Mercy Iowa City files bankruptcy with over $100 million in debt

By Sarah Lizee

Olympia, Wash., Aug. 7 – Mercy Iowa City and two affiliates filed Chapter 11 bankrutpcy on Monday in the U.S. Bankruptcy Court for the Northern District of Iowa.

The hospital said in a press release that it has signed a letter of intent with the University of Iowa on a plan where 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.

Mercy expects to seek approval of a sale process with the university serving as the stalking horse bidder.

“Mercy Iowa City believes this plan is the best path forward to preserve our hospital operations,” Tom Clancy, chairman of the board and chief executive officer of Mercy, said in the release.

“As we implement this plan, our dedicated Mercy Iowa City staff remain steadfast in their commitment to provide compassionate care to our community, just as we have since 1873.”

Chief restructuring officer Mark E. Toney said recent actions of one of Mercy’s largest creditors has significantly and negatively impacted the hospital, resulting in the bankruptcy filing.

“The board and management moved rapidly to secure a partner to maintain health care in our community,” Toney said.

“We are deeply appreciative of the university for finalizing an agreement that, if approved, will allow us to emerge from this process with a more sustainable future,” Clancy added.

In their petition, the debtors listed 1,000 to 5,000 creditors, $100 million to $500 million in assets and $100 million to $500 million in liabilities.

Its largest unsecured creditors are Allscripts Healthcare LLC, based in Raleigh, N.C., with an $8.58 million trade claim, Medefis Consolidated, based in Omaha, with a $5.51 million professional services claim and MediRevv, Inc., based in Coralville, Iowa, with a $1.03 million trade claim.

Mercy Hospital is seeking approval to access the cash collateral of its prepetition secured bondholders.

Nyemaster Goode, PC and McDermott Will & Emery LLP are the debtors’ proposed counsel.

The Iowa City-based hospital filed Chapter 11 bankruptcy under case number 23-00623.

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