Mercy Iowa City stabilized financially, ready for growth, new CEO says

IOWA CITY - Mercy Iowa City is coming back, its chief executive says, and in a big way.

The 234-bed hospital near downtown Iowa City is celebrating the 145 years since the Sisters of Mercy opened the doors to the hospital as a faith-based mission to serve the community around them - and hospital officials plan to continue to do so, even after a period of financial unrest that left the fate of the hospital in question.

In fact, it was this mission that carried the organization through this crisis and into its next stage of growth, said the new chief executive officer of Mercy Iowa City, Sean Williams.

Williams stepped into his role as CEO on May 1, coming in as it was still evolving from a major organization-wide overhaul to deal with its financial troubles, which involved the layoff of dozens of employees but has resulted in a $30 million increase in its budget in one year.

In the four months since Williams began his job, he said he has seen tremendous opportunity for growth in the organization that has addressed these challenges - which are not unique to any health care system across Iowa.

'There's a lot of foundation that's been built here that's been tremendous, but it's going to need to continue to evolve to adapt itself to the health care environment for how we're paid, how we're regulated, how we're evaluated,” Williams said.

He added, 'we're set up really well to do that.”

The Gazette sat down with Williams earlier this month to discuss those changes, and his plans for the future of Iowa City's community hospital.

RIGHTING THE SHIP

A little over a year ago and after a time of declining in-patient admissions, Mercy announced it would cut 115 positions from its organization, causing 65 full-time and part-time employees to be laid off or have their hours reduced.

The hospital cited 'the challenging health care environment and the competitive Iowa City market” in making the decision, to 'improve our operating and financial performance.”

Mercy had about 1,440 full- and part-time employees in April 2017 - the reductions affected about 8 percent of the workforce. As of June, Mercy reported 1,064 total employees.

The move was made to improve operating and financial performance, an effort that was underway by the time Williams began his tenure.

The unfortunate reality of the layoffs, Williams said, was that it was part of a decision to ensure the organization could continue to remain viable.

'Like any organization, the amount that we spend has to be at least equal to - and ideally, a little less to - the revenue that comes in. It wasn't,” he said.

Officials brought in outside consultants to take a broad look across the organization, comparing its departments to other similar-sized hospitals to see where Mercy differed - in particular, they looked for areas staffed at higher rates than those other hospitals.

The hospital also is finding aid in its new affiliation with the Des Moines-based Mercy Health Network, an organization that has seen facilities in distress before and knew the steps to take to 'right the ship,” Williams said.

That affiliation has helped streamline costs and provide additional resources.

And according to a new rating from Moody's Investors Services, that effort has helped improve Mercy's operating income by nearly $30 million in the past year, according to officials. Moody's revised its outlook on the hospital and raised its rating.

However, their upgraded rating states the organization still has 'speculative elements” and 'a significant credit risk.”

MOVING FORWARD

The last year was spent refining Mercy's focus on expense control, but now officials are looking forward.

They are developing a strategic plan to move forward over the next three to five years that will serve as a guideline in maintaining expense controls and where the best growth opportunities can be found.

The plan will be completed in October. Among these initiatives include strengthening partnerships with affiliated clinics and explore expanding its services, Williams said.

'We're going to be here for a long time,” he said.

But a factor in the financial troubles the hospital faced last year was in part due to the 'competitive Iowa City market.” The University of Iowa Hospitals and Clinics, the 811-bed hospital right down the road from Mercy, offers some of the most specialized care in the state.

Williams, however, sees UIHC not as a competitor, as Mercy is not an academic institution providing tertiary care on a routine basis. Mercy instead offers care focused on the patient without the research aspect, he said.

At the same time, Williams said it's not good for Mercy that UIHC also is facing financial constraints due to cuts in state funding.

'I think every organization in the state right now has challenges,” Williams said. 'We're not unique in the sense that the industry is not awash in revenue.”

But, Williams added, 'We're not just here to turn on investment, we're here to make sure we're living our mission.”

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