In an unusual turn of events, the University of Iowa has won the auction for Mercy Iowa City, reversing an earlier result where Mercy's chief creditor bought the financially imperiled hospital. The UI's original bid of $28 million was resubmitted Friday morning and chosen as the best and highest option.
“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," said Mark Toney, the chief restructuring officer.
According to a release, the UI plans to conduct an in-depth analysis of the health care needs of the Iowa City community before making any modifications to Mercy’s hospital or services. The university says it intends to offer employment to substantially all Mercy employees.
At issue in the reversal was a disagreement between Mercy and the first-called winning bidder Preston Hollow, a private equity firm with $42 million already invested in the hospital. Using a combination of cash and some of the credit it already had in Mercy, the Texas-based investment firm bid and won on Oct. 10. But last week, Preston Hollow and Mercy disputed whether the purchase gave access to money held by Mercy's foundation.
Meanwhile, the university’s last bid did not include any foundation money.
"Mercy Iowa City concluded that they misunderstood a material fact of our bid and reopened the auction," Preston Hollow wrote in a statement. "Mercy now contends that the University of Iowa’s bid is higher than Preston Hollow’s, even after we increased our bid today when the auction was reopened."
The auction for Mercy reopened Friday morning, and when given the option to top the UI's $28 million offer, Preston Hollow declined. Before the purchase is official, it must be approved in bankruptcy court in a sale hearing around Nov. 6.
Mercy Iowa City operates approximately 234 beds and has been in the community since 1873. The UI Hospitals & Clinics as a system operates 866 inpatient beds and employs more than 11,200 people.
