After a whirlwind few months, Mercy Iowa City is now leaning toward a University of Iowa Hospitals and Clinics ownership.

A sale hearing will be held on Nov. 6, and the decision could be finalized to give all assets of Mercy IC to UIHC, according to a press release from Mercy.

The saga started over the summer in July when the hospital filed for bankruptcy. This was followed by a lawsuit from Preston Hollow Community Capital to place the hospital in a court-appointed receivership as a result of the financial situation of the hospital.

According to a webpage from the U.S. Securities and Exchange Commission, a court-appointed receiver is a “third-party custodian” who is responsible for managing the assets and property of an individual or company that may otherwise waste such items.

Then, in August, the UI requested that the state Board of Regents approve a proposed $20 million bid from the UI to acquire Mercy and its assets. This would include Mercy’s real estate, employees, equipment and supplies, and active business operations according to an agenda from regents during a special session to discuss the bid.

The agenda also stated that under the proposed bid, the UI would not be responsible for paying back Mercy’s debt, expense, or liability of the hospital.

The regents then met on Aug. 8 to discuss the bid where they unanimously approved it, which moved the process to bankruptcy court. During this meeting, Denise Jamieson, UI vice president for medical affairs and dean of Carver College of Medicine, said the UI would continue to provide patient care during the bankruptcy proceedings.

“We know that this bankruptcy proceeding is very complex, and it’s going to take some time to play out in court,” Jamieson said. “We still have many unanswered questions, but at the same time, we’re very confident that if approved by the bankruptcy court to move forward, that affiliation between University of Iowa Health Care with Mercy Iowa City would really be in the best interests of our patients and the community.”

UI submits “stalking horse bid”

With the approval of the regents, the UI submitted a $20 million bid with the courts to acquire Mercy, which was approved by the judge and would become the “stalking horse bid” for the proceedings.

Investment website Investopedia defines “stalking horse bids” as bids that set the floor price of the auction. According to court documents, the UI’s bid meant that other bidders would be required to submit a bid of at least $20.9 million, plus an additional $800,000 fee to be paid to the UI and a minimum bid increment of $100,000.

If no competing bid was entered by 5 p.m. on Oct. 2, the UI would have obtained Mercy uncontested.

But as the deadline approached, court documents showed that another bidder had also entered the picture. Although unnamed in the documents, the bidder had submitted a legal bid that met the requirements, setting up an auction between that bidder and the UI that would take place in Chicago, with the auction proceedings to involve Mercy picking a winner from the list of bidders.

Mercy picks Preston Hollow, switches to UI

On Oct. 10, it was announced that Preston Hollow had been selected as the auction winner by Mercy after talks between the two parties and unsecured creditors of Mercy.

Preston Hollow had partnered with the company American Health Systems to submit the winning bid, according to court documents. Preston Hollow had bid $29 million to successfully win the hospital.

After winning the auction, hospital operations would have been managed by American Health Systems with financial support from Preston Hollow investors. The UI, despite losing the bid, would have received a payout of $800,000 as a result of being the “stalking horse bidder.”

But in a reversal 17 days later on Oct. 27, the UI’s bid was selected as the top choice in the auction. According to court filings, there was a “material disagreement” between Mercy and Preston Hollow. Preston Hollow was unwilling to pay Mercy’s debt upon obtaining assets for the hospital.

The UI’s final and ultimately winning bid was $28 million, a figure revealed during a UI interview with Jamieson. On top of the bid, Jamieson said another $25 million commitment was made for facility upgrades and $23 million for salaries and benefits.

“If the University is approved as the buyer by the bankruptcy court, it says it plans to conduct an in-depth analysis of the healthcare needs of the Iowa City community before making any modifications to the hospital or its services,” the release read. “In addition, the University intends to make employment offers to substantially all Mercy employees.”