State agrees Mercy Cedar Rapids doesn’t need certificate for North Liberty location

NORTH LIBERTY — Without discussion or debate, the State Health Facilities Council on Tuesday unanimously agreed that Mercy Medical Center Cedar Rapids doesn’t require a certificate of need to establish another off-site location in North Liberty.

Mercy representatives urged council members to reach that conclusion by laying out several reasons their project doesn’t trigger the need for a certificate — which requires a lengthy application, public review, and council vote before health care providers can develop new or changed institutional health services or spend more than $1.5 million annually on a capital expense.

“Mercy is not proposing to construct a new hospital, because the new off-site department will not provide the full complement of hospital services that would trigger the need for a separate hospital license,” according to one example given in a Mercy “letter of nonreviewability” submitted to the council June 25.

“Mercy is not proposing to construct an ambulatory surgical center because the surgery services offered in North Liberty will be operated under the license and Medicare provider number of the hospital in Cedar Rapids.”

Although Mercy Cedar Rapids didn’t offer details in its letter of where specifically it intends to establish the remote North Liberty location, officials disclosed plans to offer inpatient and outpatient hospital services in the growing community of 21,000 by leasing space from a “to-be formed real estate entity” that will own the building.

That arrangement will keep the Mercy project from topping an annual cost of $1.5 million — the threshold for capital health care-related expenses, donations, or lease payments triggering a certificate of need.

“The total cost of the first-year lease payment and other associated costs is approximately $1,499,000, including $1,200,000 for the lease and all pass-throughs and $299,000 for furnishings and equipment,” according to Mercy’s June letter. “This is below the $1.5 million threshold for reviewability.”

When the capital expense issue was raised during Tuesday’s State Health Facilities Council meeting, a staffer suggested Mercy’s annual North Liberty expenses now are anticipated to be a bit lower — at $1,480,000 — giving the hospital a bit more cushion.

“Since the threshold for review is $1.5 million, and the project is relatively close to that threshold, if the project increases in cost, Mercy Cedar Rapids will need to go through the certificate of need application process,” council administrator Venus Vendoures-Walsh said.

In arguing its exception from the certificate process, Mercy officials — who did not speak during Tuesday’s meeting — in their letter committed the new off-site North Liberty department “will be constructed in compliance with hospital licensing standards, will be licensed as part of the hospital, and will operate under the hospital’s existing Medicare provider number.”

“The location will be fully integrated into the hospital’s operations and will operate under the hospital’s existing board of trustees,” according to the letter, adding, “The project will not involve the addition of any new services or additional beds.”

In a statement released Tuesday, Mercy said its planned North Liberty expansion will “enhance and complement its existing primary care and urgent care clinics.” The new location also will support growth of MercyCare North Liberty, an existing family practice clinic, the hospital said.

Citing rules under the Centers for Medicare and Medicaid Services and prior interpretations of those rules by the Iowa Department of Inspections, Appeals, and Licensing, Mercy representatives in their letter said a hospital can extend its license to an off-campus site — without needing certificate of need approval — so long as it’s within 35 miles of the main hospital.

Without disclosing its planned site, Mercy’s letter said it will sit about 18 miles from the hospital’s 454-bed main campus in Cedar Rapids — adding to a mix of development morphing North Liberty into a health care hub.

A new Steindler ambulatory surgery center is being built just northeast of the I-380 and Forevergreen Road interchange in North Liberty — about 19 miles from Mercy Cedar Rapids. And just east of that along Forevergreen Road, University of Iowa Health Care is building a $525.6 million hospital campus, about 21 miles from Mercy Cedar Rapids.

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The UIHC and Steindler projects are expected to debut in 2025 — with both featuring orthopedic care.

Mercy didn’t provide a timeline for its North Liberty project or information on what services it might provide, but officials promised it won’t result in the deletion or relocation of any services from Cedar Rapids.

“Mercy will continue to provide all health services it currently provides at its existing hospital facility in Cedar Rapids, including inpatient and outpatient hospital services,” according to the letter. “Mercy’s offering of health services in Cedar Rapids will remain unchanged.”

Even if it should move beds or services from Cedar Rapids to North Liberty, that wouldn’t count as “relocation” under Iowa law — according to Mercy — because the law defines facility as being separately licensed.

“All services and beds (regardless of location) will be licensed under the main Hospital in Cedar Rapids,” according to Mercy’s request.

Health care hub

Other health care-related capital projects the state previously exempt from its certificate of need process include UIHC’s 2012 Iowa River Landing expansion in Coralville and Mercy Medical Center Des Moines’ addition of its West Des Moines hospital.

News of Mercy Cedar Rapids’ extension into Johnson County comes four years after UIHC first went to the State Health Facilities Council seeking a certificate of need to build in North Liberty.

In response to that first application, a throng of community providers objected — speaking at length during a public meeting about ways in which the university’s project could harm community hospitals, including pulling away patients and workers.

Mercy Iowa City, at that time, said approval of the UIHC endeavor could drive it out of business, and council members denied the application. A short time later, the university returned to the state with a revised application that removed all mention of orthopedics and focused on its ability to treat the sickest and most complex patients.

That second application achieved state support, clearing the way for the university to break ground days later. Meanwhile, Mercy Iowa City continued to struggle, filing for Chapter 11 bankruptcy in August — eventually culminating in a UIHC takeover through its $28 million bankruptcy auction bid.

The university took official ownership of the former Mercy Iowa City campus in January, rebranding it as the UIHC Medical Center Downtown. In addition to its new campuses in downtown Iowa City and North Liberty, the university is planning a new $1 billion inpatient tower on its main campus by Kinnick Stadium.

In its Tuesday statement about the North Liberty expansion, Mercy Cedar Rapids said it is “dedicated to providing quality, lower-cost community-based healthcare options.”

“It is crucial for community hospitals like Mercy to continue growing and adapting to what patients want, to support the advancement of our faith-based mission,” Dr. Timothy Quinn, Mercy president and CEO, said in the statement.

Vanessa Miller covers higher education for The Gazette.

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