A state board denied an application from University of Iowa Hospitals and Clinics to develop a $230 million facility in North Liberty, after several local hospital representatives said it would negatively affect their business.

The university hospital was seeking to expand to North Liberty to increase the bed capacity beyond its main hospital in Iowa City.

UIHC CEO Suresh Gunasekaran said during a meeting of the State Health Facilities Council on Wednesday that the hospital routinely has to turn away patients transferred from other hospitals because of a lack of bed space.

The hospital met with the board to seek a Certificate of Need, which hospitals are required to be granted by the Iowa Department of Public Health before beginning large developments.

Representatives from other hospitals in the area, including Mercy Iowa City, Mercy Cedar Rapids, and St. Luke’s in Cedar Rapids, were at the meeting to lobby against the construction of the new facility.

UIHC’s application was denied by a vote of 3-2 of the five-member council. The hospital can now appeal the decision.

Gunasekaran presented data that showed that, on average, the hospital had to turn away around 200 transfer patients per month during 2019 because of a lack of beds. Gunasekaran said for many patients, UIHC is the only hospital in the state with the specialization to meet their needs.

“These transfers that we’re unable to take are not going to area hospitals,” Gunasekaran said. “These patients that want and need us at UI Health Care cannot find beds, their needs cannot be met at community hospitals, they need to be met at UIHC.”

The proposed development in North Liberty would cost a total of $230 million. Construction on the site itself would cost around $150.6 million, with equipment costs coming in at $71.5 million, according to the presentation. The other costs would be in site costs and land improvements.

The North Liberty location was proposed to include 36 beds and new operating room space, as well as emergency room services.

Officials from local hospitals said that despite UIHC’s characterization of the facility as a location for specialized care, the services offered would take business away from community hospitals that don’t have the same access to resources as UIHC.

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Tim Charles, CEO of Mercy Cedar Rapids, said that the proposed development would harm local hospitals that are already battered from the COVID-19 pandemic. He said many of the services offered by the new facility, like an emergency room and imaging services, would encroach on the sphere of other hospitals in the area.

“It is absolutely directed toward and geared to deliver services that cut right at the heart of what’s required for all of us to continue to remain strong providers in our own communities,” Charles said.

Others said the university’s position as a top employer in the area puts other hospitals at a disadvantage, as UI and UIHC employees often have lower costs at UIHC facilities.

Under the UI’s two health care plans, UIChoice and UISelect, UIHC clinics are designated as “Level 1” providers and have lower deductibles, lower copays, and other associated costs compared to “Level 2” providers which includes Mercy Iowa City. Mental health care visits and emergency room visits have the same associated costs between the two.

“is it appropriate that as a state institution that is concerned about backlogs and overcrowding, that they are financially incentivizing, very strongly, their own employees and retirees to seek their care there?” Sean Williams, the president and CEO of Mercy Iowa City said.

Gunasekaran argued that UIHC and other hospitals were not competing for the same patients. He said that 50 percent of clinic visits, and 70 percent of inpatients at UIHC came from outside the Cedar Rapids-Iowa City corridor.

“We’ve got amazing community hospitals that are not going to compete with the university’s because as you can tell for simple care in the corridor, the public does know, please go to these other excellent community hospitals,” he said.

Both Charles and Williams said they wanted UIHC to form a collaboration with area hospitals to share patients and services rather than build a new facility. Alyssa Smith, an attorney representing Mercy Iowa City said the goals of the new facility could be achieved more efficiently through agreements with area hospitals.

“Every single person who testified in opposition today spoke to the council about their excess capacity, and that they would be happy to discuss ways to collaborate,” she said.