IOWA CITY — University of Iowa Health Care — undertaking more than $1 billion in new, expanded, or upgraded facility projects — wants to increase patient rates 6 percent in the upcoming budget year beginning July 1 to keep up with health care inflation, among other things.
In proposing the rate bump, which the full Board of Regents will consider Thursday, UIHC on Wednesday reported its existing charges are below the 50th percentile of academic medical centers.
For patients who self-pay — as opposed to using insurance, making them more susceptible to chargemaster rate increases — the university offers “charity care,” shielding the medically indigent from being impacted by charge hikes.
The UIHC charity care program discounts charges for services using a sliding scale based on the Federal Poverty Limit — starting at 350 percent of that limit.
“UI Health Care charges have some impact on some prospective contractual rates set by payers,” according to the UIHC rate request. “They also directly impact current reimbursem*nt for payers who use percent of charge as part of their payment structure.
“Charge rates can impact overall payer methodology or may just affect certain contract carve-outs and outlier payments.”
The rate increase would continue an annual trend — with the regents approving 6 percent UIHC bumps year after year.
The decision on how much to increase costs depends on two factors: a comparison with peers and limits on charge increases in UIHC payer contracts.
“Many commercial payers limit annual facility charge increases to no more than 6 percent,” according to the UIHC request. “Given UI Health Care’s low charge levels, it would be reasonable to increase charges more than 6 percent.”
Still, an Iowa Hospital Association tool allowing users to compare health care prices statewide shows UIHC inpatient and outpatient services often are higher — including for things like joint replacement and child birth.
For a vagin*l delivery of minor severity, UIHC in 2023 charged on average $18,931 — compared with a state average of $12,303. For a minor knee replacement last year, the average UIHC charge was $77,049 — compared with a state average of $52,503.
For outpatient hip surgery, UIHC last year charged an average $65,623 — compared with a statewide average of $49,614.
An American Hospital Association report from May indicates hospitals and health systems nationally are facing worker shortages, increasing patient acuity, supply chain issues, and inflation.
In the UIHC financial report Wednesday, hospital officials reported both operating revenue and operating expenses are over budget through April of the current budget year. Thanks to UIHC’s participation in a federal program for providers willing to expand access and increase capacity for Iowa Medicaid beneficiaries, UIHC to date in the 2024 budget year has received $261.8 million in directed payment revenue through that partnership.
Those directed payments have UIHC’s operating income 31 percent over budget.
North Liberty update
The rate hike comes as UIHC plows ahead with a long list of facility upgrades, improvements, and new construction — to be funded, in many cases, with patient revenue — including enabling projects for a more than $1 billion inpatient tower on the main campus and a half-billion-dollar hospital in North Liberty.
The North Liberty project is on schedule and on budget — after regents in 2022 approved a 33-percent budget increase for the 469,000-square-foot facility from $395 million to $525.6 million.
“The building is now closed in, and they’re fast and furiously working on the finishing touches on the inside,” UIHC CEO Bradley Haws told regents Wednesday, noting expectations to open in April of 2025.
Initially, Haws said, the hospital will be geared toward orthopedics, sports medicine, and rehabilitation — which was a point of contention with neighboring community hospitals years ago when UIHC sought state approval for the project.
Among those who complained was Mercy Iowa City — suggesting the new UIHC hospital would run it out of business and convincing state officials to deny the university’s first application. In a second, resubmitted UIHC application, officials removed all reference to orthopedic care — focusing instead on helping ease the university’s overcrowding and demand for tertiary and quaternary care.
The state, based on the revised application, granted a certificate sought by UIHC — which earlier this year took over Mercy Iowa City after that community hospital filed for bankruptcy.
And Haws on Wednesday said even though the North Liberty project will focus on orthopedics, it also will help UIHC treat its sickest and most acute patients — as promised in its state application.
“By moving those services off of the university campus, it creates capacity in the space that they occupy,” he said, reporting UIHC occupancy regularly is at more than 90 percent. “Even as recently as this morning, (we) were in a meeting where there's a long list of people who would like to occupy the space when we move orthopedics and rehab out of their current locations.”
Vanessa Miller covers higher education for The Gazette.
Comments: (319) 339-3158; vanessa.miller@thegazette.com
