Controversial psychiatric hospital, first of its kind in Iowa, approved for Quad Cities

State regulators on Thursday approved a proposal to build Iowa’s first private, free-standing psychiatric hospital.

A national company, Strategic Behavioral Health, plans to build the $15 million, 72-bed hospital in Bettendorf. The project was opposed by the Quad Cities’ two main health-care systems, which testified that they already offer sufficient services and would be harmed by a new facility built by the for-profit company.

The Iowa Health Facilities Council, which had twice previously deadlocked 2-2 on the proposal, voted 4-1 in favor of it Thursday. This was the first time the full council considered the matter. 

Supporters testified that the new project would provide desperately needed mental-health services for eastern Iowa. They told the Iowa Health Facilities Council that too many Iowans with mental illness spend hours or even days in hospital emergency rooms, while staff members try to find an open psychiatric bed somewhere in the state.

Supporters also told regulators the psychiatric hospital could help take pressure off the state’s jails, where many people with mental illness wind up because of the lack of treatment options.

“What we are doing now to them is criminal – it is criminal. And we as a state ought to be ashamed of ourselves,” Tama County Magistrate Richard Vander Mey told the council Thursday morning.

Dawn Smith, who is chairwoman of the Cedar County Board of Supervisors and helps oversee a regional mental-health authority, said she’s tired of hearing about Iowans waiting days for treatment or being sent to jail for behaviors related to mental illness. She said she visited Strategic Behavioral Health mental hospitals in Colorado and Wisconsin and came away impressed. She urged the state council to let the national company set up a hospital in the Quad Cities.

“Competition is good for business, and it is a basis for our society,” she said.

Company President Jim Shaheen said Strategic Behavioral Health carefully chooses locations for its psychiatric facilities. "We came to this state because we saw the crisis," he said. "...This patient population has been marginalized, has been kicked to the curb."

Near the end of the nine-hour hearing, council member Roberta Chambers said she was swayed by members of the public who testified about trouble finding care in mental-health crises.

"I think it's time that we listened to those people," said Chambers, a retired lawyer from Corydon. 

Representatives of existing mental-health agencies in the Quad Cities told regulators they have been expanding their inpatient and outpatient services, and they said they can handle the area’s needs. They said the proposed facility, owned by a for-profit company, would cherry-pick patients with financial means.

“Approval of this application would rip apart the safety-net system,” said Dennis Duke, president of the Robert Young Center. That agency, based in Rock Island, Ill., provides mental-health services and is part of the UnityPoint hospital system.

The Iowa Health Facilities Council’s role is to determine if large health-care projects are necessary or if they would create expensive duplication of services. If it approves of a project, it issues a “certificate of need.”

The council considered the Bettendorf proposal twice last year, but deadlocked on 2-2 votes, with a member absent both times. The situation sparked criticism of the board, including by then-Gov. Terry Branstad, who suggested the council had become a way for existing health-care companies to quash potential competition.

The council’s new chairman, H.W. Miller of Bettendorf, noted at the outset of Thursday’s hearing that he retired in 2015 as a longtime family-practice physician for the Genesis health system, one of the main opponents of the proposed psychiatric hospital. He said he believed he could give an unbiased assessment of the controversy, and he asked if anyone had an objection to him presiding. No one did. If they had, and Miller had recused himself, the parties could have risked having another 2-2 tie vote. He wound up voting for the proposal. 

Shaheen said the company hopes to break ground soon, and have the new hospital up and running within a year-and-a-half. 

The Bettendorf facility will be the only free-standing psychiatric hospital in Iowa other than state-owned institutions in Independence and Cherokee. Strategic Behavioral Health, which is based in Tennessee, owns 10 psychiatric hospitals in six states, and is building an 11th.

Leaders and supporters of the existing Quad Cities health systems testified Thursday that they’ve increased their inpatient mental-health units and plan to keep doing so. Doug Cropper, president of the Genesis Health System, displayed charts showing that his hospital’s inpatient psychiatric unit is almost never full. Cropper added that the main focus in the community is improving outpatient services and residential programs, as alternatives to inpatient units. The Strategic Behavioral Health proposal focuses on building a large mental-health hospital.

“It’s the wrong investment,” Cropper said.

Cropper cited a financial report from Strategic Behavioral Health showing that it took in $140 million in revenues last year but spent just $114,000 on charity care. That amounted to just .08 of 1 percent, he said. His hospital’s mental-health unit, by contrast, had $14.5 million in revenue, and spent $825,000 on charity care, or more than 5 percent.

“This is a mission service for Genesis. We hope to just break even. We’re not trying to make a profit,” he said.

Shaheen, the company president, disputed Cropper's claim, saying the Genesis system is more profitable than Strategic Behavioral Health.

Supporters of the current Quad Cities health systems cited a recent study commissioned by the United Way. The study found that there is a strong need for more coordinated mental health support services in the area, but not a need for more inpatient psychiatric beds.

Davenport Mayor Frank Klipsch told the state council that local leaders approached health system administrators several years ago and urged them to strengthen their mental health services.

“We asked them to step up, and they did step up,” he said. The mayor said he wouldn’t want to see an outside company come in and take the most profitable patients, hurting the longstanding service providers.

But Mike Garone, Strategic Behavioral Health's development director, urged the council not to leave the issues to the longstanding Quad Cities agencies.

"They've had decades to fix a broken system, and they keep asking for more time," he said.