University of Iowa to buy Mercy Hospital after bankruptcy filing

August 8, 2023 by No Comments

On Monday, Mercy Iowa City revealed its commitment by signing a Letter of Intent with the University of Iowa, a state institution, outlining a strategic plan. This plan entails the transfer of the majority of Mercy’s operational facilities and vital assets to the University. The primary aim is to ensure the seamless continuation of patient care, while also maintaining opportunities for medical professionals and staff members.

To execute this strategy, Mercy Iowa City took a step forward by submitting a voluntary Chapter 11 bankruptcy reorganization petition to the U.S. Bankruptcy Court in the Northern District of Iowa.

Mercy intends to pursue authorization for a sales process, in which the University will take on the role of the “stalking horse bidder.” The overarching objective is to facilitate the transition of the hospital and its workforce to new ownership and management that are committed to upholding the essential services offered to the local community.

On July 24, Preston Hollow Community Capital, the largest investor in Mercy Iowa City Hospital, initiated legal actions in Johnson County Court to instate a receivership for assuming control of the hospital’s operations.

According to the filed documents, Mercy’s financial stability has significantly declined by $40 million over a span of nine months. If the current trajectory persists, the hospital may face financial instability that could lead to closure by September 29.

Despite these challenges, Mercy Iowa City emphasizes that both its hospital and clinics remain operational. Employees, physicians, and healthcare providers continue to prioritize patient care and community well-being.

In conjunction with the accelerated Chapter 11 filing, Mercy Iowa City has submitted a motion to the Court, seeking permission to utilize its available cash and investments to sustain ongoing operations.

Additionally, Mercy has requested that the Court authorize the disbursement of wages and benefits to employees for their regular work during this period.

While operating under Chapter 11 protection, Mercy retains the ability to conduct business as usual and fulfill financial obligations to suppliers for goods and services rendered after the initiation of bankruptcy proceedings.

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