The University of Iowa acquires Mercy Iowa City

Mercy Iowa City is seen in this file photo.

By Lindsay Steele
The Catholic Messenger

IOWA CITY — A bankruptcy court approved the sale of Mercy Iowa City to the University of Iowa earlier this month.

 “We are heartened to begin the planning to bring Mercy Iowa City into UI Health Care,” university and hospital officials said in a press release. “We are beginning to plan for our organizations to officially join as one in early 2024. In the meantime, there will be no immediate changes for patients, employees, or physicians.”

Sisters of Mercy founded Mercy Hospital in 1873 as a place where medical students could gain clinical experience and the sisters could pursue their mission of caring for the poor and sick. Over the years, Mercy grew to become a 194-bed hospital with a 10-county clinic system.


The university had expressed interest in acquiring Mercy Iowa City when the acute care hospital and regional referral center filed for Chapter 11 bankruptcy in August. The two parties signed a letter of intent for the university to acquire all of Mercy’s operating facilities and key assets. On Aug. 8, the Iowa Board of Regents voted to approve the university’s $20-million bid to acquire Mercy Iowa City. However, Mercy’s creditors objected to the sale price and the bankruptcy judge ordered the sale of assets to go to auction.

The university raised its bid to $28 million with an additional commitment of at least $25 million in immediate facility upgrades, but Mercy Iowa City’s financial investor  — Preston Hollow Community Capital — entered the winning bid, using the amount of debt Mercy owed it as collateral for the purchase price instead of entering a cash bid. University officials said they were disappointed in the decision “because we believe there is value in having patient care delivered by an Iowa-based health system.”

Ultimately, 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 university said in an Oct. 27 press release. The bankruptcy court approved the sale on Nov. 6.

Although many details need to be worked out, the university said all Mercy Iowa City employees in good standing will be offered employment with UI Health Care and community providers not employed by UI Health Care may continue to practice at the facility under an open medical staff model. The university asks current Mercy patients to continue to schedule and go to appointments as usual.

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