UIHC rates to increase

BY IAN MURPHY | APRIL 24, 2014 5:00 AM

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The University of Iowa Hospitals and Clinics rates will increase by 6 percent starting July 1.

However, this is only bad news for those who are uninsured.

Ken Fisher, associate vice president of finance for the University of Iowa Hospitals and Clinics, estimated the increase would affect about 2 percent of people who go to the hospital.

He said those who have no health insurance might not be able to pay anyway, regardless of the increase.

“Somebody that’s a self-payer that gets a $100,000 bill isn’t going to pay that,” Fisher said.

The rate increase was determined by contracts with commercial paying partners, as well as competitive rates with other similar hospitals.

Fisher said increasing the rate still puts the hospitals on the lower end of the scale.

The commercial payers, such as insurance companies, negotiate contracts with the hospitals that assume hospitals will increase their rates, Fisher said. Many of the contracts limit rate increases to no more than 6 percent.

“Everybody believes that hospitals are the big piggy bank, and you can just take money from them and be fine,” Fisher said. “If we don’t raise our prices, we won’t raise our revenue.”

The UIHC is expecting an operating margin of 3 percent of the net operating revenue, meaning 3 percent of the charges from patient care and services will be retained as profit for the hospitals.

The rate increase will not affect the University of Iowa Health Alliance, a partnership between UIHC, Mercy Health Network, Mercy Medical Center-Cedar Rapids, and Genesis Health System, which was announced in 2012.

Each of the providers will continue to charge their own rates, said Jean Robillard, UI vice president for Medical Affairs.

Another factor in the increase was competitiveness of the rates.

After adjusting for the variety of cases the UIHC sees and the gross operating revenue received from the number of days a patient stays, the UIHC ranks in the 24th percentile, meaning before expenses to the hospital are factored out.  The hospitals are in the 13th percentile of net revenue after these adjustments. 

Fisher said the rate increase will help pay for $249.5 million in capital projects the hospitals will fund in the fiscal year 2015, $76.5 million of which will be on routine renovation and equipment replacement.

Overall, the hospitals have fallen short on projected revenue through the first three quarters of the fiscal year.  However, Fisher said officials have been able to manage the operating expenses appropriately so the hospitals can make up for the loss in revenue.

“Our finances continue to be strong,” said Ken Yates, the chief executive officer of UIHC.

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