— Mercy Iowa City is holding a series of “all staff” meetings Wednesday to announce upcoming changes for the 194-bed hospital — including appointment of a new CEO, the hire of another operations-improvement consultant, and a new plan to end its relationship with MercyOne.
“We are working with MercyOne in Des Moines to phase out of our administrative and management services agreement,” according to a companywide email Mercy Board of Directors Chair Tom Clancy sent Tuesday. “During this transition, MercyOne will continue to provide services to us as needed.”
MercyOne System Vice President Mike Trachta — who has been serving as acting Mercy Iowa City CEO since 2021 — will return to a full-time role at MercyOne in Des Moines, according to Clancy, who in the email announced he’ll be stepping in as Mercy Iowa City’s new chief executive officer.
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The 13-member board — which Clancy heads and which includes Trachta — appointed him to lead Mercy as its new CEO, given his “long and rich history with Mercy.”
“My wife, Renee, and I worked here as nurses in the ‘90s,” he wrote. “We live in Iowa City and have a deep affection for the mission of the Sisters of Mercy.”
Clancy, in his email, acknowledged fiscal challenges facing the hospital and announced the board has hired ToneyKorf “to develop and implement a plan to position Mercy Iowa City to improve its operations.”
ToneyKorf Partners is a management and advisory firm specialized in “helping health care organizations address complex and critical challenges.”
“They have worked with us for a few months on various reviews, including the forecasting cash flow,” Clancy wrote.
The email didn’t say how much Mercy Iowa City is paying the New York-based consultant that, according to its website, focuses on “transforming organizations by increasing revenue, reducing costs, and incorporating key constituents into the processes.”
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Last summer, Mercy Iowa City retained a different “strategic and operational performance improvement” consultant — Insight Health Partners — after breaching debt coverage obligations, according to the Municipal Securities Rulemaking Board.
Moody’s Investors Service last month downgraded the hospital’s credit rating — again — from B1 to Caa1, putting it four ranks from the lowest rating. A Moody’s report in March credited the downgrade to, among other things, “severe cash flow deterioration, from historically weak levels, which has resulted in material and rapid cash burn and is likely to necessitate the funding of a debt service reserve at (2023 budget year end.)”
That report indicated Mercy’s “cash flow losses are largely reflective of elevated labor and supply costs and a slowed revenue cycle after implementation of a new billing system.”
“While labor and inflation pressures are sector-wide challenges, the impact to Mercy has been disproportionate,” according to Moody’s. “Additionally, sluggish recovery of inpatient volumes and ongoing shifts in care to outpatient settings has impaired demand, with inpatient volumes continuing to lag pre-COVID levels.”
Moody’s reported Mercy Iowa City had $74.4 million in outstanding debt at the close of the 2022 budget year last June.
In filings with the rulemaking board, Mercy in December reported net assets at $34.5 million — down $60.3 million, or 64 percent, from $94.9 million in December 2021. Mercy’s cash and cash equivalents fell from $22.1 million in the 2021 budget year to $5.8 million at the end of fiscal 2022; its total assets in December were down to $179.1 million from $209.9 million six months earlier in June.
A recent Mercy disclosure showed its occupancy for the quarter that ended Dec. 30 was down to 27 percent from 31 percent during the same period in 2021. Its “patient days” were down from 6,179 in 2021 to 5,415; total surgeries dropped from 1,858 to 1,742.
Mercy Iowa City is one of 23 hospitals affiliated with the Des Moines-based MercyOne Network, which systemwide encompasses more than 18,000 employees spread across more than 230 care locations.
The Iowa City campus instigated a management partnership with MercyOne on June 1, 2017 — paying the oversight agency an annual $2 million “management service fee.” But Mercy Iowa City in June 2021 said it wanted out and to align with a different and larger organization.
MercyOne officials at that time told The Gazette the decision was made jointly in light of Mercy Iowa City’s “historical operating challenges, the impact of the pandemic and the changing health care dynamics in the market.”
“At this time, MercyOne simply cannot provide that level of integration because we are in the midst of more fully aligning our internal structure,” MercyOne officials.
Mercy Iowa City officials said they wanted a new partner capable of offering broader access to infrastructure, better purchasing power, and more clinical and operational support.
MercyOne at that time — like it’s doing today — committed to providing services during Mercy Iowa City’s transition.
“We are an independent hospital, and given the market dynamics as well as challenges from the health care industry, we need to integrate much more closely with a larger health system so we can achieve economies of scale aligning with our long-term goals,” Mercy Iowa City spokesman Aaron Scheinblum said of the separate from MercyOne June 30, 2021.
A Gazette investigation found Mercy’s search for a new owner yielded takeover offers from Mercy Medical Center in Cedar Rapids, UnityPoint Health, Marshfield Clinic Health System of Wisconsin, and the University of Iowa Hospitals and Clinics.
The university’s $605 million offer to take ownership of the community hospital proposed making Mercy the “centerpiece” of a new UIHC “community division.” But none of the deals materialized, and Mercy Iowa City in July 2022 announced it was ending its search for a new partner or owner.
“While we have received several proposals and vetted a number of potential partners, we have not identified a partner that is a good long-term fit for us,” Trachta wrote in an email at the time. “Therefore, we have made the decision to end our search for a strategic partner and remain an affiliate of MercyOne.”
www.thegazette.com
“We are working with MercyOne in Des Moines to phase out of our administrative and management services agreement,” according to a companywide email Mercy Board of Directors Chair Tom Clancy sent Tuesday. “During this transition, MercyOne will continue to provide services to us as needed.”
