The University of Iowa has signed a letter of intent to acquire “substantially all the operating facilities and key assets” of Mercy Iowa City — which has filed for bankruptcy — in hopes of ”preserving the continuity of care for patients and continuing opportunities for physicians and employees.“
Mercy on Monday filed a voluntary petition for reorganization in the U.S. Bankruptcy Court in the Northern District of Iowa — and administrators expect to seek approval of the sale process with UI serving as the “stalking horse bidder.”
The goal, according to a Mercy news release, is to transition the 150-year-old community hospital and its employees to a new owner and operator that “intends to preserve the services provided by the hospital to the community.”
UIHC in 2022 offered $605 million to take ownership of the community hospital and make it the “centerpiece” of a new UIHC “community division,”
according to an investigation by The Gazette.
That deal, though, fell through and never materialized. And Mercy, for the time being, remained in partnership with MercyOne, of Des Moines.
“Mercy Iowa City believes this plan is the best path forward to preserve our hospital operations,” Mercy CEO and board chairman Tom Clancy said in a news release Monday. “As we implement this plan, our dedicated Mercy Iowa City staff remain steadfast in their commitment to provide compassionate care to our community, just as we have since 1873.”
In announcing the bankruptcy filing and acquisition, Mercy officials confirmed the hospital and its clinics remain open — and employees, physicians, and other providers are continuing to focus on providing care to patients and the community.
Mark Toney — recently appointed as Mercy’s chief restructuring officer after the hospital hired ToneyKorf Partners LLC as its “health care turnaround professional and fiduciary” — in a statement Monday said a bondholder’s recent demand for a court-appointed receiver played into Mercy’s bankruptcy filing and the UIHC acquisition.
“The recent actions of one of our largest creditors has significantly and negatively impacted the hospital and resulted in this bankruptcy filing,” Toney said. “The board and management moved rapidly to secure a partner to maintain health care in our community.”
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Clancy added a note of gratitude for UIHC — given the bondholder Preston Hollow Community Capitol, which invested $41.8 million in Mercy’s 2018 bond series, and Computershare Trust Company wanted Peter Chadwick of Berkeley Research Group to serve as Mercy’s receiver.
In court filings, the trust company and bondholder said Mercy owes $63 million on publicly-issued bonds and the receiver would "take operational control of the hospital facilities, maintain and preserve the bondholders’ real property and personal property collateral, receive and recover funds and proceeds constituting collateral, and, if necessary, conduct a process for the sale or monetization of the collateral and hospital facilities, including, without limitation, an affiliation, joint venture or some other strategic transaction with another health care provider or providers.“
“We are deeply appreciative of the university for finalizing an agreement that, if approved, will allow us to emerge from this process with a more sustainable future,” CEO Clancy said in a statement.
In arguing for a court-appointed receiver, the bondholder revealed “confidential” financial reports — showing, among other things, that Mercy was headed for a “cash horizon event” in mid- to late-October.
Documents show Mercy’s liquidity has dropped about $40 million, or 52 percent, over the last five months and its cash flow projections have plummeted from $18.4 million in June to a forecast $1.2 million by October.
Dipping below $5 million by September would put Mercy, according to its investors, at “a level insufficient to maintain ongoing operations.”
The University of Iowa has signed a letter of intent to acquire “substantially all the operating facilities and key assets of Mercy Iowa City — which has filed for bankruptcy — in hopes of ”preserving the continuity of care for patients and continuing opportunities for physicians and employees.“
www.thegazette.com
