Mercy Medical Center officials announced this afternoon they have reached an agreement with Wellmark Blue Cross and Blue Shield that will allow Mercy to move forward immediately on construction of a new hospital in West Des Moines.

According to a Wellmark spokesperson, the 10-year contract will allow Mercy to open the hospital with 82 beds initially, but allow it to add beds as demand increases. Mercy has agreed to be reimbursed at rates “significantly lower” than at Mercy Capitol, which the new facility will replace.

“We are pleased to reach a resolution that will allow both Mercy and Wellmark to meet the future health care needs of the patients we serve,” Mercy President and CEO David Vellinga said in a prepared statement. Mercy expects to begin site preparation in mid-July.

Wellmark spokeswoman Angela Feig said Iowa Health – Des Moines is negotiating with Wellmark for a similar agreement to begin construction of a hospital that would be located just a block away.

Wellmark filed suit against Mercy, Iowa Health – Des Moines and the Iowa Department of Public Health in February in an effort to compel the state’s Health Facilities Council to review the projects. That council determined in January that the hospital projects were not subject to review because they are considered replacement or modernization projects, which don’t fall under its jurisdiction.

As part of the agreement announced today, Mercy will go forward with its plans to close Mercy Capitol once the new Mercy West Lakes Hospital is completed, and Wellmark will drop Mercy from the pending lawsuit.

The settlement agreement “ensures that our customers and their patients get maximum value in the West Des Moines facility while replacing an outdated facility with approximately the same number of beds,” Wellmark Chairman and CEO John Forsyth said.