University of Iowa freezes new construction for now

Budget headwinds put $120 million clinic expansion on hold

The Old Capitol building is shown in Iowa City on Monday, March 30, 2015. (Adam Wesley/The Gazette)
The Old Capitol building is shown in Iowa City on Monday, March 30, 2015. (Adam Wesley/The Gazette)

COUNCIL BLUFFS — The University of Iowa Hospitals and Clinics has put plans on hold for a $120 million expansion of its Iowa River Landing clinic in Coralville “pending financial outlook improvement” at the health care system.

Confirmation of a freeze on that project — which UI Health Care has put $5.85 million into so far — comes as UI administrators on Wednesday also announced a campuswide, five-month moratorium on “project work.”

UI Senior Vice President Rod Lehnertz said the moratorium is “required and needed for us to address the $5.49 million cut by the state during the final quarter of this fiscal year,” which ends June 30.

“This will be an effort to shed cash spending and cash flow in the final quarter,” Lehnertz told a Board of Regents properties and facilities committee meeting here.

UI President Bruce Harreld is expected to give details of the freeze during Thursday’s board meeting, and Lehnertz declined to discuss affected projects in advance of the presentation.

The university last summer reported plans for $278.9 million in new capital work for the 2018 budget year, which started July 1. Among the projects listed were a $50 million Museum of Art, a $30 million Tippie College of Business entrepreneurial center, a $10 million Field House renovation, a $10.8 million new Finkbine Golf Clubhouse and $50 million in Main Library renovations.

UI Hospitals and Clinics had $240 million in new projects on its 2018 list, including the $120 million Iowa River Landing expansion.

Brooks Jackson, UI Health Care vice president for medical affairs, said Wednesday his organization is following the larger campus moratorium, although caveats are possible.

“We are not going to build any big buildings,” Jackson said. “But if it’s a patient safety issue, we will make exceptions.”

All three of Iowa’s public universities — along with its UI Health Care operation — are trying to cope with significant financial headwinds. Faced for the second year with a projected budget shortfall, lawmakers again enacted midyear cuts that have decreased the state’s general education support over two years by more than $40 million.

This year’s round of late-term cuts has the UI cutting $5.5 million and Iowa State cutting $5.4 million before July 1.

UIHC is dealing with reduced government reimbursements for health care, rising costs, shifting consumer demands and uncertainty with the Affordable Care Act, among other challenges.

The hospitals and clinics started the current budget year with a $7.2 million deficit.

Some of the hospital’s budget challenges involved the 14-story, $360 million UI Stead Family Children’s Hospital, which opened in February. The project was plagued by cost overruns and contractor disputes.

An arbitration panel last month ordered UIHC to pay one contractor a $21.5 million award. The university initially fought it, although a deal could be forthcoming. And UIHC is in court with another contractor.

In response to its financial challenges, UI Health Care has initiated an $86 million plan to cut expenses and increase revenue. Administrators Wednesday told the regents they’re making progress, realizing $41.4 million of savings so far with 60 percent of the initiatives planned in the second half of the budget.

Of the goal, $46 million was tied to reduced labor costs, targeting the equivalent of 500 full-time positions.

Through March 9, administrators said, the hospital cut 487 positions through attrition and layoffs, though Jackson said it is heavily weighted toward attrition.

By deferring the start of some capital projects and major equipment acquisition, the hospital is reducing capital spending this budget year by about $60 million.

Officials still announced plans to fund $142.7 million in capital projects and equipment in the 2019 budget year, but Jackson noted, “We will have to see how long this moratorium goes.”

On the schedule for its capital expenses in the next budget year is a nearly $20 million upgrade or replacement of radiology equipment; more than $10 million for an acute leukemia and bone marrow transplant unit; and nearly $9 million for a pediatric specialty clinic expansion.

The Iowa River Landing expansion is supposed to allow ambulatory orthopedic services to relocate from the main hospital campus — which regularly is near capacity — and provide enough space to accommodate up to 200,000 annual clinic visits.

UI Hospitals and Clinics opened its main clinic in Iowa River Landing in October 2012. Although it is postponing this expansion, spokesman Tom Moore said the project will occur eventually.

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