(C) Iowa Capital Dispatch
This story was originally published by Iowa Capital Dispatch and is unaltered.
. . . . . . . . . .
Regents approve U of I acquisition request for Mercy Hospital of Iowa City [1]
['Brooklyn Draisey', 'More From Author', '- August']
Date: 2023-08-08
The University of Iowa will move ahead with plans to purchase Mercy Hospital of Iowa City after receiving approval from the state Board of Regents. The hospital filed for bankruptcy and announced the plan for acquisition early Monday.
Regents approved the university’s request to purchase the hospital with a bid of at least $20 million. Mercy’s property, equipment, inventory, hospital employees, supplies and active business operations are included in the proposed sale.
In addition to the real estate in Iowa City, the university would also acquire Mercy Family Medicine locations in Tipton, Kalona, West Liberty and Williamsburg.
Under the agreement, the university would establish an advisory board for Mercy and ensure it has its own chief administration officer. The hospital would maintain an open medical staff, and the university would make routine capital investments in the hospital in line with its goals.
The agreement also indicates the proposed acquisition has been under consideration for at least 10 months. It references a nondisclosure agreement dated Nov. 1, 2022, that bars either Mercy or the university – a public institution — from making “any public announcement related to the transaction” without the agreement of the other party.
University of Iowa President Barbara Wilson said in the meeting that Mercy Iowa City leadership approached the university about making a bid in order to keep the hospital open for the community, and this acquisition fits into University of Iowa Health Care’s mission to care for all Iowans.
“We recognize that the outcome is, of course, in the hands of the bankruptcy court,” Wilson said. “But we share a goal to preserve the ability to offer health care access to a wide variety of individuals, both in the community and beyond.”
A timeline for the proceedings will be set by a bankruptcy judge Tuesday afternoon, University of Iowa Health Care Associate Vice President for Legal Affairs Joseph Clamon said. Mercy is asking that the auction take place no later than the end of September, with the support of the university, and the hope is that matters are resolved by sometime in November.
Mercy-Iowa City will continue its usual operations during bankruptcy proceedings. University of Iowa Vice President for Medical Affairs Denise Jamieson said the university will work with Mercy-Iowa City’s employees and leadership over the coming months to learn more about services, needs and concerns.
“This will really help all of our patients receive organized timely, high-quality health care services from both Mercy-Iowa City as well as University of Iowa Health Care,” she said. “We are excited about a potential future where our entities would join us one, and we really think this would be in the best interests of the state’s health care needs.”
As part of the bankruptcy filing, Mercy-Iowa City has filed a motion with the court to use its cash and investments to fund ongoing operations, which is typical of entities that are attempting to reorganize through bankruptcy. In addition, Mercy has asked the court to allow the hospital to pay employees their customary wages and benefits for the work they perform.
Regent Nancy Dunkel said in the meeting that, as someone whose family has utilized the services of University of Iowa Hospitals & Clinics, this acquisition will be good for Iowa in terms of expanding quality health care.
“It’s a whole issue for all of us,” Dunkel said. “So I’m 100% behind this.”
As previously reported in the Iowa Capital Dispatch, Preston Hollow Community Capital, the hospital’s largest senior secured creditor, claims Mercy is in “a financial freefall.” The specialty finance company went to court last month asking a judge to appoint a receiver who could take control of the hospital’s assets, claiming the 234-bed, acute care hospital is incurring “unsustainable financial losses” and arguing that a receiver was needed to avoid a shutdown of the hospital.
Mercy sought to have that case dismissed, calling Preston Hollow’s actions a “pretextual power play by an investment fund that puts the medical team, employees, patients and larger community at risk.”
According to Preston Hollow’s petition, Mercy’s liquidity has declined by $40 million, or 51%, over the past nine months and the hospital has a negative cash flow of roughly $2.6 million per month.
The hospital’s own financial projections show that its liquidity will dwindle to less than $5 million – a level that’s insufficient to pay the cost of ongoing operations – by late September, the petition alleges.
“If action is not taken immediately, the hospital may be forced to cease operations and shutter,” the petition states, adding that Preston Hollow has implored the board to initiate a financial turnaround plan “before it falls off the financial cliff” in September.
Tax records show that the hospital finished the 2022 fiscal year $16.8 million in the red, taking in $177 million while spending almost $194 million. That was a dramatic shift from the previous year, when the hospital took in $10.4 million more than it spent.
According to those same records, the hospital’s net assets or fund balances dropped precipitously over that same period, from $96.8 million in 2021 to $55.8 million in 2022.
[END]
---
[1] Url:
https://iowacapitaldispatch.com/2023/08/08/regents-approve-u-of-i-acquisition-request-for-mercy-hospital-of-iowa-city/
Published and (C) by Iowa Capital Dispatch
Content appears here under this condition or license: Creative Commons CC BY-ND-NC 4.0.
via Magical.Fish Gopher News Feeds:
gopher://magical.fish/1/feeds/news/iowacapitaldispatch/
