Troubled Mercy Iowa City hospital suffers downgrade to 'substantial risk' level

Mercy Iowa City hospital, one of 23 affiliated hospitals of Des Moines, Iowa-based MercyOne, was downgraded to "Caa1" from "B1" because of what Moody's on March 16 called "severe cash flow deterioration."

The cash flow losses are largely due to elevated labor and supply costs as well as lower revenue cycle management capabilities following the implementation of a new billing system, Moody's said. The "Caa1" rating is categorized as "substantial risk."

Operating performance is not expected to reach breakeven level anytime soon.

"Mercy has continued to face challenges in securing a long-term strategic partner, high management turnover, and inability to achieve lasting performance improvement," the research note said.

Mercy Iowa City retained consultants Insight Health Partners in February after breaching debt coverage requirements.

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