office of Gov. JB Pritzker had been working on a solution.

"We do have a buyer," Robinson said in December. "We're in conversations with that buyer right now and we're hopeful that we can get this buyer the support they need to acquire the hospital and continue the health care that we need on the South Side of Chicago."

But as to the question of a buyer, a Mercy spokesperson said in December that there were no buyers who had presented themselves as having enough funding to meet the operational and capital needs in the hospital within the timeframe that had been laid out, or the ability to run Mercy as a full-service hospital.

The spokesperson said Mercy owner Trinity Health had conducted a national search and approached 20 potential buyers with the hope that one of them could continue operating Mercy as a full-service hospital, but there was no interest and the plan did not work out.

Meanwhile, the Illinois Health Facilities and Services Review Board said in December despite its decision to block Mercy from closing, there was a possibility that it might have to suspend services anyway.

Bankruptcy attorney Clint Krislov, who is not involved in the case, said Chapter 11 allows Mercy to pivot closer to restructuring – if not closing.

"You can be sure that the state will have something - a plan that they have for how this is going to play out - and it will be interesting, because I know that the state regards this as a facility that needs to stay open for the benefit of the people," Krislov sad. "This is not one of these just run-it-through-the-mill cases. This is a very important thing, and it's going to be essentially on (U.S. Bankruptcy Court) Judge (Timothy A.) Barnes."

Mercy has a hearing set for Friday morning to lay out its plan. But again, the chief executive officer of the hospital said it is still moving forward with shutting down this May.

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