Steindler delays North Liberty project upon partner prospect with ‘in-state’ hospital system

NORTH LIBERTY — The state’s consideration of a proposed ambulatory surgery center — near where the University of Iowa already is building a $395 million hospital — has been bumped from this month to February after a hospital system approached Steindler Orthopedic Clinic about a potential collaboration at what’s shaping up to become a bustling new medical district in growing North Liberty.

On Wednesday, when The Gazette published an article about Steindler North Liberty Ambulatory Surgery Center seeking approval from the State Health Facilities Council, a hospital system not yet publicly identified approached the center requesting it consider “a proposal to build an inpatient hospital that could anchor the Steindler development.”

That vision would include an orthopedic specialty hospital, according to Patrick Magallanes, president and chief executive officer of Steindler Orthopedic Clinic in Iowa City. And it could fully transform the long-vacant swath of land into a new health care hub just off Interstate 380.

Because an orthopedic specialty hospital would incorporate outpatient surgery, Magallanes told The Gazette, the change would affect the application for an ambulatory surgery center, “at least as currently contemplated in size.”

Needing time to cement the collaboration and reach an agreement, the project’s applicant — Steindler surgeon Taylor Dennison — asked the state to pull his project from this month’s agenda and move it to February. The state confirmed that change.

Although Magallanes didn’t share many details about the project’s potential partner, he confirmed that “we have a potential in-state partner.”

MercyOne, Mercy Medical Center in Cedar Rapids, UnityPoint Health-Cedar Rapids and Mercy Iowa City all strongly opposed the UI Health Care application to build a $230 million, 300,000-square-foot hospital facility on 60 nearby acres at the intersection of Forevergreen Road and Highway 965.

They accused UIHC — which has aired plans to use a “significant portion” of its new North Liberty beds for “inpatient orthopedics” — of veering into the community health care lane, threatening the existence of local providers and creating a health care monopoly in Iowa.

UIHC pushed back, noting its need for more space to treat Iowa’s sickest patients — including the rising numbers being transferred from community hospitals. And while the state council denied UIHC’s initial application, given the community provider concerns, it approved a revised application Aug 31.

Days after achieving that approval, UIHC revealed plans to build on the North Liberty site another 169,000 square feet of academic, research and clinic space — which didn’t require a state certificate like the new hospital did. That additional square footage bumped up the project’s total cost to $395 million, more than the UI’s recent $392.7 million Stead Family Children’s Hospital.

The university almost immediately began moving earth on the site, even as design work continues. A groundbreaking ceremony was held Thursday.

An original application for the $17.9 million Steindler project on 36 acres adjacent the UIHC project sought approval for only a 35,880-square-foot ambulatory surgery center. But it also included its master plan a vision of a new 71,000-square-foot orthopedic clinic, a 157,000-square-foot hospital and a four-story hotel covering 95,000 square feet and 2.25 acres.

“What payers, patients, the community, and private physicians NEED, and what this certificate of need application represents, is a choice,” according to the original application. “That is competition. A choice will keep costs competitive and that only happens if the choice includes a choice in modern facilities that are lower in cost.

“In their application, UIHC acknowledged health care delivered in an academic medical center costs more than the same care in a community hospital,” according to the Steindler proposal. “One way, perhaps the only way, to help control pricing and cost is to give a private physician development the opportunity to create pricing pressure.”

In discussing how a new Steindler facility would affect other providers in the area — including those that host Steindler surgeons, like Mercy Iowa City — the application notes patients more often are opting for outpatient settings.

Steindler also addressed head-on the anticipated argument that “Mercy Hospital Iowa City is dependent upon Steindler Orthopedic Clinic surgeons and the impact on Mercy Hospital Iowa City will be significant if Steindler Orthopedic Clinic surgeons are no longer doing outpatient orthopedic surgeries at the hospital.”

Although the application argues Steindler surgeons have been loyal providers for Mercy, it asserts that hospital today “offers century-old infrastructure and is in a financial condition that severely restricts its ability to invest in repairs or new technology and is actively seeking a buyer or affiliation partner.”

“Mercy Hospital Iowa City is no longer cost effective for payers and patients, efficient or appropriate for modern orthopedic outpatient procedures,” according to the application. “To be clear, Mercy Hospital Iowa City has been invited to participate in the development of the 36-acre site. Reportedly, it has met with a firm to conceptualize a presence on a partition of the 36 acres.

“Whether Mercy Hospital Iowa City intends to participate remains to be seen.”

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