University of Iowa Hospitals and Clinics Budget Narrative


In FY 2018, the strategic focus for the University of Iowa Hospitals and Clinics (UIHC) will continue to center on the offering of a broad spectrum of clinical services to all patients, serving as the primary teaching hospital for the University, and providing a base for innovative research to improve health care.

UI Hospitals and Clinics is committed to providing patient-focused care in an environment devoted to innovative care, excellent service, and exceptional outcomes. These three commitments identified in the strategic plan are the key drivers in creating the FY 2018 operating budgets.  Achievement of each commitment will occur by following defined goals, strategies, and tactics.

  1. Innovative Care
  • Care Delivery - UIHC will be recognized as a state and national leader in developing and implementing new and more efficient health care delivery models that emphasize quality-driven patient experience.
  • Clinical Programs – Select UIHC clinical services will be leaders in the state and national market by offering cutting edge clinical services, robust clinical research, and strong training opportunities.
  1. Excellent Service
  • Patient Satisfaction – Patients and families will be highly satisfied with their entire UIHC experience in all settings.
  • Referring Physician Satisfaction – UIHC will be recognized by referring physicians for its efficient and effective support to their patients.
  • Staff, Faculty, and Volunteer Engagement – Staff, faculty, and volunteers are valued and engaged in the pursuit of UIHC’s vision.
  1. Exceptional Outcomes
  • Safety – UIHC will provide a continuously improving, safe environment for all patients and staff at all times.
  • Clinical Outcomes – UIHC will use a continuous improvement process to achieve exceptional clinical outcomes.

The following are key strategies implemented to achieve UIHC’s goals:

  • Opening of the Stead Family Children’s Hospital in the spring of 2017 to provide expanded and enhanced services to children, as well as increased inpatient capacity
  • Continue renovations to expand acute and ICU bed capacity as well as conversion to single patient rooms
  • Increase access to outpatient services at the Iowa River Landing (IRL) offsite clinic location.  The IRL  will alleviate the outpatient capacity issues at the current facility and allow for more convenient access to services in the community
  • Expand outpatient services provided in the community through the addition of new facilities and partnership affiliations
  • Continue to improve patient access through  centralized clinic appointment scheduling
  • Continue the focus to improve the patient experience with emphasis on patient satisfaction.
  • Continued focus on several key product lines, including Pediatrics, Cancer, Heart & Vascular, Neurosciences, and Orthopedics
  • Assure patient quality and safety remain a top priority
  • Continued emphasis on population health initiatives, including continued Care Coordination focus, Physician Quality and Cost Dashboards, and Payor ACO arrangements
  • Focus on appropriate utilization of drugs, patient supplies and ancillary tests
  • Continued development of innovative initiatives to reduce the costs of care and expand patient’s access to care (i.e. Telemedicine initiatives)
  • Aggressive management of labor productivity and effectively flexing to match resources to volumes
  • On-going policy of contracting with third-party payors at fair and reasonable rates
  • Continued emphasis on revenue cycle and supply chain initiatives
  • Maximize the use of the EPIC information technology infrastructure to provide comprehensive patient information under one common platform


There are ever-increasing financial pressures on the healthcare industry.  In FY 2017, UIHC faced a number of significant challenges.  The most significant challenge was the privatization of the Medicaid program in April 2016.  The State of Iowa moved substantially all of the Medicaid population to Managed Medicaid Organizations (MCOs).  This is a significant change that affected 560,000 Iowans and roughly 45,000 UIHC patients.  There are multiple new and varied administrative processes with three MCOs (United, AmeriHealth, and Amerigroup) and carve-out organizations (Optum, Superior).  With this change there has been increasing revenue risk for the Medicaid population.  UIHC has experienced a significant jump in denials, inaccurate payer payments and aging of accounts receivable.  We have worked aggressively with the leadership at the MCO’s to resolve these issues.  It is a process that takes significant resources and time to work through.  

The challenges in FY 2018 will be even greater.  Expense inflation (salary and non-salary) continues to outpace the level of payor rate increases.  An average “all-in” salary increase of around 3.75% is projected for FY 2018 due to base salary increases consistent with contract negotiations and increases in the fringe benefit pool rates. While we continue to standardize product utilization and implement supply chain savings initiatives, medical and surgical supply costs are estimated to rise 2% or more due to price increases and changes in technology. Pharmaceutical cost increases are anticipated in the 7.5% range.  Revenue challenges faced will include the commercial insurance payment rates increasing slower than expense inflation, impacts of healthcare reform and cost control measures on Medicare and Medicaid payment rates and the continuing challenges related to the Iowa Medicaid MCO’s.  Additionally, changes at the federal level raises questions about what insurance options may be available for individuals in Iowa for FY 2018.


The University of Iowa Hospitals and Clinics predicts continued high demand for its services.  Inpatient acute admissions are expected to increase approximately 5% while outpatient activity is anticipated to grow by over 6% over FY 2017 projections.  The case mix index is anticipated to remain high at a level of 2.031, reflective of the acuity of care required by inpatients  


Additional net revenues will be required in FY 2018 to meet the 2.5% operating margin budgeted.  These additional net revenues will be achieved through new volumes and a rate increase of 6% approved by the Board in April to be effective July 1, 2017.  Market data indicates that UIHC continues to have lower rate adjustments when compared to academic medical center peers and other Midwest healthcare institutions.   

As always, UIHC is concerned with the effect of higher charges on its patient population.  A study completed by the University HealthSystem Consortium shows that the impact on insured patients is minimal, with little or no change to deductibles and co-payments.  Self-pay patients, who account for approximately 1% of UIHC charges, have limited exposure due to UIHC’s discount policy for the medically indigent.  The following table summarizes how increases in rates affect various payor groups:

Rate Increase Impact by Payor:

  • Medicare
    • Charges and cost affect DRG and APC rate setting
    • Affordable Care Act scheduled reductions (through 2019)
    • Charges affect new technology rate setting
    • Outlier thresholds and payments are based on charges and cost
    • Coinsurance up to policy maximum
  • Medicaid
    • Charges and cost affect DRG and APC rate setting
    • Outlier thresholds and payments are based on charges and cost
    • Unknown impacts of move to Managed Medicaid
  • Managed Care
    • Payors with outpatient percent of charge payment provisions
    • Stop-loss thresholds and payments
    • Carve-out arrangements (i.e. high cost drugs, prosthesis, new technology, etc)
    • Coinsurance up to policy maximum
  • Commercial Non-Contracted
    • Payment based on charges
    • Coinsurance up to policy maximum
  • Self Pay
    • Individuals not otherwise eligible for uncompensated care discount policy


UIHC Policy Guidelines for Uncompensated Care Discount Percentages:

2016 Annual Income Guidelines for Uncompensated Care Eligibility Determination (Effective January 31, 2017):

Family Size Poverty Guidelines 200% 250% 300% 350%
1 $12,060 $24,120 $30,150 $36,180 $42,210
2 $16,240 $32,480 $40,600 $48,720 $56,840
3 $20,420 $40,840 $51,050 $61,260 $71,470
4 $24,600 $49,200 $61,500 $73,800 $86,100
5 $28,780 $57,560 $71,950 $86,340 $100,730
6 $32,960 $65,920 $82,400 $98,880 $115,360
7 $37,140 $74,280 $92,850 $111,420 $129,990
8 $41,320 $82,640 $103,300 $123,960 $144,620
* $4,160 $8,360 $10,450 $12,540 $14,630

(*) For family units over eight (8), add the amount shown for each additional member.
Source: Department of Health and Human Services - Federal Poverty Guidelines