The University of Iowa’s final but unsuccessful bid to win the assets of Mercy Iowa City — as part of its filing for Chapter 11 bankruptcy — was $28 million, plus an additional commitment of at least $25 million in “immediate facility upgrades,” new UI Health Care Vice President for Medical Affairs Denise Jamieson said in a question-and-answer about the unrealized Mercy deal.
That primary UI bid of $28 million was $8 million above the $20 million the university offered as Mercy’s “stalking horse bidder” — setting the low bid for the bankruptcy sale and requiring any competing bidder to top it by at least $900,000, an amount that included a fee for breaking up the UI-Mercy arrangement.
Mercy’s largest bondholder Preston Hollow Community Capital, in a drawn-out auction that spanned nearly a week, outbid the university — partnering with American Healthcare Systems in committing to invest an undisclosed amount into the struggling Mercy to sustain it as a community hospital.
Jamieson, in her Q&A published on the UI Health Care communications site Monday, did not disclose Preston Hollow’s final winning bid. But, referencing Mercy’s bid procedures outlining its obligation to choose the “highest or otherwise best qualified bid,” Jamieson suggested the university made the best offer.
“We strongly believed our proposal was in the best interest of Mercy Iowa City, its employees, its patients, as well as our own employees,” she said. “We were disappointed in the outcome.”
Mercy owes Preston Hollow and master trustee Computershare nearly $63 million, along with tens of millions more to other secured and unsecured creditors. The hospital’s pension plan also is not fully funded — leaving thousands of employees and retirees stressed about their financial nest eggs.
A bankruptcy judge gets the final say on whether the Preston Hollow bid is the “highest or otherwise best” offer. A date for that hearing has not yet been reset — after the longer-than-expected auction delayed the original hearing date last week.
Preston Hollow announced as part of its transition from the 150-year-old Mercy Hospital to a new community hospital that it and American Healthcare Systems will meet with existing Mercy doctors, nurses, and other employees “to hear their feedback and recommendations, answer questions, and establish the partnership necessary to continue meeting the hospital’s mission in the years to come.”
AHS leadership has told The Gazette they’ve bought the assets of several struggling community hospitals and haven’t used it as an opportunity to conduct mass layoffs.
Newsletter Signup
Delivered to your inbox every day
In Jamieson’s Q&A on Monday, she said the university also would have spent $23 million making Mercy employees UI employees — given salary and benefit investments.
“The University of Iowa made a strong bid for Mercy Iowa City, and in seeking to preserve the stability of our health care system, we saw a path to serve more Iowans,” she said.
In the days leading up to the auction, UI administrators — assuming they would win — started reaching out to Mercy employees to arrange meetings about the anticipated takeover, according to a Mercy email obtained by The Gazette.
But Preston Hollow’s secured debt allowed them the ability to “credit bid” — when a secured creditor can bid the debt a debtor owes them in an auction for the assets. Given Mercy’s debt, Preston Hollow could have credit bid up to nearly $63 million.
In hopes Preston Hollow wouldn’t do that, Mercy worked into its bidding procedures language discouraging credit bidding — including one clause allowing bondholders to become “consultation parties” so long as they promised in writing not to credit bid.
When asked in the Q&A what Jamieson hopes will come of the new Mercy structure, which will keep it a competitor rather than an affiliate, she was heartened by its sustained health care focus.
“It’s our understanding that the selected bidder intends to keep Mercy Iowa City as a hospital,” she said. “That’s positive, and we plan to support the best interests of our shared patients, local health care providers, and the community.”
UIHC won’t be involved, she said, but, “We hope the selected bidder invests in Iowa, its people, and its economy.”
To the question of why the university started down the path of purchasing Mercy, Jamieson said it was for “the right reasons.”
“Out of a strong need to protect and enhance access to quality health care and jobs in our community,” she said. “I was also struck by how deeply our leaders and employees care about the people who work at Mercy Iowa City and their patients.”
As for what’s on tap for the university, Jamieson said “strategic growth.” That, she said, includes a half-billion-dollar hospital under construction in North Liberty and a larger and more expensive new inpatient tower on the main campus.
UI Health Care also is undergoing hundreds of millions in upgrades and additions to its existing emergency room, inpatient tower, and UI Stead Family Children’s Hospital — not to mention expansive academic projects within the UI Carver College of Medicine.
“In addition to these plans, we continue to explore new partnerships and collaborations to develop and increase access to care in all parts of Iowa, particularly when it comes to rural areas,” she said. “University of Iowa Health Care remains deeply committed to our mission to serve all Iowans, and we remain open to an array of approaches that further that mission.
