RESPONSE TO DES MOINES REGISTER REQUEST FOR INFORMATION

August 14, 2016

Is Mercy seeking a Certificate of Need from the state to complete any
aspect of the $500 million project?
The proposed long-range campus plan involves renovation and modernization of
existing services and facilities. The plan does not involve any change to Mercys
licensed bed complement. Therefore, the proposed plan does not require Certificate
of Need review by the State Health Facilities Council.
All businesses delivering services to the community must invest in physical assets
to remain viable. Changes in patient care, medical technologies and daily
operations have resulted in challenging demands on Mercys current patient towers,
which were built in the 1970s. Based on the changes in the clinical complexity and
needs of treating inpatients today and given the need for a digital supportive
structure, facilities need to be flexible and adaptive to anticipate continued changes
in health care treatment and support needs. As the project evolves over the next
decade, the investment is reasonable for an asset that is expected to serve the
community for many years, as the current patient towers have done.
The proposed campus master plan is a rational approach to address Mercys facility
needs and meet the growing demands for care from our community. Mercy looks
forward to continued dialogue with the City of Des Moines and with the community
about this important long-term plan for Mercy services and facilities.
How will Mercy pay for this project?
Mercy and the Sisters of Mercy are known as cautious stewards of limited resources,
and our current financial position is sound. The proposed campus plan has been
thoroughly evaluated by two outside firms and our internal financial team for its
impact on the long-range financial performance of Mercy. We believe the timing of
this project is warranted given a growing need for care in our community and the
challenges of our current inpatient facility. The project will be funded with a mix of
cash reserves and borrowing.
Mercy and its partners made significant investment in the downtown campus
throughout the past 15 years -- including creation of the East Tower, renovation of
our Emergency and Surgery departments and, most recently, creation of the Mercy
Childrens Hospital and new Behavioral Health patient care areas. The cost of this
next phase of development over the next decade if approved by the City of Des
Moines and Mercys governing bodies will be approximately the same as the
investment made on these projects. The proposed Campus Master Plan is the next
step in Mercys efforts to improve and modernize the downtown campus and invest
in the northern region of the City of Des Moines.
Other information
A new patient tower will be more cost-effective than trying to address facility
challenges by renovating the existing patient towers. We completed an exhaustive

review of renovating the current patient towers as our first objective for this phase
of our ongoing campus plan. Unfortunately, the towers are not designed to allow
for renovation to achieve the desired healing environments and more extensive
regulatory requirements anticipated in the future. A replacement patient tower
option gives Mercy the opportunity to build a facility that is energy efficient and
incorporates evidence-based design to improve workflow, infection control, and
patient and employee safety. Health care organizations have an obligation to keep
their facilities modern, taking advantage of innovations that improve safety and
outcomes, and creating healing environments. Health care facilities, specifically
inpatient acute care hospitals, tend to be more expensive to build on a cost per
square foot basis, due to an incredible maze of regulatory requirements and life
safety codes we must meet.
Mercy is not seeking or receiving any development incentive payments from the
City for this project, as many private developers have received over the past several
years for investments of similar magnitude and scope in Des Moines. The proposed
campus master plan project will not raise the cost of health care to insurance
customers or other consumers. The capital expenditures for the facility have been
built into Mercys 10-year capital budget without any price increase beyond Mercys
normal adjustments for inflation. Also, in the past year, Mercy paid approximately
$1.86M in property taxes for the more than 50 properties Mercy has throughout the
Des Moines metro area.
Mercys sound financial position allows us to reinvest in facilities and technology to
meet future health needs. It allows us to invest in delivering world-class health care
and in improvements in the health of the community by working to prevent and
cure illness. Mercy is also able to provide jobs for people who live in the City of Des
Moines and surrounding areas. Mercy and our physicians and staff contribute to the
local economy through the purchase of goods and services, and payment of sales
tax.
We are also confident this project will contribute to overall improvement in the
northern region of Des Moines, and enhance the connection of the region to the
downtown area. Mercy is partnering with the City, with our neighbors and with local
neighborhood initiatives (like the 6th Avenue Corridor project) to assure the project
positively impacts businesses and those who live and work in the surrounding area.
A portion of the project budget includes enhancements on the borders and
thoroughfares of Mercys campus to support surrounding development planned by
the City of Des Moines and other community organizations.