University of Iowa plans to acquire Mercy Iowa City, a 234-bed, financially troubled hospital that is resisting an investment firm's takeover, according to a news release shared with Becker's.
Mercy Iowa City has filed for Chapter 11 bankruptcy in the Northern District of Iowa. Included in that filing is a reference to a letter of intent between Mercy Iowa City and the State of Iowa that outlines the plan to transition Mercy Iowa City to become part of UI Health Care. The affiliation requires approval from the university board of regents, state of Iowa, and the bankruptcy court.
"We have always maintained great respect for Mercy Iowa City, knowing the vital role it has played in our community since 1873," University of Iowa President Barbara J. Wilson and College of Medicine Dean Denise J. Jamieson, MD, said in a joint statement. "As members of the same community, many of us know and care about people who work at Mercy Iowa City. We want you to know that leaders from the University of Iowa, UI Health Care, and Mercy Iowa City are working together to avoid significant disruption. Although many decisions will be in the hands of the bankruptcy court, we share a goal to preserve and enhance local and regional access to quality healthcare and jobs."
Mercy Iowa City has seen tumult in recent months. In late July, its biggest investor — Preston Hollow Community Capital — filed a petition for receivership of the hospital. The Texas-based investment firm argued that the hospital is "in financial freefall" and sought to take over operations.
"The recent actions of one of our largest creditors has significantly and negatively impacted the hospital and resulted in this bankruptcy filing," Mark E. Toney, chief restructuring officer of the hospital, said in a news release. "The Board and management moved rapidly to secure a partner to maintain health care in our community."
Before the actions of Preston Hollow Community Capital, in April, Mercy Iowa City announced the end of its management agreement with Des Moines, Iowa-based MercyOne, which had been in place since 2017. At the same time, Mercy Iowa City named Tom Clancy, PhD, RN, president and CEO and hired management and advisory firm ToneyKorf Partners to develop and implement an operational improvement plan.
The changes followed a downgrade from Moody's in March due to "severe cash flow deterioration" and headwinds with high management turnover and performance improvements.
UI Hospitals & Clinics is the "clinical nucleus" of UI Health Care and includes the main adult-care hospital, a specialized disabilities and development outpatient facility (serving pediatric and adult patients), and UI Stead Family Children's Hospital. As a system, it has 866 inpatient beds and more than 11,200 employees.