O’Fallon clears way for St. Elizabeth’s expansion. What’s next before work can begin?

On the heels of St. Elizabeth’s Hospital disclosing an expansion project for $50 million last week, the O’Fallon City Council has cleared a path by amending its redevelopment agreement with the Hospital Sisters Health System.

“We are in the early stages of the planning process for additional resources to complement the services St. Elizabeth Hospital and our physicians provide to O’Fallon and surrounding communities,” an HSHS spokesman said this week.

St. Elizabeth’s said this will be a cost-effective way to address significant overutilization and unmet community needs. HSHS opened the 120-acre medical campus in November 2017 and located it near the Interstate 64 interchange at Green Mount Road.

“Today, 40% of patients within our service area travel to St. Louis for healthcare services. A majority say they would elect to receive their healthcare in Illinois if access to specialized care was improved,” St. Elizabeth’s President Chris Klay said.

Citing a need for expanded health care availability, Klay presented plans for a new 70,000-square-foot medical office building, with construction likely in 2025 and completion in 2026.

It would include a new Ambulatory Surgical Treatment Center with four operating rooms and two procedure rooms.

Klay said the plan is dependent upon approval from the Illinois Health Facilities and Services Review Board. St. Elizabeth’s has submitted a certificate of need application for authorization, and the board is expected to act on the request Jan. 28, 2025.

“We are confident the Illinois Health Facilities Review Board will review our application and agree that adding an outpatient surgical center would significantly benefit our patients by improving access to high-quality surgical services from their preferred health system much closer to home,” a St. Elizabeth’s spokesman noted.

“The region presently has a shortage of available medical office building space to meet the demand,” Klay said.

The O’Fallon council unanimously approved a resolution at their meeting Monday, Oct. 7, which amended the original redevelopment agreement to extend the timeline until Dec. 31, 2026.

City Administrator Walter Denton explained that the resolution is the only action the city must take to advance the project. The proposal does not need to go through the Planning Commission or the council again. But the hospital will have to apply for building permits and other such steps the city requires for new construction.

Denton noted that the proposed resolution does not change or extend the Green Mount Medical Campus TIF District.

“The construction of the medical campus has far exceeded the minimum requirements to pay for the infrastructure and has been an ideal example of public-private partnerships using Tax Increment Financing,” he said.

When O’Fallon partnered with the Hospital Sisters Health System in 2011 to build a new St. Elizabeth’s Hospital, moving the operation from Belleville, one of the challenges was the existence of abandoned coal mines under the property.

Therefore, a Tax Increment Financing District was created to provide a funding source to remediate the mines underneath, reconstruct Green Mount Road, and extend major utilities to the hospital before construction began, Denton explained.

“The city agreed to issue bonds to pay the upfront cost of the infrastructure improvements with the intention of being reimbursed by TIF revenue,” Denton said.

The TIF Redevelopment Agreement between the city and St. Elizabeth’s Hospital includes timelines for the hospital to build taxable medical office space so the city can pay the bonds and the TIF can generate an increment to pay for TIF-eligible expenses, Denton said.

“While the medical campus has been successful and a benefit to the community, the hospital has not built the amount of taxable property required in the Redevelopment Agreement. It allows the mayor to grant a one-year extension, which he did last year, and any further extension requires city council approval,” Denton said.

The expansion project will create additional taxable property for the TIF District, Denton said.

Denton said that in the planning stages, the hospital thought it would build 50,000 square feet, but when they realized the need, that was expanded to 135,000 square feet.

“They accelerated their schedule by five years because of the need. The city is not out any money – it’s all positive,” Denton told aldermen Monday.

Klay said many providers – spanning general surgery, urology, neurosurgery, otolaryngology, gynecology, gastrointestinal and orthopedic specialties – have asked St. Elizabeth’s for improved operating room access to meet the needs of their patients. This will help with time efficiency and being cost-effective as outpatients.

Klay also noted that large neurosurgery, urology, podiatry, and pediatric physician groups are asking for new or additional space on St. Elizabeth’s campus, including Cardinal Glennon and Urology and Neurology of St. Louis, he cited as examples.

Klay stressed that the patient referrals for the surgical center will come from St. Elizabeth’s and no other facilities. He also said that commitment letters from tenants for the office building will be new providers to the region and from existing ones who want to expand.