Mercy Iowa City and the University of Iowa announced Friday, Oct. 27, that after additional discussions and clarifications, and the reopening of the auction process, the University of Iowa will be moving forward to purchase the hospital and related assets and operations.
This is a change from an earlier announcement indicating the bondholders, led by Preston Hollow Community Capital, had won the bid.
According to a news release, a material disagreement arose regarding the terms of the bondholders’ bid. After further consideration by all parties, it was determined that the University’s offer was the best and highest bid. The auction was reopened earlier this morning, and the debtors determined that the bid of the University was the highest or otherwise best bid.
The Board of Regents had previously moved to accept University of Iowa’ s request to purchase Mercy Iowa City for $20 million Aug. 8, after Mercy filed for Chapter 11 reorganization in U.S. Bankruptcy Court in Iowa’s Northern District.
The university’s bid was raised to $28 million at a bankruptcy auction in early October.
An Oct. 27 email statement addressed to University of Iowa employees, signed by both President Barbara Wilson and Vice President for Medical Affairs Denise Jamieson, stated that “recent events related to the ownership of Mercy Iowa City have unfolded quickly and the bondholder determined its previously selected bid was not financially viable Mercy agreed with the bondholder’s conclusion and, as a result, declared the university’s bid as the winning offer.”
The next milestone in the sales process is a hearing, where the bankruptcy court will determine if the sale is approved. This hearing is likely to take place on or around November 6, 2023.
If the university is approved as the buyer by the bankruptcy court, it says it plans to conduct an in-depth analysis of the healthcare needs of the Iowa City community before making any modifications to the hospital or its services. In addition, the university intends to make employment offers to substantially all Mercy employees.
“The Board of Directors and management are confident that the sale of Mercy Iowa City to the university of Iowa is the best path forward for our patients, physicians, staff, and community. We are pleased to be working closely with a health system widely regarded as world-class, and one who understands and can meet the needs of Iowa City,” said Tom Clancy, chairman of the board and CEO of Mercy Iowa City, in the release. “We anticipate forward momentum as we close the chapter on the last 150 years and start a new one hand-in-hand with the university.”
Mark Toney, Chief Restructuring Officer, added, “Though it has been an unusual process, we are incredibly grateful to the university and the State of Iowa for their graciousness during this process. We expect to work with all the stakeholders in the bankruptcy case in order to transition the patient care and this important institution to new stewardship.”
Mercy ‘misunderstood’
In an Oct. 27 statement, Preston Hollow reiterated its past commitment to ensuring Johnson County residents receive quality health care through a community-based hospital, stating that it has been working diligently the past several weeks to ensure a smooth transition for the hospital after it received the winning bid.
However, it asserted, Mercy misunderstood an important fact in the bid and reopened the auction, declaring University of Iowa to be the highest bidder despite Preston Hollow increasing its bid accordingly.
“In the meantime, our team will continue to evaluate the process to ensure the hospital remains viable long-term and the facility’s nurses, doctors, and other staff can continue to deliver high-quality services to patients across the community,” the statement declared.
Update
Three days later, Preston Hollow issued another statement regarding the sale.
“Immediately after the conclusion of the re-opened auction, the University of Iowa Hospitals and Clinics (UIHC) issued a release containing an inaccurate statement regarding the viability of the bondholders’ bid,” the statement said. “A representative of UIHC confirmed that such statement was “prepared out of context” and was erroneous. The bondholders stand by the terms of their final $30 million bid.”
A bankruptcy court hearing is scheduled for November sixth to determine whether or not UIHC’s bid to acquire Mercy will be approved. The closing date of the sale is expected in early 2024, following the hearing and approval.
This is a developing story. The CBJ will continue to update as more becomes known.
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Steindler Orthopedic: Delay of Mercy sale impacting health care, community
