If no other bids to obtain Mercy Iowa City assets that exceed the University of Iowa Hospitals and Clinics $20 million bid are entered before Oct. 2 at 5 p.m., UIHC will acquire the 185-bed hospital, according to federal bankruptcy court documents.
A federal bankruptcy judge approved an order to allow the UI to enter a “stalking horse bid” in the bankruptcy proceedings for Mercy Iowa City last week.
In addition to the federal judge allowing UIHC’s bid to move forward, the hospital’s foundation asked a federal judge on Sept. 20 to clarify its obligations to the hospital during the bankruptcy proceedings.
In an email sent to hospital volunteers on Sept. 15 obtained by The Daily Iowan, UIHC outlined its continued dedication to continuing services while Mercy IC goes through the complex bankruptcy proceedings.
“While the outcome of the bankruptcy filing is not yet certain, the UI is doing all it can to support Mercy Iowa City and preserve health care access for patients and jobs for Iowa City and nearby communities,” the email read.
UIHC’s early bid entry allowed it to gain protections and set the floor for bids on Mercy’s assets, according to court documents.
Mercy IC Foundation asks federal judge to clarify its role
After a federal bankruptcy judge entered a ruling to allow the UI to proceed with its pre-emptive bid for Mercy Iowa City, creditors petitioned to require the Mercy Iowa City Hospital Foundation to support the hospital while it is in financial “freefall.”
The Mercy Iowa City Hospital Foundation asked a federal bankruptcy judge to define its financial obligation on Sept. 20 to the hospital’s operations while the hospital continues to lose money while its bankruptcy filing works through federal bankruptcy court.
The foundation argued that although the foundation was created to support the hospital with charity funds, it is not legally obligated to provide the hospital funds for daily operations while it operates at a cash burn.
According to the same filing, Mercy Iowa City sought $4 million from the foundation on Sept. 4 for continuing operational costs.
The foundation said that while it has historically assisted with the hospital’s operational costs, it has discretion over approving and denying the request — thus, it was never required to provide funding.
However, Mercy Iowa City’s bondholders Computershare Trust Company and Preston Hollow Community Capital asserted that Mercy Iowa City Hospital Foundation’s assets should be used to subsidize the hospital while it loses over $2.6 million per month, according to pre-bankruptcy financial reports.
The bondholders continue to argue that since the foundation’s main goal is to support the operations of the hospital through charity, it is obligated to use its assets before diminishing the value even more by using the cash collateral of bondholders.