Education

UI asks again for Children's Hospital budget increase Project design changes, then legal fights, drove costs higher

Fans wave to the UI Stead Family Children’s Hospital between the first and second quarters of the Iowa game against Illinois at Kinnick Stadium in Iowa City on Saturday, Oct. 7, 2017. (Liz Martin/The Gazette)
Fans wave to the UI Stead Family Children’s Hospital between the first and second quarters of the Iowa game against Illinois at Kinnick Stadium in Iowa City on Saturday, Oct. 7, 2017. (Liz Martin/The Gazette)

IOWA CITY — University of Iowa Health Care executives managing construction of the new Stead Family Children’s Hospital for years delivered favorable budget projections to the Board of Regents, vowing to spend less than expected.

After the hospital opened in early 2017 and final bills were being reconciled, hospital officials still projected the project would come in millions under the approved $360.2 million budget.

“The total project cost is expected to be $350.9 million, or $9.4 million favorable to budget,” according to an update prepared then for the board.

IOWA CITY - The University of Iowa later this month will seek Board of Regents permission to increase its Stead Family Children's Hospital construction budget to more than $392 million after the Iowa Court of Appeals on Wednesday ruled against the university in a long-running dispute with the contractor.

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But that outlook meant rejecting contractor payment requests and back-charging the companies for “work they did not adequately complete” — all of which was tied up in court.

But now two years later — after multiple arbitration panel awards, District Court affirmations and appellate court rulings in favor of the contractors, the UI next week will ask the Board of Regents to increase its Children’s Hospital budget by $32.5 million.

The increase, which marks the project’s third budget hike requiring board approval, will bump the total to $392.7 million from $360.2 million, which already represented a sharp increase from the starting project budget of $270.8 million in 2011.

The earlier increases came after thousands of mid-construction design changes, rampant mismanagement and innumerable delays documented in reporting from The Gazette.

In a report last fall to the regents, UI President Bruce Harreld said the university would appeal awards in favor of the contractors because some of the work was substandard and “judges can make mistakes.”

But after another ruling last week against it, the UI agreed to drop is court fight and seek another budget increase.

“The university, in conjunction with the Board of Regents, has reviewed and improved its contracts, procedures, and delivery methods as it relates to construction projects,” Harreld said in a statement.

UIHC building usage funds will cover the higher cost, not general education dollars.

Documents made public Tuesday do not outline what changes the board and the UI have made to its contracts, procedures and delivery methods. The request is on the board’s consent agenda, which means regents could approve it without discussion.

Proposed rate hike

Also on the agenda for next week is a UIHC request to increase rates for services by 6 percent starting July 1. Such an increase has become routine, as UIHC has requested and received board permission to enact similar increases over the last decade.

The UI hospital system — the largest in the state — decides how much to propose increasing rates by, among other things, comparing the rates of its peers and by considering increase limits in some payer contracts.

“Given UIHC’s low charge levels, it would be reasonable to increase charges more than 6 percent,” according to board documents. “However, given the cap on charge increases in many of its contracts, it is most prudent to cap the increase proposal to 6 percent.”

Administrators previously have said many patients won’t feel any direct impact from the rate increases, as they often fall to payers like Medicare and Medicaid.

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

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