Federal cuts to health care will delay UIHC’s $2 billion inpatient tower

IOWA CITY — In light of federal health care-related funding cuts expected to strip $9.5 billion from the State of Iowa over the next decade, University of Iowa Health Care on Thursday announced changes to its many campus constructions plans — including its more than $2 billion inpatient tower.

The Jacobson Tower — to be funded by hospital earnings, equity, and private giving, including a $70 million donation from the Richard O. Jacobson Foundation — “continues on a new timeline,” UIHC officials said in a news release.

Officials didn’t offer timeline specifics or new dates for work on what was supposed to be an 842,000-square-foot tower — planned to begin this year and finish by 2030. But UIHC is delaying indefinitely three projects billed as enabling the new tower.

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Hospital parking ramp 1 — a 57-year-old, 165,000-square-foot structure that has “extensive deferred maintenance and was not built to the design standards of today’s vehicle size” — will “remain open for now.”

That ramp, which the Board of Regents approved over the summer to come down in early 2026, sits on the footprint of the future inpatient tower, officials said.

The four-story, 69,000-square-foot Wendell Johnson Speech and Hearing Center — which was built in 1967 and was scheduled for demolition this fall — also will “remain for now.”

With the recent debut of a new $249 million, 263,000-square-foot UI Health Sciences Academic Building, the Speech and Hearing Center’s services — including the UI Department of Communication Sciences and Disorders — still will relocate.

And plans for hospital entrance and skywalk changes — among nearly $73 million in early-phase tower work the board approved in June — also are “on hold for now.”

“While UI Health Care is in a more stable financial position than many other academic health care systems across the country, adjustments to capital projects, needed to modernize its facilities, will be necessary,” according to Thursday’s UIHC announcement.

Still, UIHC Associate Vice President Brad Haws — who serves as chief executive officer of the clinical enterprise — said the administration remains committed to “creating access wherever we can” to keep up with the growing demand for UIHC services.

“That's why we continue to make advancements to add inpatient rooms through the Jacobson tower and modernization of our aging facilities,” Haws said. “While projects may not be on the same time frame or scope as originally planned, we will do the best we can with the resources available to us.”

Even before the board approved spending $73 million on early tower work in June, UIHC already had spent $137.2 million on aspects of the project that didn’t require regent approval, like planning, design services, and feasibility studies.

That total also doesn’t include campus construction to make room for the tower — referred to as “enabling” projects — including a new $17.5 million road, $75 million parking ramp, water tower, and the academic health sciences building.

UIHC officials on Thursday said work on the new road — connecting Newton Road to the main UIHC campus entrance — will continue, with completion expected at the end of this year. With a new water tower already up, the university still plans to remove the old tower beginning this fall into the spring.

In addition to the academic health sciences building, the university in March completed its Hawkeye Parking Ramp, just north of Kinnick Stadium.

$1 trillion nationally

In disclosing project delays Thursday, UIHC officials pointed to federal funding changes expected to “significantly affect the health care industry over the next 10 years” — cutting more than $1 trillion nationally and $9.5 billion from the State of Iowa, according to a KFF analysis of the Congressional Budget Office’s latest cost estimate.

Federal cuts with the biggest fallout include termination of more than 1,100 National Institutes of Health grants and a massive reduction in payments through Medicaid and other programs under the recently-signed “One Big Beautiful Bill Act,” according to the Association of American Medical Colleges, or AAMC.

The new law is expected to result in an increase of about 10 million uninsured people by 2034 — most of whom would have been covered by Medicaid and the Affordable Care Act, according to AAMC and the Congressional Budget Office.

UIHC’s most-recent budget report — presented to regents in June — showed the health care system received $302.5 million in Medicaid-related directed payment revenue through April, which was nearly $16 million over budget.

That extra income — which UIHC started reporting to regents in 2022, the same year it debuted plans for the inpatient tower — had the system as of April at a 9 percent operating margin, with $254.6 million in operating income. Without the directed payment revenue, UIHC would have had a nearly $48 million operating deficit.

In light of that could-be deficit and looming federal funding cuts, regents — before approving the early inpatient tower work in June — asked UIHC officials whether it makes sense to continue spending at such an elevated scale, noting the $2-plus billion tower is expected to be the most expensive facilities project in state history and UIHC had just debuted a new $525.6 million inpatient hospital in North Liberty.

“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,” Haws told regents at the time.

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Behind the scenes, regent David Barker was questioning UIHC leadership on the degree of analysis involved in choosing to build on the already-congested main campus instead of off site.

“Tell me if I am understanding the projections correctly,” Barker wrote in an email earlier this year. “$1.25 billion of the cost will be funded out of UIHC cash flow. Our cash flow over the next 10 years is expected to be $5.44 billion. So we will be spending a little less than a quarter of our cash flow on the tower over the next 10 years.”

Cancer-research facility

In addition to its inpatient tower and all the enabling projects, UI Health Care nearly a year ago in September 2024 announced planning had begun for a new cancer-focused research facility on the west side of campus.

The Board of Regents that month gave the university unanimous approval to begin planning the new facility — slated for one of two locations, either the Medical Education Building site or the Westlawn site, both identified as buildings “to be razed.”

“Both facilities have extensive deferred maintenance needs and costs,” according to board documents. “Building a new structure would allow for the best use of an existing parcel of land.”

UIHC did not answer The Gazette’s questions last week about whether and where the new center will be built — although the university in February reported the “outdated Westlawn, located along Newton Road, is slated for removal to make way for a new cancer-focused research building.”

But officials on Thursday said UIHC "plans to move forward with increasing its cancer research space.“

“This remains a priority given Holden Comprehensive Cancer Center’s pivotal role as the only National Cancer Institute-designated comprehensive cancer center in Iowa,” officials said. “UI is a leader in achieving the state’s high cancer survival rates and is a vital player in tackling Iowa’s fastest-growing rates of new cancers in the country.”

Vanessa Miller covers higher education for The Gazette.

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