The University of Iowa Hospitals and Clinics’ acquisition of Mercy Iowa City remains uncertain after a competing bid was made on Monday.
The UI made the initial bid of $20 million to acquire the hospital’s assets, known as a “stalking horse bid.” The UI’s bid set the floor price for all subsequent bids and gained protections including expense reimbursement, according to court documents. An auction will be held on Wednesday in Chicago.
Per clauses in the bidding process, any competing bids are required to match the $20 million, plus an additional breakup fee of $800,000 and a required bid increment of $100,000. As a result, the competing bid made on Monday is likely to have reached a minimum of roughly $20.9 million.
The acquisition of the hospital comes after a period of turbulence, which started with a lawsuit brought against the hospital in July by Preston Hollow Community Capital, a Mercy Iowa City bondholder, and Computershare Corporate Trust, N.A., a corporate trustee of Mercy Iowa City.
The two investors made a push for Mercy to be placed in a court-appointed receivership, thereby removing ownership of the hospital from Mercy Health Systems. Investors had cited the hospital’s poor financial state as the reason for wanting a receivership to be put into place.
Lawyers for the hospital then filed motions for the judge to dismiss the case on Aug. 4. A few days later on Aug. 8, the state Board of Regents held a meeting to discuss approving the UI’s $20 million bid for the hospital.
The regents unanimously approved the bid, and the acquisition subsequently moved to bankruptcy court where the UI and Mercy both filed an agreement with the U.S. Bankruptcy Court in the Northern District of Iowa for approval.
The pair were also aiming to have the deal completed by November. During the regents meeting in August, UI President Barbara Wilson asked the regents to accept the bid agreement as it was in the best interest of the medical system in Iowa.
“We have an aging population, we have more and more complex needs among our patients, and a shortage of physicians,” Wilson said at the August meeting. “We, as the University of Iowa, remain committed to our mission of care for all citizens of the state.”
RELATED: UI to obtain ‘essentially all’ Mercy IC assets on Oct. 2 if unchallenged
UI vice president for Medical Affairs and dean of Carver College of Medicine Denise Jamieson struck a similar tone when also speaking about the acquisition in August. She said it was important for the UI to provide patient care for the Iowa City community during the bankruptcy proceedings.
“[The] affiliation between University of Iowa Health Care with Mercy Iowa City would really be in the best interests of our patients and the community,” Jamieson said.
Shreya Reddy contributed to this report.
Editors Note: A previous version of this report misstated Computershare Trust Computershare Trust Company, N.A. as an investor in Mercy. Computershare Trust Company is a trust administrator. The Daily Iowan regrets this error.