“That includes creating compelling career pathways for our people so that employees who are already here want to stay and others see us as an employer of choice.”
www.thegazette.com
That primary UI bid of $28 million was $8 million above the $20 million the university offered as Mercy’s “stalking horse bidder” — setting the low bid for the bankruptcy sale and requiring any competing bidder to top it by at least $900,000, an amount that included a fee for breaking up the UI-Mercy arrangement.
Mercy’s largest bondholder Preston Hollow Community Capital, in a drawn-out auction that spanned nearly a week, outbid the university — partnering with American Healthcare Systems in committing to invest an undisclosed amount into the struggling Mercy to sustain it as a community hospital.
Jamieson, in her Q&A published on the UI Health Care communications site Monday, did not disclose Preston Hollow’s final winning bid. But, referencing Mercy’s bid procedures outlining its obligation to choose the “highest or otherwise best qualified bid,” Jamieson suggested the university made the best offer.
“We strongly believed our proposal was in the best interest of Mercy Iowa City, its employees, its patients, as well as our own employees,” she said. “We were disappointed in the outcome.”
Mercy owes Preston Hollow and master trustee Computershare nearly $63 million, along with tens of millions more to other secured and unsecured creditors. The hospital’s pension plan also is not fully funded — leaving thousands of employees and retirees stressed about their financial nest eggs.
A bankruptcy judge gets the final say on whether the Preston Hollow bid is the “highest or otherwise best” offer. A date for that hearing has not yet been reset — after the longer-than-expected auction delayed the original hearing date last week.
‘A strong bid’
Preston Hollow announced as part of its transition from the 150-year-old Mercy Hospital to a new community hospital that it and American Healthcare Systems will meet with existing Mercy doctors, nurses, and other employees “to hear their feedback and recommendations, answer questions, and establish the partnership necessary to continue meeting the hospital’s mission in the years to come.”
AHS leadership has told The Gazette they’ve bought the assets of several struggling community hospitals and haven’t used it as an opportunity to conduct mass layoffs.
Daily News
Newsletter Signup
In Jamieson’s Q&A on Monday, she said the university also would have spent $23 million making Mercy employees UI employees — given salary and benefit investments.
“The University of Iowa made a strong bid for Mercy Iowa City, and in seeking to preserve the stability of our health care system, we saw a path to serve more Iowans,” she said.
In the days leading up to the auction, UI administrators — assuming they would win — started reaching out to Mercy employees to arrange meetings about the anticipated takeover, according to a Mercy email obtained by The Gazette.
But Preston Hollow’s secured debt allowed them the ability to “credit bid” — when a secured creditor can bid the debt a debtor owes them in an auction for the assets. Given Mercy’s debt, Preston Hollow could have credit bid up to nearly $63 million.
In hopes Preston Hollow wouldn’t do that, Mercy worked into its bidding procedures language discouraging credit bidding — including one clause allowing bondholders to become “consultation parties” so long as they promised in writing not to credit bid.
‘The right reasons’
When asked in the Q&A what Jamieson hopes will come of the new Mercy structure, which will keep it a competitor rather than an affiliate, she was heartened by its sustained health care focus.
“It’s our understanding that the selected bidder intends to keep Mercy Iowa City as a hospital,” she said. “That’s positive, and we plan to support the best interests of our shared patients, local health care providers, and the community.”
UIHC won’t be involved, she said, but, “We hope the selected bidder invests in Iowa, its people, and its economy.”
To the question of why the university started down the path of purchasing Mercy, Jamieson said it was for “the right reasons.”
“Out of a strong need to protect and enhance access to quality health care and jobs in our community,” she said. “I was also struck by how deeply our leaders and employees care about the people who work at Mercy Iowa City and their patients.”
As for what’s on tap for the university, Jamieson said “strategic growth.” That, she said, includes a half-billion-dollar hospital under construction in North Liberty and a larger and more expensive new inpatient tower on the main campus.
UI Health Care also is undergoing hundreds of millions in upgrades and additions to its existing emergency room, inpatient tower, and UI Stead Family Children’s Hospital — not to mention expansive academic projects within the UI Carver College of Medicine.
“In addition to these plans, we continue to explore new partnerships and collaborations to develop and increase access to care in all parts of Iowa, particularly when it comes to rural areas,” she said. “University of Iowa Health Care remains deeply committed to our mission to serve all Iowans, and we remain open to an array of approaches that further that mission.
“That includes creating compelling career pathways for our people so that employees who are already here want to stay and others see us as an employer of choice.”
University of Iowa’s final bid for Mercy Hospital was $28 million
The University of Iowa’s final bid to win the assets of Mercy Iowa City -- as part of its filing for Chapter 11 bankruptcy -- was $28 million, plus an additional commitment of at least $25 million in “immediate facility upgrades,” new UI Health Care Vice President for Medical Affairs Denise...
www.thegazette.com
