University of Iowa to acquire Mercy Iowa City; Catholic provider has filed for bankruptcy

September 1, 2023

Mercy Iowa City has signed a letter of intent with the University of Iowa for the university to acquire Mercy's facilities.

In a related move, the Iowa Catholic hospital has filed to reorganize under Chapter 11 of the U.S. Bankruptcy Code. In a press release, Mercy leadership said plans call for Mercy to seek court approval of a sale process, with the university serving as the "stalking horse bidder." The goal will be to transition the hospital and its employees to a new owner and operator.

Under this plan, the university will acquire substantially all the operating facilities and key assets of Mercy, preserving the continuity of care for patients and continuing opportunities for physicians and employees, the hospital said.

According to the bankruptcy filing, the university plans to pay $20 million for the purchase. The 194-bed Mercy Iowa City hospital and clinics remain open during this process.

Tom Clancy, chairman of the board and CEO of Mercy Iowa City, said in a release that "Mercy Iowa City believes this plan is the best path forward to preserve our hospital operations."

Mark E. Toney, Mercy Iowa City chief restructuring officer, said in the release that "the recent actions of one of our largest creditors has significantly and negatively impacted the hospital and resulted in this bankruptcy filing. The board and management moved rapidly to secure a partner to maintain health care in our community."

According to the release, Mercy Iowa City has filed a motion with the bankruptcy court to use its cash and investments to fund operations. Mercy also has asked the court to allow the hospital to be able to pay employees their wages and benefits. According to information from Mercy, the hope is that the sale process will be completed by about mid-October.

Mercy Iowa City has a medical staff of 250 physicians, and it has 1,350 employees. It was founded by the Sisters of Mercy in 1873.


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