UIHC to have ‘honest conversation about feasibility’ of $1.5B inpatient tower

IOWA CITY — On the heels of a White House memo last week threatening the hundreds of millions in Medicaid-related directed payment revenue University of Iowa Health Care has been getting for the last three years, administrators Wednesday said they could rethink plans for a new $1.5 billion inpatient tower.

“By November, hopefully we'll know more about what's happening with the federal funding and those kinds of things, then we'll have to sit down with this group and have a really honest conversation about the feasibility of the entire project and whether that still fits within our capital plans and affordability,” UIHC Associate Vice President and CEO of the clinical enterprise Brad Haws told regents on Wednesday.

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UIHC officials on Wednesday confirmed the project’s budget target is $1.5 billion — making it the largest facilities project in state history — and that doesn’t include equipment costs.

“$2.2 billion is the number that is targeted when you look at significant equipment costs,” Senior Vice President and University Architect Rod Lehnertz said.

To regent David Barker’s question of whether changes at the federal level could make the new inpatient tower “not feasible,” Haws said, “Correct.”

"The changes in Medicare, Medicaid, the 340B (drug) pricing, all of those have dramatic potential impacts on us,“ Haws said. ”And we're waiting daily to see what the news is out of Washington and wanting to be very cognizant of those as we plan.“

‘Early work’

Wednesday’s discussion about the pending 842,000-square-foot inpatient tower — for which the campus already has spent hundreds of millions in enabling projects — began with a new UIHC request to spend $72.5 million on “early work.”

The health care enterprise already has spent $137.2 million on aspects of the project that didn’t require board approval — including planning, pre-design services, feasibility studies, and construction cost estimating, according to board documents.

And that total doesn’t include all the campus work undertaken to make space for the tower — including a new $17.5 million road, $75 million parking ramp, $249 million academic health sciences building, and a new water tower.

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The $72.5 million “project description and budget” regents are considering this week will cover the first of three phases for the larger project — renovating and expanding entrances, forging a new entrance point for the existing skywalk, and razing the current main entrance canopy, plus other utility and infrastructure.

In seeking approval for that early work — in light of federal changes threatening tower plans — Haws said the university would need to do it anyway.

“I think those would be necessary regardless of the size or dimension of what we need and what we would call the hospital modernization,” Haws said. “I don't think if we had a federal change in circumstances that we would — if we had to pause or delay — that we would look back and say that was money misspent, because it is increasing the access. It is increasing the ability of our campus to sustain more patient care.”

Alternatives

Preliminary descriptions of the new tower have it including multiple floors of inpatient units with 48 single-occupancy rooms each — which are the standard today, as opposed to double rooms.

Its construction would add to a rash of expansion across the UIHC system — which in April opened a new 469,000-square-foot hospital in North Liberty primarily for its orthopedics department. The university last year also bought at bankruptcy auction the former Mercy Iowa City hospital, turning into its new downtown campus.

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At 842,000 square-feet, the new tower would be 80 percent bigger than the new North Liberty Hospital and 66 percent bigger than the 507,000-square-foot UI Stead Family Children’s Hospital.

To a question of whether UIHC has considered alternatives to building on what already has been deemed the “most densely populated square mile in the state of Iowa” — their main campus across from Kinnick Stadium — Haws said a consultant looked at how other health systems have handled expansion nationally.

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“A little bit less common is a complete relocation of the whole campus,” he said. “That doesn't happen very often, as you might imagine. But when you get into aging facilities like we have and like a lot of academic centers have where the buildings are 50-plus years old, you have to make a decision.”

Most commonly, Haws said, the systems pursue modernization.

“Some people call them towers, bed-additions, but it's really a complex addition of modernization on the campus.”

Barker pressed UIHC officials about the impact such a massive construction project would have on traffic in an already congested space, asking, “Would it be fair to say that putting a tower in an already dense area is going to have some negative impact on traffic?”

“It would certainly increase the patient and visitor and staff traffic counts,” Haws said. “We'll have to accommodate that in the construction plan.”

Associated with its new tower plans, UI officials this week also are seeking board permission to raze the 65-year-old Hospital Parking Ramp 1 and water tower, and the 58-year-old Wendell Johnson Speech and Hearing Center.

Like the early-work proposal, officials said those buildings would need to come down regardless — “even if you decide not to build the tower.”

‘Waste, fraud, and abuse’

Regent Robert Cramer — referencing federal funding changes potentially impacting UIHC — said, “It seems more realistic that the tower project could be scaled back, as opposed to just eliminated.”

The most recent UIHC budget report through April of this fiscal year — which ends this month — shows the system received $302.5 million in Medicaid-related directed payment revenue, which is $15.5 million more than budgeted.

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Without that additional revenue, the UIHC system would have an operating deficit of $48 million. Instead — thanks to the directed payment revenue — UIHC’s operating income is nearly $255 million, which is $63 million more than budgeted.

In a White House memo June 6 aimed at “eliminating waste, fraud, and abuse in Medicaid,” the president accused states and health care providers of gaming the system through a “gimmick” allowing states to avoid contributing money to Medicaid and pay health care providers much more in directed payments.

“These state directed payments have rapidly accelerated, quadrupling in magnitude over the last four years and reaching $110 billion in 2024 alone,” according to the memo. “This trajectory threatens the Federal Treasury and Medicaid’s long-term stability.”

Promising action to preserve Medicare and Medicaid programs, the president directed the secretary of Health and Human Services to “take appropriate action to eliminate waste, fraud, and abuse in Medicaid, including by ensuring Medicaid payments rates are not higher than Medicare, to the extent permitted by applicable law.”

Vanessa Miller covers higher education for The Gazette.

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