Future for suburban hospital rests with Justice Department
The fate of a proposed $78 million, 83-bed hospital in West Des Moines, which would be the first new hospital in Greater Des Moines in decades, now rests with antitrust officials in Washington, D.C.
Central Iowa Health System and Mercy Medical Center, the state’s two dominant health-care providers, filed paperwork with the U.S. Department of Justice two weeks ago. Hospital executives are preparing to travel to the capital to discuss possible competition concerns face-to-face with government regulators.
“We’re kind of waiting to hear back from them,” said Sid Ramsey, CIHS’s vice president for business development and the executive in charge of CIHS’s effort to build the West Des Moines hospital. “We’re waiting for a date when we can sit down with them and do an informal review of our business plan and what we’ve done to date.”
Over the past eight months, a small group of executives from CIHS and Mercy have been meeting together to figure out ways to jointly build and run a hospital. Each hospital has committed three executives to the project. They have been meeting at least once a month, and sometime more frequently than that.
In February, CIHS Chief Executive Eric Crowell and David Vellinga, the CEO at Mercy, told the Business Record that they had agreed to extend their discussions about jointly building a hospital for another 30 days. At the time, the pair said their main hurdle would be gaining support from antitrust regulators.
Both Crowell and Vellinga, who are conducting all media interviews regarding the West Des Moines hospital together, declined to be interviewed for this article. They said in February they had resolved many concerns and that they were close to having a workable business model. Ideas that they agreed upon included several aspects of how the hospital would be managed.
Lawyers who specialize in antitrust issues have been called in to the meetings, as have consultants from Kurt Salmon Associates, Crowell and Vellinga said.
“They’re trying to give it their shot,” said Laura Wenman, Mercy’s spokeswoman.
Despite the efforts, a measure of pessimism remains. During the February interview, Crowell said he and Vellinga “remain pretty pessimistic” that Justice Department officials would approve their plan.
Last week, Ramsey said he wasn’t sure what decision Justice Department officials would make, but that any decision would let the two groups move ahead.
“It remains to be seen whether those are plans that are acceptable to the Department of Justice,” he said.
“Whatever the outcome, we’re going to have a clear picture in terms of what’s important to them and how we can shape our discussions and move things along.”
The hospitals have several options if the Justice Department rules against their plans for a joint facility.
CIHS has already filed an application called a certificate of need with Iowa officials that, if approved, would give it permission to build the hospital by itself. Mercy, too, could build its own hospital and has expressed interest in doing so on land it owns across the street from CIHS’s site.
CIHS’s application has been with the state’s Certificate of Need Program for roughly nine months and would have to be updated significantly, according to Barb Nervig, who is in charge of the department.
If the Justice Department rules in favor of the project, an entirely new certificate of need application would be required, she said. Crowell has said that a joint hospital could be twice as large as the one CIHS currently proposes because CIHS made its plans expecting Mercy would build a competing facility.
“No matter which way they go, and I’ve told their attorneys this, they’re going to have to do some updating,” Nervig said.
The first round of talks between the two health-care providers about building a West Des Moines hospital were broken off by CIHS at the end of 2001, mostly because of concerns that the project would be vetoed by antitrust officials.
Shortly afterward, CIHS announced plans to build a $78 million, 83-bed facility on its own.
It was then that Mercy said it would consider building its own hospital and Vellinga announced plans to buy the former Metropolitan Medical Center. Vellinga also said his hospital group would build an ambulatory surgical center in Ankeny.
Mercy spokeswoman Wenman said last week that the hospital expected to meet with Ankeny officials in the next six weeks and that construction on the facility could begin in June.
Last August, CIHS put its application for a certificate of need on hold. CIHS executives said they would spend the next six months working with Mercy on a joint facility.