Investor pushes for Mercy Iowa City to be placed in court-appointed receivership after financial troubles

IOWA CITY, Iowa (KCRG) – A financial investor in Mercy Iowa City announced on Monday its desire for the community hospital to be placed on a court-appointed receivership after the hospital received notice that it defaulted on its bond agreement.

In a message sent to hospital employees and staff on July 21st, the hospital stated that it received notice that its bondholder considers the hospital in default on its bond agreements. Mercy Iowa City disputes the claim, stating that they have made all of the payments on the bond as required.

Financial investor in the hospital, Preston Hollow Community Capital, responded to the report of the bond default on Monday. They request that Mercy Iowa City be placed in a court-appointed receivership in order to “stabilize itself” from unsustainable financial losses.

You can read their full statement below:

“In 2018, Preston Hollow Community Capital was pleased to make a substantial investment in Mercy Iowa City in order to support the hospital’s mission of ensuring families in Johnson County and eastern Iowa have access to high-quality, affordable healthcare services. Unfortunately, since that time the Mercy Iowa City board of directors has made a series of decisions that have put that mission at risk, along with the Hospital’s ability to meet its financial obligations to their talented team of nurses, doctors, and more.

With the board having refused to shift its approach to address these issues and with the hospital now on the verge of insolvency, the choice remaining for Preston Hollow Community Capital is to request that Mercy Iowa City be placed in a court-appointed receivership in order to stem its unsustainable financial losses, stabilize its operations and avoid a closure of the facility.

We hope this step will provide a framework for a rehabilitation and recapitalization of Mercy Iowa City and ensure that its existing patients continue to receive the care they need and have multiple options where they can access health care services.”

This comes not long after the hospital’s credit rating was downgraded in March 2023, after having outstanding debt at the close of the 2022 budget year.

Mercy Iowa City is reportedly reviewing Preston Hollow’s statement but has not provided an updated response to KCRG-TV9 at this time.

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