University of Iowa Health Care ‘likely’ will redesign inpatient tower

IOWA CITY — Although the need for an expansive new University of Iowa inpatient tower that’s 50-percent bigger than its 14-story Children’s Hospital hasn’t changed, the federal funding landscape has, officials told the Board of Regents this week.

“The changes that are out there in the marketplace likely mean a redesign of the Jacobson Tower and may result in a temporary slowdown in some of our major capital projects,” UIHC CEO Brad Haws said Wednesday at the board’s meeting in Cedar Falls.

He didn’t spell out specifically how the $2-plus billion inpatient tower project might change due to federal funding cuts, which are expected to slash $2 billion from UI Health Care, but Haws said, “I hope to be able to bring more information in the future.”

“We are still committed to the modernization that's required, including the Jacobson inpatient tower, but due to the uncertainty at the federal level, we need to reassess the plans and ensure that they're affordable,” he said.

UI Health Care officials first introduced the idea for a new massive inpatient tower in January 2022 as part of their 10-year facilities plan, which warned that aging facilities over the next decade would yield 44 percent of existing inpatient beds obsolete. When paired with growing state needs, UIHC anticipated needing more than 400 new beds “to satisfy complex health care needs of Iowans.”

“If UIHC runs out of capacity, UIHC’s financial stability will be threatened,” officials told the Board of Regents nearly four years ago.

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Medicaid revenue

At that time, UIHC officials said the enterprise was “well positioned to avoid this health care crisis,” in part thanks to “improved federal Medicaid support.”

“With partnership from the State of Iowa, UIHC has secured participation in a directed payment program for safety net providers beginning in fiscal year 2022,” the university told regents in 2022. “This Medicaid funding will substantially increase UIHC margin over the coming years. The two primary uses of this funding will be to modernize facilities and to invest in staffing in order to expand capacity for Medicaid patients.”

In the budget year that ended June 30, UI Health Care received nearly $390 million in directed payment revenue, giving it an 8.4 percent operating margin with operating income reaching $296 million.

But, without the directed payment revenue, UIHC would have ended the year with a $94 million deficit. And, under the recently-signed “One Big Beautiful Bill Act,” institutions like UIHC will see a massive reduction in Medicaid support.

The hit is expected at more than $1 trillion nationally and $9.5 billion for Iowa, according to an analysis of the Congressional Budget Office’s latest cost estimate.

“We are about 20 percent of Medicaid volume that happens in the state,” Haws said. “So just for us, that's a $2 billion hit.”

Six to 12 months

Before the bill’s passage, the campus — with regent support — had been moving ahead with hundreds of millions in construction aimed at enabling and supporting the tower, including a new academic building, water tower, parking ramp, and road.

But the funding change has paused some of the supporting construction that had been planned. Like hospital parking ramp 1 — which had been scheduled for demolition given its extensive deferred maintenance — will “remain open for now.”

The four-story, 69,000-square-foot Wendell Johnson Speech and Hearing Center — which also was scheduled for demolition — will “remain for now” as well.

As for a new timeline for the delayed inpatient tower, Haws on Wednesday told regents details remain in flux.

“It’s probably going to be six to 12 months before we can do a full assessment,” he said. “There are still financial dynamics in the Legislature and in Washington that we don’t fully understand, and they are significant enough that they could potentially impact our plans.”

Vanessa Miller covers higher education for The Gazette.

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