A community hospital, if you can keep it

Mercy Hospital-Iowa City is located at 500 E. Market St. in Iowa City. CREDIT MERCY IOWA CITY

“A republic, if you can keep it,” was Benjamin Franklin’s famous answer when he was asked whether we had a republic or a monarchy after the newly-written Constitution was freshly signed. 

In the aftermath of Mercy Iowa City’s bankruptcy proceedings, a similar response might be fitting when considering the question of whether we now have an academic medical hospital or a community hospital: “A community hospital, if you can keep it.”

We certainly hope that Iowa City and Johnson County will be able to keep Mercy Iowa City, or whatever it will be called going forward, as a community hospital. But there is much work to do.

Primary secured debt holder Preston Hollow Community Capital (PHCC) had the highest bid. PHCC will join upstart American Healthcare Systems in sustaining Mercy Iowa City as a “viable hospital.”

The bankruptcy proceedings, and the subsequent media reports, seemed to lack reason or logic regarding the value of the entity, especially the UIHC’s stalking horse bid of just $20 million. It was previously reported by The Gazette that in 2021 UI Health Care offered a $650 million package to take ownership and make Mercy the “centerpiece” of a new UIHC “community division.”

Consider that the A.A. Pagliai’s Pizza restaurant building and associated parking lot just a few blocks away from Mercy Iowa City was put on the market for $5 million. 

Certainly if UIHC had been able to acquire Mercy Iowa City for just $20 million, it would have been the deal of the century, but it seemed that wasn’t a realistic outcome regardless of the media reports and maneuvering by the UI and the Iowa Board of Regents. 

Normally, the success of the University of Iowa Hospitals & Clinics begets the success of Iowa City and the region, and vice versa. But we’re not certain that would have been the case if UIHC had been successful in acquiring Mercy Iowa City.

Going from two viable, albeit quite different, hospitals in Iowa City to only one would have been bad from a cost standpoint. (Certainly the VA Hospital is important, but not considered a similarly operated facility in Iowa City.) It is well documented that academic medical centers have significantly higher costs.

The new owners have stated a commitment to preserving a viable community hospital. We think that makes the most sense, as opposed to selling off parts for a fraction of what a highly functioning community hospital would be worth.

Certainly, PHCC needs to understand that Iowa City is a unique place to operate a business and that maintaining a collegial atmosphere in operating a community hospital might be more important here than in most non-university communities.

And the residents of Iowa City and Johnson County need to understand that while this is a nonprofit organization, it needs to make money and pay debtors, and it will need the community’s support to bring it back to the highly functioning and viable community institution that it once was. Let’s hope that happens soon.