The former employees of the now-shuttered Westlake Hospital in Melrose Park have filed a federal class action lawsuit against the hospital’s owner Pipeline Health that could be felt in Oak Park.
In the lawsuit filed Sept. 11 in U.S. District Court in the Northern District of Illinois, the employees claim that Pipeline violated the Federal Worker Adjustment and Retraining Notification Act by not providing them with at least 60 days’ advance notice of termination and that Pipeline created a shell company “for the sole purpose of acquiring — and then immediately closing — Westlake Hospital” as part of a strategy developed to benefit Pipeline’s investors.
This most recent lawsuit is the latest in a string of legal actions that have been taken since Pipeline, which is based in California, purchased Westlake Hospital along with two other Chicago-area hospitals, Weiss Memorial in Chicago and West Suburban Medical Center in Oak Park, in January for $70 million.
In order to finalize the purchase, Pipeline officials told the Illinois Hospital Facilities and Services Review Board, which regulates the sale and purchase of hospitals in the state, and local elected officials like Melrose Park Mayor Ron Serpico and state Rep. Emanuel “Chris” Welch (D-7th) that they would keep Westlake open for at least two years and maintain the hospital’s Charity Care, which allows uninsured and under-insured patients the ability to access affordable medical care.
Pipeline, however, had plans to close Westlake all along, the lawsuit states. And the company created two shell companies, Pipeline-Westlake and SRC Hospital Investments II LLC, in order to carry out its intentions while getting around state regulations. Pipeline closed Westlake in August.
Those shell companies, the lawsuit states, had no authority or independence and were controlled by Pipeline Health President Nicholas Orzano and Pipeline Health CEO Jim Edwards, who took turns as CEO of SRC, which is the same parent company used to purchase Weiss and West Suburban.
“Pipeline health is playing the exact same shell game with its two other Illinois hospitals,” the lawsuit claims.
“Pipeline Health’s flagrant manipulation of the system endangers not only the former patients and employees of Westlake Hospital, but also everyone in the Chicago and Oak Park communities, especially those that currently rely on Weiss and West Suburban for health care and employment,” the lawsuit states. “Unlike non-profit hospitals, Weiss and West Suburban are owned by a for-profit investment firm that cares about one thing and one thing only: money.”
As with Westlake, the lawsuit claims, Pipeline structured the Weiss and West Suburban hospital entities as “disposable objects that can be thrown away — or forced into Chapter 7 liquidation — as soon as they are no longer profitable or profitable enough for Pipeline Health’s investors.”
Officials with Pipeline Health could not be reached for comment. In the past, they have denied many of the allegations that have been brought forth in a string of lawsuits and injunctions that have been filed by various entities, including the village of Melrose Park, since January.
Pipeline officials have repeatedly explained that they closed Westlake, because it was losing money and threatening the financial viability of Weiss and West Suburban.
“The competitive healthcare environment in Illinois along with a decrease in patient demand and the rapidly changing role of hospitals in healthcare delivery have resulted in an unsustainable financial strain on Westlake for many years,” Pipeline Health officials explained in a statement in February.
Dr. Eric Whitaker, one of Pipeline’s principals, said in February that pouring more money into Westlake “really would have endangered the other two hospitals we had as part of the purchase.”
In March, the village of Melrose Park filed a lawsuit against Pipeline, accusing the company along with other investors in the deal of “committing fraud and civil conspiracy in connection with their purchase of Westlake Hospital.” In addition, a court upheld a preliminary injunction that prohibited Pipeline from closing Westlake Hospital.
In August, Pipeline-Westlake filed for Chapter 7 bankruptcy in the United States Bankruptcy Court for the District of Delaware. The case was eventually transferred to the United States Bankruptcy Court for the Northern District of Illinois, where it is pending.
On Aug. 19, a Chapter 7 bankruptcy trustee notified 549 Westlake Hospital employees that they were terminated, according to the lawsuit, which specifically names three employees — two nurses and a unit secretary — as plaintiffs suing on behalf of other workers.
The plaintiffs were “blindsided” by the announcement that the hospital was closing and that they were terminated, the lawsuit states.
“Pipeline Health is an investment firm that made a decision to decimate the Westlake Hospital community in order to make more money for its investors,” Ari Scharg, the attorney for the former employees, stated in an email last week.
CONTACT: michael@oakpark.com
