In a surprising turn of events, bondholder Preston Hollow Community Capital outbid the University of Iowa (UI) for the assets of Mercy Iowa City in a bankruptcy auction. Many had expected Mercy Iowa City, a financially struggling hospital, to be acquired by UI for $20 million. However, Preston Hollow, along with collaborator American Healthcare Systems, won the auction and plans to sustain Mercy Iowa City as a community hospital. The Dallas-based firm intends to make significant capital investments to stabilize the hospital’s operations, restore community-care service lines, and bring the facility back to profitability.
Under the new ownership, Mercy Iowa City will remain an Iowa not-for-profit organization with board members comprised of community leaders in Iowa City and Johnson County. Preston Hollow, along with American Healthcare Systems, has extensive experience rehabilitating hospitals across the United States. While specific details of the hospital concept are scarce, Steindler Orthopedic Clinic is expected to be involved in the partnership. The transition process has already begun, with all-team meetings being held to collect feedback and establish a partnership to continue the hospital’s mission.
Although the final details of Preston Hollow’s bid and the sale agreement have yet to be made public, the sale is expected to receive final approval in the near term. Once approved, American Healthcare Systems will assume operational and financial responsibility for Mercy Iowa City by mid-November. While the University of Iowa had anticipated winning the auction, Preston Hollow’s credit bid, which allowed it to assume assets free and clear of previous debts and liabilities, proved more appealing. Mercy executives expressed gratitude to the university for its commitment to preserving healthcare in Iowa City, while also expressing confidence in Preston Hollow and American Healthcare Systems’ ability to operate and rehabilitate the hospital.
