Iowa Lawmakers, Wellmark Want Review of Hospital Construction Law

August 16, 2006

Hospital executives should seek approval from state regulators before closing hospitals on Des Moines’ east side and opening new ones in the suburbs, say some lawmakers and officials along with Iowa’s largest health insurer.

Mercy Medical Center filed papers last week showing it plans to eventually close the Mercy Capitol hospital and replace it with a new hospital in West Des Moines.

Iowa Health Systems, which owns Iowa Methodist Medical Center, Iowa Lutheran Hospital and Blank Children’s Hospital, bought an interest in property in West Des Moines earlier this month. The move raised speculation that Iowa Health, Mercy’s main competitor, planned to close Iowa Lutheran and replace it with a new hospital in the fast-growing suburb.

Most large medical projects in Iowa need to be approved by the Iowa Health Facilities Council, which decided in 2004 that a proposed Iowa Health hospital in West Des Moines would not provide enough services to justify the cost.

State law allows hospitals to bypass regulatory approval if they replace an existing facility with a new one in the same county.

Three lawmakers say they are worried about that exemption.

Sen. Jack Hatch, D-Des Moines, said hospital executives should not be allowed to avoid approval by regulators.

The Legislature should consider changing the law to remove the exemption, said Hatch, co-chairman of the Legislature’s Health and Human Services Appropriations Subcommittee.

Rep. Dave Heaton, R-Mount Pleasant, is another co-chair of the subcommittee, and Rep. Linda Upmeyer, R-Garner, chairwoman of the House Resources Committee, also said lawmakers should review the law.

Mercy Vice President Joseph LeValley said the exemption should not be viewed as a loophole the hospital is trying to sneak through.

The law was passed in 1997 after a statewide panel reviewed the role of the Iowa Health Facilities Council. The panel was comprised of lawmakers, insurers and health care leaders, he said.

“The state of Iowa has done a thorough job of looking at this issue and has said specifically that this is something that should be allowed,” LeValley said.

Sen. Pat Ward, R-West Des Moines, supports the current law, which she says was created to give hospitals the ability to make business decisions as long as they weren’t adding capacity to the health care system.

Instead of limiting the exemption, the state should consider expanding it to allow new hospitals within a metro area, not just within a county, Ward said.

Iowa Health-Des Moines Vice President Sid Ramsey said the company would not oppose a review of the law by the Legislature.

“As long as all hospitals are treated equally in opportunity, we’re completely fine with that,” he said.

The Iowa Hospital Association supports the exemption, which it says can be a useful tool.

Several hospitals have used the exemption to hospital new hospitals without seeking regulatory approval. Examples include Burlington, the Quad Cities and Orange City.

Officials with Wellmark Blue Cross/Blue Shield say all proposals for new hospitals should receive regulatory approval.

Wellmark, Iowa’s largest health insurer, opposed Iowa Health’s plan to build a hospital in West Des Moines in 2004, saying the Des Moines area already had too many hospital beds.

Wellmark Vice President Cliff Gold said the company is reviewing the need for a hospital in the western suburbs, but doubts the area could support two hospitals.

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