Steindler Orthopedic talks with unnamed hospital system continue

Talks between Steindler Orthopedic Clinic and an unnamed hospital system to build a new hospital alongside an ambulatory surgery center in what’s fast becoming a health care hub in North Liberty are ongoing — but they’re not moving fast enough to merit state consideration at this time.

Steindler North Liberty Ambulatory Surgery Center in the fall bumped its application to build a $19.2 million facility near Interstate 380 off the State Health Facilities Council’s October agenda to its February consideration after a hospital system whose name as not been disclosed approached Steindler about a potential collaboration that might alter its application.

The prospective partnership could have anchored Steindler’s proposed development with an inpatient hospital, but the parties couldn’t agree on details in time for the council’s February meeting, according to Steindler President and Chief Executive Officer Patrick Magallanes.

“The outside collaboration with hospital(s) continue,” Magallanes told The Gazette, declining to discuss details further.

So Steindler North Liberty resubmitted its application to the state for a 35,880-square-foot ambulatory surgery center only. But in the application, the center that has a main campus in Iowa City but also serves Eastern Iowa also cites long-range plans for the property — including a 71,000-square-foot orthopedic clinic; 157,000-square-foot hospital; 75,000-square-foot medical office building; and four-story hotel with event space covering 23 of the 36 acres it owns east of I-380 and north of Forevergreen Road.

About 1.5 miles east of the proposed Steindler development, University of Iowa Health Care this fall began constructing a 469,000-square-foot hospital and clinics campus expected to cost $395 million, making it the most expensive health care project in state history — topping the $392.7 million UI Stead Family Children’s Hospital, which opened in 2017.

Opposition

Numerous community health care providers took issue with the UIHC proposal — including MercyOne, Mercy Medical Center in Cedar Rapids, Mercy Iowa City and UnityPoint Health-Cedar Rapids — accusing the university of steering out of its lane of treating the most complex cases and as a result threatening community health care provided by other hospitals. But the UIHC application later was approved.

The Steindler North Liberty Ambulatory Surgery Center application, now scheduled for state consideration next month, references the need for competition in the area and the threat posed by the new UIHC North Liberty project.

“By any reasonable sensibility, given its distance from the specialized care at the main UIHC campus, the UIHC North Liberty project is clearly targeting the patient population traditionally served by the private practice community in Johnson County,” the application reads. “What payers, patients, the community, and private physicians NEED, and what this certificate of need application represents, is a choice. That is competition.”

The Steindler proposal has received some pushback, too — specifically from Johnson County Surgical Investors and Iowa City Ambulatory Surgical Center, a 13-year-old multi-specialty center jointly owned by the Johnson County group and Mercy Iowa City.

They accuse Steindler Orthopedic of trying to circumvent a long-standing agreement that gives 13 of its physicians “active medical staff privileges” at the Iowa City center — located just a half mile from Steindler’s current Iowa City home.

As physicians and part-owners of both Steindler and Johnson County Surgical Investors, the 13 doctors signed agreements not to own, operate, manage, finance, lease or invest in any other ambulatory surgical center in Johnson County — or provide any management services to a competitor, according to an opposition letter to the state from the Johnson County investors group.

After sending Steindler Orthopedic cease-and-desist letters over the summer, the investors group told the state that Steindler sidestepped the agreement by creating two new business entities for the North Liberty proposal under the names “Steindler North Liberty Ambulatory Surgical Center,” the official applicant; and “North Liberty Physician Real Estate LLC,” involved in the property transaction.

The sole owner, member and shareholder of those two new companies is Taylor Dennison, a Steindler physician who isn’t a member of the Johnson County Surgical Investors.

When the state asked the applicant for further explanation of his relationship with Steindler Orthopedic Clinic, an attorney representing Dennison said the orthopedic clinic has no ownership interest or control over his two companies. Rather, Dennison and his companies support the Steindler plan to develop its 36 acres in North Liberty and he’s “stepped forward to develop and offer that ambulatory surgery center.”

As part of that deal, Steindler Orthopedic has agreed to sell Dennison the land on which the new surgical center will sit.

‘Endeavoring to compete’

Although much of the renewed Steindler application is the same as its first, the applicant did elaborate on the need for a new, modernized ambulatory surgery center by mentioning deficiencies and shortcomings at the Iowa City Ambulatory Surgical Center.

According to the application, among other things:

According to the Steindler application, a proposed timeline has project construction wrapping in November 2023 and beginning to offer services in January 2024. A tentative timeline for the new UIHC hospital and clinics in North Liberty has construction wrapping in spring or summer 2025.

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