Mercy Iowa City's sale to University of Iowa officially approved by bankruptcy court
A bankruptcy court approved the University of Iowa's purchase of Mercy Hospital in Iowa City on Monday.
The Bankruptcy Court for the Northern District of Iowa has officially handed over ownership of the 234-bed hospital and its assets to the university, who had submitted a winning bid of $28 million in an auction late last month. In a statement Monday, university officials and Mercy executives say they are "heartened to begin the planning to bring Mercy Iowa City" into the UI Health Care system.
"From the beginning, both our institutions have focused on bringing accessible health care to Iowans, regardless of their ability to pay," according to a joint statement from UI and Mercy Iowa City leadership Monday. "It is that same spirit of steadfast commitment to service that will be vital as we join our two organizations."
The anticipated merger is expected to take place in early 2024, officials said.
There are no immediate changes for patients, employees or physicians as hospital executives begin planning next steps. Patients at Mercy Iowa City are encouraged to schedule and go to appointments as usual.
Community providers not employed by UI Health Care can continue to practice at Mercy's facility under "an open medical staff model," officials said Monday. Those employees in good standing will be offered jobs at UI Health Care.
"Together, we will preserve and enhance access to quality health care and jobs for those throughout our region," according to officials' statement.
Months long whirlwind nears its end
The UI won the auction for the 150-year-old community hospital in Iowa City in an unusual turn of events last month after a previous $29 million winning bid by Mercy's top creditor was reversed.
More: University of Iowa awarded rights to Mercy Iowa City after talks with Preston Hollow stall
Texas-based investment firm Preston Hollow Community Capital was set to take over operations of Mercy after successfully beating out other contenders in an auction in early October, but that effort halted after Mercy reopened the auction process.
Preston Hollow, which had invested $42 million into the hospital in 2018, had initially won the bid using a combination of cash and some of the credit it had in Mercy. However, the hospital and the private equity firm disagreed over who would be responsible for covering Mercy's operating costs, leading to concerns over whether Preston Holly would be adequately invested in helping the hospital maintain its operations.
“Needless to say, this disagreement necessarily meant that the value of the final bid from Preston Hollow was materially different than what the Debtors and the Committee determined at the auction,” Daniel M. Simon, one of the attorneys for Mercy, said in court last month.
Hospital operations, staffing to remain unchanged
Once the deal is closed, the university plans to retain all medical staff in "good standing" with the hospital. Faculty appointments do not have to stay at the hospital and will not be required to remain at Mercy.
The university has also agreed to establish an advisory board comprised largely of community members independent from the hospital.
Additionally, the UI will invest heavily in hospital improvements, including improving infrastructure and IT services, a key point of emphasis in winning the bid. Preston Hollow's bid did not originally include money earmarked for future developments.
The university has committed to provide at least $25 million for medical equipment, roofing and general technology as Mercy integrates with the university's health care system.
Ryan Hansen contributed to this article.
Michaela Ramm covers health care for the Des Moines Register. She can be reached at mramm@registermedia.com, at (319) 339-7354 or on Twitter at @Michaela_Ramm
This article originally appeared on Des Moines Register: Mercy Iowa City sale to University of Iowa approved by bankruptcy court
