Historic Doctors Hospital slated for auction

By Nancy Lo

The former Doctors Hospital of Hyde Park on 5800 South Stony Island Avenue is a decrepit shadow of what it once was. Now, with windows and doors boarded up, the Doctors Hospital is up for auction at the Daley Center on June 28. Leslie Hairston, alderman of the Fifth Ward, confirmed the new June foreclosure auction date, which follows a canceled April 28 auction.

“There has been great interest,” Hairston said. “I don’t know the number…but I did hear that there are people out of state that are interested.”

Before the new date was set, Hank Webber, vice president of Community and Government Affairs, said that “reuse of the property is something the community strongly supports…If and when it is for sale the University will evaluate options.” Webber could not be reached for further comment since the announcement of the new auction.

Although there has been immense interest in the property, the University of Chicago Hospitals (UCH) is not considering the property. “It is unlikely that such an old building would be suited to modern clinical practice,” said John Easton, spokesperson for the UCH. “The nature of health care delivery and codes for clinical space has changed a lot since that building has gone up.”

In light of the new auction date, various preservation groups and historical societies have been keeping an eye on the proceedings. “We’ve been monitoring it and are hopeful that it will be preserved,” said Jonathan Fine, president of Preservation Chicago. “It’s a well made, well designed building that lends itself more to renovation than demolition. Any creative architect can use it for numerous projects: housing, rental, office space, residential.”

According to the City of Chicago’s Chicago Historic Resources Survey, Schmidt, Garden, and Martin designed the hospital in colonial revival style with Georgian details. Completed in 1995, the survey evaluated 17,371 different buildings constructed prior to 1940 for their historical and architectural significance and then color-coded their results. The former Doctors Hospital was labeled orange because it possesses “some architectural feature or historical association that made them potentially significant in the context of the surrounding community.”

“We are interested in the building both because it has architectural significance and because it figures prominently in Hyde Park’s history, the history of the Illinois Central Railroad, and the history of modern health care,” said Jack Spicer, board member of the Hyde Park Historical Society (HPHS) and chair of the Preservation Committee. He added that for these reasons, the HPHS plans to recommend to the city to make the building a Chicago landmark.

Part of the history includes a dark episode of bankruptcy and Medicare/Medicaid fraud. James Desnick, M.D. bought the property in 1992 and became the chairman and primary shareholder. In court papers, employees told how cash and cigarettes were passed out to the homeless, drunks, and addicts who agreed to be admitted for what was often no medical reason. Unnecessary medical tests, hospital stays, and procedures were billed to Medicare and Medicaid. Under investigation and fined twice in two years for health care fraud, the Doctors Hospital declared Chapter 11 bankruptcy and closed in April of 2000.

To avoid a federal civil suit, Desnick agreed to pay back $14 million to the state and federal government for over-billing Medicare and Medicaid. He has not been accused of criminal wrongdoing. However, Robert Krasnow Sr., former vice president of marketing for the Doctors Hospital, pleaded guilty in January 2001 and was sentenced to 37 months in prison and fined $5 million for racketeering and tax evasion. Monty McClellan, M.D. was sentenced to two years in prison and fined $500,000 for fraud and tax charges. Today, McClellan is under suspension for a 2004 felony conviction for mail fraud in U.S. District Court.

Desnick and his firm, Desnick Eye Center, have been involved in a number of malpractice suits and in other civil suits including one with ABC News. He has also been involved in a federal lawsuit in Florida for a Medicare fraud scheme in which hospitals, nursing homes, and doctors received kickbacks in return for patient referrals.

According to the Illinois Department of Financial and Professional Regulation, Desnick was fined $100,000 in 1995 and put on probation until April 2000 for allegedly violating a provision of the Medical Practice Act. As part of the agreement, he agreed not to practice medicine for the first two years of probation. Currently, Desnick resides in Highland Park and has an active medical license.

As auction day approaches, the former Doctors Hospital’s lawns are mowed, its lights turned on at night, and its security firm fees paid by Draper and Kramer, receivers for the property. Mel Jackson from Draper and Kramer’s Residential Management said that the firm does not own the property but maintains the property by foreclosure court order as it is being turned back to the lenders.

The law firm in charge of the foreclosure sale is Sonnenschein, Nath & Rosenthal LLP, but partner Robert Richards, per client request, was unable to comment on aspects of the public sale. He did note that the auction would be a sheriff’s sale and that LaSalle National Bank is acting as trustee in the proceedings.

Beth Johnson, member of the Preservation Committee at HPHS, graduate student at the Art Institute of Chicago, and author of Proposal for Adaptive Reuse of Illinois Central Community Hospital explained the various uses potential buyers could have with the property. “I’m proposing for a mixed-use building…my proposal is to keep the upper floors primarily residential such as more affording housing,” she said. “Lower floors in the south end are a nice area to set up a much needed daycare for infants or after-school kids.” She also noted that the area’s proximity to museums and parks, its ample space in the back for an on-site playground, and the structure of the former emergency room as a section away from traffic would make it easily convertible to a daycare facility. Other space on the lower floors could be devoted to offices, businesses, and restaurants.

“Preservation for me is to preserve culture in a 3-D fashion. It’s how people lived, how things were built,” Johnson said. “It’s one thing to see something in a photograph—it’s another to go inside and understand the space and how it affected life.”