Higher education

University of Iowa Health Care rates to climb 6 percent

Costs rise with new Children's Hospital on tap

The exterior of the University of Iowa Children’s Hospital is shown from the ground as it is under construction in Iowa City on Thursday, October 15, 2015. (Andy Abeyta/The Gazette)
The exterior of the University of Iowa Children’s Hospital is shown from the ground as it is under construction in Iowa City on Thursday, October 15, 2015. (Andy Abeyta/The Gazette)

COUNCIL BLUFFS — University of Iowa Health Care patient rates will increase 6 percent in the next budget year, which administrators for the $1.9 billion enterprise said will help them keep pace with the rising cost of doing business and the opening of the new UI Children’s Hospital later this year.

Ken Fisher, associate vice president for finance with UIHC, said bringing the new $360 million, 507,000-square-foot Children’s Hospital online will add about $40 million of fixed operating cost, which is about 3 percent of the UIHC’s operating margin.

“So while we anticipate there will be growth, we do not anticipate the growth will cover the full incremental cost of the Children’s Hospital — at least in the first full year of operation,” he said.

The Board of Regents unanimously approved the rate increase — something it has done annually for years — during its meeting Thursday in Council Bluffs.

Fisher justified the proposal by showing that UIHC reported an operating income in the 2015 budget of $84.085 million — or 6.4 percent — and a similar operating income of $84.384 million this year — or 6 percent — this year. But due to rising expenses, including the cost of opening the Children’s Hospital, anticipated operating income in next budget year is expected to drop to $52.5 million, or 3.5 percent.

That projection comes even as total net operating revenue is expected to grow to $1.5 billion — up from $1.3 billion in 2015 and $1.4 billion in 2016. Those increases, according to UIHC administrators, largely are tied to massive volume growth — admissions to the UI Hospitals and Clinics have gone up 3,898 over the past six years, and patients discharged have surged 33,894 during the same period.

The hospital’s total weekday average daily census is up nearly 100 patients from two years ago — it sits at 654 to date this year.

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Its peak daily census since January occurred in March, when the hospital reported 698 inpatients, documents show. The university boasts 728 staffed beds, meaning a 698 census represents 96 percent occupancy.

“That is almost gridlock,” said Ken Kates, associate vice president and chief executive officer for UIHC. “We are staffing every possible bed we can open in Iowa City.”

The hospital is implementing several initiatives to deal with the high census, including increasing staff, adding specialists and moving toward growing capacity. Administrators are converting one floor of the Helen K. Rossi Volunteer Guest House — which provides lodging and services to families of patients — into 13 new observation beds.

And it’s renting 14 rooms at a nearby hotel for those families who would have stayed at the Rossi House. As a result of the new Children’s Hospital opening, 61 more private beds in the main hospital will be converted by summer 2018.

With other potential opportunities to add beds, the hospital’s capacity could grow to 856 beds by the 2019 budget year, according to Kates.

When asked to explain the growth, UIHC administrators credited changes enacted through the Affordable Care Act, more coordination and referrals with providers and an improved economy.

“When the economy is better, people use health care,” said Jean Robillard, vice president for medical affairs with UI Health Care.

At the same time revenue continues to grow, expenses also are increasing — with total operating expenses swelling from $1.15 billion in 2015 to $1.24 billion in the current year to a projected $1.37 billion in the next year.

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