Mercy Iowa City says staffing agencies pulling workers from hospital

IOWA CITY — In the days after Mercy Iowa City filed for bankruptcy protection, five staffing agencies contracted to supply the community hospital with temporary health care workers — including nurses — began pulling them before the expiration of their contracts, threatening Mercy’s “ability to continue staffing the inpatient units.”

“Mercy has had to turn away patients due to a lack of staff, and the lack of staff has added pressure on Mercy’s patient care team,” Kim Volk, vice president of patient care services and chief nursing officer for Mercy, said in a court declaration.

“Mercy is not able to fill its open positions without the staffing agencies,” according to a Mercy request that a U.S. bankruptcy judge order the agencies to — among other things — “return their staff to finish the remainder of their contract with Mercy.”

In Mercy’s petition, filed earlier this week, attorneys also asked a judge to find the agencies violated bankruptcy code; impose sanctions in the form of punitive damages and attorneys fees; credit Mercy “for the time the staff member was gone from their position”; and hold in civil contempt any agency that doesn’t return their workers or show up in court within seven days to explain themselves.

Mercy also asked it be allowed to “later seek an assessment of appropriate damages for each of the staffing agencies’ violations.”

“(Mercy) has informed the staffing agencies of their violations, but the (agencies) have refused to conform their conduct,” according to the court petition. “(Mercy) is left with no choice but to seek court intervention to protect themselves, (Mercy’s) stakeholders, and, ultimately, (Mercy’s) patients.”

Staffing shortages

On Sept. 7, 2021 — with the country emerging from the depths of COVID-19 shutdowns and two years before Mercy would file for Chapter 11 bankruptcy Aug. 7 — the hospital entered into a “vendor management agreement” with Medefis Inc. to connect Mercy with staffing agencies for its temporary workforce needs.

The agencies were to supply workers so the hospital could operate around the clock — unless they don’t have enough people “ready, willing, and able” to accept the assignment. In exchange, Mercy was to pay the agencies within 30 days and with a 1-percent interest rate for amounts overdue, according to court documents.

Mercy, in the years since, has tapped the agencies for staffing across a range of departments — including general surgery, inpatient units, radiology, intensive care units and the emergency room. The pandemic upped the need for Mercy’s use of agency staff and traveling nurses “to address an increased shortage of local clinical staffing.”

“This was one of the events that lead to the Chapter 11 case,” according to the petition, highlighting an irony that “these hiring needs have become more critical since the filling of (Mercy’s) Chapter 11 cases.”

Bankruptcy law

Mercy argued the agencies are “thumbing their nose at a core principle and policy of bankruptcy law” barring anyone in a contract with a debtor — like Mercy — from terminating or changing the arrangement after a bankruptcy filing.

“Shortly after the petition date, the staffing agencies began removing temporary staff from placement at Mercy prior to the expiration of the staff members’ contracts, began refusing to provide any future staffing services to Mercy, and/or began threatening to do the same unless Mercy pays the pre-petition debts,” according to Mercy’s petition. “The staffing agencies base their post-petition non-performance under the agreements on Mercy’s non-payment of pre-petition amounts.”

The specific agencies listed as having pulled their temporary contract workers from Mercy Iowa City include: Aureus Medical Group, Innovate Healthcare, StaffDNA, Travel Nurse Across America and LiquidAgents Healthcare.

In an “urgent” attempt to mitigate damages from the pulled temporary workers, Mercy has tried to hire some of the contracted agency workers through an “internal contract.”

“In order to continue to serve its patients and this community, (Mercy) is forced to bring this motion and seek an order from the court compelling the staffing agencies to comply with their contractual obligations,” according to Mercy.

A judge, in response, agreed to set a “expedited hearing” on the matter for Tuesday. That’s a day after bids — if any — are due to compete with the University of Iowa’s “stalking horse bid” offer to buy Mercy’s assets for $20 million.

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