University of Iowa hospitals raise rates again 6%

IOWA CITY — As it has done annually for years, the Board of Regents last week approved a University of Iowa Hospitals and Clinics across-the-board 6-percent rate increase in health care services starting next month — the highest allowed in many UIHC contracts with insurance providers.

“Given UIHC’s low charge levels, it would be reasonable to increase charges more than 6 percent,” according to a UI request. “However, given the cap on charge increases in many of its contracts, it is most prudent to cap the increase proposal to 6 percent.”

Compared with peer academic institutions, officials told the board, UIHC rates are “relatively low.” UI peer institutions include the universities of Illinois, Michigan, Minnesota and Wisconsin — all of which have affiliated hospitals and health care systems.

“UIHC charges are below the 50th percentile of academic medical centers,” according to the request.

A comparison tool produced by the Iowa Hospital Association, however, shows UIHC — the state’s only academic medical center — is more expensive than most in Iowa for many services.

For a typical vaginal childbirth in 2022, for example, UIHC charged on average $18,428 — above the $11,468 at Mercy Medical Center in Cedar Rapids; $10,450 at Mercy Hospital Iowa City; and $8,459 at UnityPoint Health St. Luke’s Hospital, the comparison shows.

For a “moderately severe” vaginal childbirth, UIHC charged $22,179 on average, about double the $11,397 at Mercy Iowa City, $9,366 at St. Luke’s and $12,872 at Mercy Cedar Rapids.

UIHC’s 6-percent rate increase has become an annual occurrence, and many patients don’t feel a direct impact due to insurance coverage or payers like Medicare or Medicaid absorbing the hikes. Some patients who pay out of pocket will feel the increase, starting in the new budget year that takes effect July 1, but UIHC has a charity care program protecting the “medically indigent” from being impacted.

That program discounts charges using a sliding scale based on the federal poverty level, which the government sets based on the amount of income a family needs for food, clothes, shelter and other necessities. The UIHC discount program starts at 350 percent of the poverty level — which this year amounts to $122,990 for a family of five.

Increasing its rates for service could help UIHC keep its revenue above its rising operating expenses — which through April had topped $2 billion, 9.2 percent above last year. Compared to a decade ago through April 2013, when operating expenses were at $92.6 million, the university has seen its budget expand more than 2,000 percent.

Where its operating margin in 2013 was 1.8 percent and its net margin was 7 percent, both those have grown today to 13 percent and 14 percent respectively — thanks to a year-old partnership with the state’s Iowa Medicaid Enterprise to participate in a federal program providing supplemental funding for UIHC’s role as Iowa’s “safety net hospital and one of the largest providers of Medicaid services in Iowa.”

Increasing access through growth

Revenue from that program — which amounted to $270 million through April this budget year and reached nearly $305 million at the end of the 2022 budget year — will go toward increasing access to UIHC services.

“A critical component of increasing access includes expanding and modernizing UI Health Care facilities,” UIHC communications officials said at the collaboration’s inception last year.

The university in recent months has embarked on more than $1 billion in construction projects across its growing campuses — including a $525.6 million hospital in North Liberty, a $95 million two-floor expansion of its existing inpatient tower; and a $37 million renovation and expansion of its emergency department.

The university last week received Board of Regents approval to spend $249 million on a 263,000-square-foot “Health Sciences Academic Building” — pulling resources from, among other things, UIHC revenue.

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And the university also is moving ahead with plans to build a 842,000-gross-square-foot inpatient tower on its main campus. Officials haven’t yet shared a full budget for that project, but UIHC plans to spend $620.9 million between 2024 and 2029 — excluding spending to date and after 2029.

A request for qualifications for “architectural health care design services” on the new tower — issued June 8 — reports the university has chosen Neumann Monson Architects as its architect-of-record. A health care architect then will serve as a consultant for major medical components like operating rooms and radiology.

The proposed new tower — according to that request — will include new main hospital entrances; multiple floors of 48 inpatient beds each; a tunnel connecting it to the Stead Family Children’s Hospital; a skywalk to parking; dining and retail space; and “full-glass views to the surrounding Iowa landscape, as well as into Kinnick Stadium.”

Vanessa Miller covers higher education for The Gazette.

Comments: (319) 339-3158; vanessa.miller@thegazette.com