Former CFO, COO sue bankrupt Iowa hospital for severance

Two former executives of Mercy Iowa City are suing the hospital for allegedly shorting their severance payments, The Gazette reported Sept. 12. 

The lawsuit was filed July 24 by Dawna Miller, the hospital's former CFO, and Judy Andronowitz, its former clinic chief operating officer. Both were terminated in August 2022 as the hospital announced its search for a new strategic partner had failed and that it would keep its affiliation with Des Moines-based MercyOne. 

Both women's severance agreements promised them 12 months' salary if employment ended "as a result of a reduction in force or material position redesign after one year of continued service." The hospital paid these amounts but not "additional payments that are due and owing," according to the lawsuit. 

The pair allege the hospital has not responded to their demands or provided an explanation for withholding payment. The lawsuit does not specify how much the former executives are seeking or what sort of additional payments are owed. 

"Miller and Andronowitz reasonably anticipate that Mercy Hospital will not pay any of the additional amounts owed under the offer letters and severance agreements," the lawsuit says. "Mercy Hospital is aware of its contractual obligation to pay plaintiffs the severance owed them, and its refusal to pay the additional severance is intentional."

The former executives seek the payment owed, plus interest and the cost of attorney fees and damages. 

Mercy Iowa City filed for Chapter 11 bankruptcy Aug. 7. The filing includes a reference to a letter of intent between Mercy Iowa City and the state of Iowa that outlines a plan to transition the hospital to become part of the University of Iowa Health Care. Iowa City-based University of Iowa has offered to buy all of Mercy's assets for $20 million; the hospital owes secured creditors $63 million, and potentially millions more to unsecured creditors, like the plaintiffs in 18 unresolved legal disputes. 

Mercy recently changed the original terms of the bankruptcy ruling that required any bidders to keep the facility a hospital. The system has extended its sale deadline to Oct. 2 and will now take other bids from developers. 

Mercy Iowa City told Becker's it does not discuss current or former personnel matters.

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