UIHC’s North Liberty hospital budget increase gets state approval

Nearly one year after first earning approval to a build a new hospital in North Liberty, University of Iowa Health Care won crucial approval Aug. 30 to raise the budget by 33.5% during a State Health Facilities Council meeting by a 3-1 vote. A $230 million budget was approved in 2021, with the new budget now settling at $307 million after UI officials insisted a sizable increase was necessary to combat current economic conditions. "We are pleased to continue moving forward with the construction of the University of Iowa Hospitals & Clinics facility in North Liberty to meet Iowa’s need for additional accessible, high-quality, complex care," said Kimberly Hunter, interim CEO for UI Health Care, in a statement. "Like anyone who visits the gas station or grocery store, we’re all subject to increased costs right now due to inflation, increased labor costs, and supply chain issues. Both the State of Iowa Board of Regents and State Health Facilities Council approved the revised budget for construction, allowing us to continue to anticipate and meet the future increased health needs of Iowans, even in this more challenging economic environment." During their presentation, Ms. Hunter cited shortages in local and skilled trades labor, unprecedented construction material inflation and regulatory and safety factors as big financial hurdles. "Building materials like steel, copper and aluminum have experienced 40% or greater increases in price due to worldwide shortages," she said. "And there are shortages in the labor market locally and there are not enough contractors to perform all of the work in the Iowa City area." The annual increase in construction costs was 14-18% in the last several years, whereas from 2010-2020 the annual inflation increase was steady around 2-3%, according to JE Dunn Vice President and Preconstruction Director Sam O'Connor. JE Dunn is the construction manager at risk for the project. University of Iowa Health Care also requested a traffic study to study the impacts a state-of-the-art hospital would have on the intersection in a growing North Liberty. In July, the Board of Regents approved a 33% increase to the North Liberty development from $395 million to $525 million, a figure thought to be only reached during a "worst case" scenario. The most recent budget approval by the State Health Facilities Council focuses solely on a budget increase for elements voted on during the Certificate of Need process, meaning council's approval was not needed for the second building on the 469,000-square-foot space, said UI Health Care spokesperson Laura Shoemaker in an email. The second building will house faculty offices and research, education and clinic space.

Objections raised

If the council deemed the request to alter the scope and nature of the project, or if it was not seen as reasonable, the project would've been in danger of being halted until the university submitted an appeal. While the council ultimately passed the request, several members were concerned the university's request – including chair Harold Miller who voted no. "I have a little bit of difficulty believing that suddenly that these problems were perceived at this point in time and in 2021 we were not perceiving an problems regarding construction costs," he said. "I am troubled that we had no change in estimated cost. My second concern is we have massive cost overruns...and we haven't dealt with the concerns regarding the deficiencies of the scope and scale of the project." "I'm a little bit disappointed they didn't account for some of the inflation that was coming at us already a year ago," council member Brenda Perrin. UI officials responded saying during the window between the second application last year and when the contract was finalized inflation rose out of control in a way "no one could have anticipated." They also said recent Bureau of Labor statistics data shows signs that inflation is on its way back down. Last year, other local hospitals urged the council to vote no on a new UIHC hospital as they viewed it as an expansion that would cut too deeply into primary care services already offered in the areas, putting long-term survival at risk. UnityPoint Health - Cedar Rapids President and CEO Michelle Niermann once again expressed her disapproval of the plan Tuesday, noting she was skeptical of the university true intentions. "The university has signaled a strong interest in entering into the lane traditionally occupied by community hospitals and healthcare systems, with its $605 million bid to acquire Mercy Iowa City and develop a community health care division," she said. "Profitable growth is not an unworthy objective but it's not necessarily equivalent to need, particularly when those same services are already offered throughout eastern Iowa communities." The campus is expected to be ready for use by June 2025.