New UI Children's Hospital would improve care and boost revenue

IOWA CITY - If University of Iowa Hospitals and Clinics does not move ahead with expansion plans, the operating margin will steadily decline in the next decade, hospital officials said Wednesday.

That's because the money the hospital receives from third-party payers, such as insurance providers and Medicare, is not keeping up with hospital expenses, officials said.

The 1o-year expansion plans, including the construction of a new $271 million Children's Hospital, will support a boost in patient numbers and services and therefore an increase in revenue that is necessary, hospital leaders told the state Board of Regents Wednesday.

“Our ability to be financially viable is critically linked to our ability to grow our volume,” hospital Chief Financial Officer Ken Fisher said.

The hospital committee of the Board of Regents approved the design and budget plan for the new UI Children's Hospital Wednesday; the Children's Hospital plan will go to the board for approval Thursday at the regular regents meeting in Iowa City.

“This is a great project for Iowa and Iowa's children,” hospital Chief Executive Officer Ken Kates said.

Facilities for the UI Children's Hospital are now spread among at least 10 locations and floors spanning three and a half blocks on the hospital campus, officials said. The new Children's Hospital tower, to open in 2015, will consolidate those services in a state-of-the-art location that will increase space, capacity and quality, officials said.

Bed capacity will increase by 19 percent with the new Children's Hospital, which will be built to the north of the Pomerantz Pavilion and to the south of Hospital Parking Ramp No. 2, and to the west and connecting to the Pappajohn Pavilion. Total pediatric inpatient admissions have grown by nearly 20 percent over the past five years, officials said. Most pediatric specialty services are projected to increase by 2 percent to 4 percent annually over the next three years.

The Children's Hospital project would be funded with $150 million in bonding debt, $71 million in hospital revenues and $50 million in private fundraising. Officials want to raise a total of $100 million privately for the project - half for the construction and half for programming. Of that, $32 million has already been raised and a $10 million commitment will be announced in May. Naming opportunities are available, including naming the building and the Children's Hospital entity for $50 million.

The Children's Hospital is part of a 10-year, $1.1 billion expansion plan presented by hospital leaders to the regents Wednesday. The plan includes a list of 14 major facilities projects, some already underway and others several years down the road.

Those projects will move many outpatient clinic services to new facilities off-site, make all hospital patient rooms private rooms, increase operating room space and improve technology at the hospital, officials said. The list also includes the construction of a new tower for patient rooms, slated to open in 2020.

Facilities for patient care at the hospital range from 20 years old to 35 years old. Technology has changed, as have patient expectations about private rooms, officials said. And since 2005, the hospital's inpatient volume has grown by 24 percent, while outpatient volume has grown by 39 percent.

“We are out of date and we are undersized,” Fisher said.