Sale, future of Mercy remains in limbo
Full day of bidding is not enough
An auction for Mercy Iowa City’s assets began Wednesday as the University of Iowa Hospitals and Clinics and other bidders seek control of the long-time local hospital.
Mercy Hospital and its satellite clinics filed for Chapter 11 bankruptcy in August, leaving the future of Iowa City’s oldest hospital in doubt. The same day the bankruptcy filing was announced, the University of Iowa said it would bid for hospital control.
At least one other competing bid forced the exchange into a private auction, which started at 10 a.m. Wednesday in Chicago.
A late Wednesday filing confirmed the auction was ongoing and would be continued “at a later date.” Court documents did not reveal who made the competing bid.
A sale hearing will be held once bidding has concluded, scheduled for Oct. 10.
The Bankruptcy Court for the Northern District of Iowa will decide whether to approve the sale. The bidding process is not expected to extend past the Oct. 10 hearing date.
“Multiple” bids have been placed for the beleaguered Iowa City hospital, the UI confirmed through a release on The Loop, its medical communication website.
“If the University of Iowa bid is selected and approved by the courts on Oct. 10, we will begin the process of bringing our two organizations together,” the university health care release read.
The State Board of Regents directed the UI in August to place a $20 million bid.
An acquisition of Mercy would include 14 buildings largely located on the
Mercy Iowa City campus and smaller offices in North Liberty, Kalona, Tipton and Williamsburg.
Local hospital operations have continued as normal throughout the proceedings.
Objection filed to increase debt to MediRevv
If the University of Iowa Hospitals and Clinics were to assume control of Mercy, their bid would be considered a stalking horse bid – one where Mercy retains pre-sale receivables, including debts to companies like MediRevv.
MediRevv’s attorneys filed a “limited” objection on Wednesday morning, claiming the filing price owed should increase by about $150,000, from nearly $1.19 million to more than $1.34 million.
The Coralville-based company believes the error was intentional, as was understating the number of contract amendments.
MediRevv attorneys also partially objected to a sale to the “stalking horse” without knowing the company’s role in the sale.
MediRevv claimed in its filing that a future outline does not exist to make clear whether its agreement with Mercy to provide revenue cycle management services would continue through the sale or stop at that time.
Mercy wants to stay local; bankruptcy was due to mismanagement, capital firm says
The 194-bed Mercy Hospital has served area residents since 1873 and the organization would like to keep ownership in the Iowa City area.
“We recognize the outcome is in the hands of the court, but we share a goal to preserve the ability to offer health care access to a wide variety of individuals in the community and beyond,” UI President Barbara Wilson said during the special Regents meeting in August.
She said the potential acquisition aligns with the school’s vision for the future.
“This is one way to continue to meet the needs of this community and around the state,” Wilson said. “Our goal is to continue to provide health care, make sure we are serving the needs of the state.”
In a statement made after the filing was announced, Mercy Iowa City’s Chairman of the Board and CEO Tom Clancy said bankruptcy was the “best” step forward to “preserve our hospital operations.” Clancy was named CEO in the spring.
Dallas-based Preston Hollow Community filed a motion in July to try and take over the business operations of Mercy Hospital.
Preston Hollow Community Capital officials accused Mercy Iowa City’s board of directors and management of making a series of decisions that jeopardized the facility’s ability to pay off its debts, including $62 million in publicly issued bonds and $40 million in pension plans.
Mercy has struggled financially
Preston Hollow said Mercy Iowa City was in “financial freefall” in its July petition to the court.
The company invested over $40 million in Mercy in 2018 but said the hospital suffered unsustainable losses, including a $2.6 million monthly “cash burn.”
Mercy Iowa City’s financial projections revealed that the system’s liquid assets were set to fall below $5 million on Sept. 29, a mark they feel cannot sufficiently maintain full operations.
The hospital announced plans to leave its partnership with MercyOne, the largest statewide healthcare system, in April, less than seven years after joining.
Previous plans to exit the MercyOne partnership failed in 2021.
The hospital’s credit rating was downgraded in March by Moody’s, a financial services company that analyzes credit ratings and provides risk analysis for investors.
The company’s analysis said the hospital is experiencing “continued weak cash metrics” and a “limited clinical array” compared to its in-town competitor, the University of Iowa Hospitals and Clinics.
The Des Moines Register reported that Mercy Iowa City hired New Yorkbased financial management firm ToneyKorf Partners, which specializes in helping struggling healthcare systems improve their operations.
Michaela Ramm contributed reporting.
Ryan Hansen covers local government and crime for the Press-Citizen. He can be reached at rhansen@presscitizen.com or on X, formerly known as Twitter, @ryanhansen01.