MercyOne System Vice President Mike Trachta — who has been serving as acting Mercy Iowa City CEO since 2021 — will return to a full-time role at MercyOne in Des Moines, according to Clancy, who in the email announced he’ll be stepping in as Mercy Iowa City’s new chief executive officer.
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The 13-member board — which Clancy heads and which includes Trachta — appointed him to lead Mercy as its new CEO, given his “long and rich history with Mercy.”
“My wife, Renee, and I worked here as nurses in the ‘90s,” he wrote. “We live in Iowa City and have a deep affection for the mission of the Sisters of Mercy.”
Clancy, in his email, acknowledged fiscal challenges facing the hospital and announced the board has hired ToneyKorf “to develop and implement a plan to position Mercy Iowa City to improve its operations.”
ToneyKorf Partners is a management and advisory firm specialized in “helping health care organizations address complex and critical challenges.”
“They have worked with us for a few months on various reviews, including the forecasting cash flow,” Clancy wrote.
The email didn’t say how much Mercy Iowa City is paying the New York-based consultant that, according to its website, focuses on “transforming organizations by increasing revenue, reducing costs, and incorporating key constituents into the processes.”
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Last summer, Mercy Iowa City retained a different “strategic and operational performance improvement” consultant — Insight Health Partners — after breaching debt coverage obligations, according to the Municipal Securities Rulemaking Board.
Financial strife
Moody’s Investors Service last month downgraded the hospital’s credit rating — again — from B1 to Caa1, putting it four ranks from the lowest rating. A Moody’s report in March credited the downgrade to, among other things, “severe cash flow deterioration, from historically weak levels, which has resulted in material and rapid cash burn and is likely to necessitate the funding of a debt service reserve at (2023 budget year end.)”
That report indicated Mercy’s “cash flow losses are largely reflective of elevated labor and supply costs and a slowed revenue cycle after implementation of a new billing system.”
“While labor and inflation pressures are sector-wide challenges, the impact to Mercy has been disproportionate,” according to Moody’s. “Additionally, sluggish recovery of inpatient volumes and ongoing shifts in care to outpatient settings has impaired demand, with inpatient volumes continuing to lag pre-COVID levels.”
Moody’s reported Mercy Iowa City had $74.4 million in outstanding debt at the close of the 2022 budget year last June.
In filings with the rulemaking board, Mercy in December reported net assets at $34.5 million — down $60.3 million, or 64 percent, from $94.9 million in December 2021. Mercy’s cash and cash equivalents fell from $22.1 million in the 2021 budget year to $5.8 million at the end of fiscal 2022; its total assets in December were down to $179.1 million from $209.9 million six months earlier in June.
A recent Mercy disclosure showed its occupancy for the quarter that ended Dec. 30 was down to 27 percent from 31 percent during the same period in 2021. Its “patient days” were down from 6,179 in 2021 to 5,415; total surgeries dropped from 1,858 to 1,742.
MercyOne partnership
Mercy Iowa City is one of 23 hospitals affiliated with the Des Moines-based MercyOne Network, which systemwide encompasses more than 18,000 employees spread across more than 230 care locations.
The Iowa City campus instigated a management partnership with MercyOne on June 1, 2017 — paying the oversight agency an annual $2 million “management service fee.” But Mercy Iowa City in June 2021 said it wanted out and to align with a different and larger organization.
MercyOne officials at that time told The Gazette the decision was made jointly in light of Mercy Iowa City’s “historical operating challenges, the impact of the pandemic and the changing health care dynamics in the market.”
“At this time, MercyOne simply cannot provide that level of integration because we are in the midst of more fully aligning our internal structure,” MercyOne officials.
Mercy Iowa City officials said they wanted a new partner capable of offering broader access to infrastructure, better purchasing power, and more clinical and operational support.
MercyOne at that time — like it’s doing today — committed to providing services during Mercy Iowa City’s transition.
“We are an independent hospital, and given the market dynamics as well as challenges from the health care industry, we need to integrate much more closely with a larger health system so we can achieve economies of scale aligning with our long-term goals,” Mercy Iowa City spokesman Aaron Scheinblum said of the separate from MercyOne June 30, 2021.
A Gazette investigation found Mercy’s search for a new owner yielded takeover offers from Mercy Medical Center in Cedar Rapids, UnityPoint Health, Marshfield Clinic Health System of Wisconsin, and the University of Iowa Hospitals and Clinics.
The university’s $605 million offer to take ownership of the community hospital proposed making Mercy the “centerpiece” of a new UIHC “community division.” But none of the deals materialized, and Mercy Iowa City in July 2022 announced it was ending its search for a new partner or owner.
“While we have received several proposals and vetted a number of potential partners, we have not identified a partner that is a good long-term fit for us,” Trachta wrote in an email at the time. “Therefore, we have made the decision to end our search for a strategic partner and remain an affiliate of MercyOne.”
Mercy Iowa City announces end to MercyOne relationship, again
Mercy Iowa City this morning is holding a series of “all staff” meetings to announce upcoming changes for the 194-bed hospital — including the appointment of a new CEO, the hire of a operations-improvement consultant, and a new plan to end its relationship with MercyOne.
www.thegazette.com
