Steindler Orthopedic vows independence from university, despite Mercy purchase

IOWA CITY — In a letter updating its tens of thousands of patients on how this week’s news of Mercy Iowa City’s bankruptcy could affect them and their care, Steindler Orthopedic Clinic on Friday vowed to “remain independent” — even as the 150-year-old community hospital, and Steindler’s longtime partner, “will cease to exist.”

With the University of Iowa offering $20 million to buy Mercy’s assets, with alternate bids likely due Sept. 19, the Steindler letter said the UI purchase is all but a foregone conclusion.

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“While other buyers could emerge and participate in an auction, that scenario is unlikely,” Steindler President and CEO Patrick Magallanes wrote in the letter. “What will occur is that the University of Iowa will purchase Mercy’s assets, and Mercy Hospital and Clinics will transition to the University of Iowa Hospital & Clinics network.”

Overnight, he said, patients of any “former” Mercy location will be billed by UIHC, rather than Mercy.

“Mercy Iowa City Hospital (old hospital) becomes a satellite UIHC hospital (new hospital),” Magallanes said, responding to questions Mercy and UIHC officials haven’t answered directly to date.

“Current Mercy employees must apply for all positions retained in the new hospital and clinics,” according to the Steindler letter. “Those hired will be UIHC employees, which is terrific because the exceptional folks supporting Mercy until the end will have jobs in the new hospital.”

Noting the university has committed to “maintaining a hospital in the building that has housed Mercy Iowa City Hospital for nearly 150 years,” Magallanes said specifics aren’t yet known.

“What becomes of Mercy’s liabilities, including debts, will be resolved through bankruptcy,” he said.

UIHC will take control of Mercy’s assets, and Magallanes said, “Mercy Iowa City will be replaced by UIHC management and staffed by UIHC employees.”

“I do not suggest this will be as easy as flipping a switch,” he said. “It will be incredibly complex, and everyone involved must thoughtfully collaborate.”

Surgeries

Steindler for years has partnered closely with Mercy, performing surgeries in its operating rooms and collaborating with its physicians.

“All surgeries we have scheduled or will schedule that will occur in the new hospital must be authorized under the new hospital payer contracts,” Magallanes said in the letter.

Steindler, he said, hasn’t been included in any planning or conversations with Mercy or UIHC. But, according to Magallanes, “we now understand that Steindler will be able to treat our patients without interruption in the former Mercy hospital that will become a UIHC hospital.”

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Steindler last month broke ground on a 35,880-square-foot, $29.3 million ambulatory surgery center in North Liberty — just west of where UI Health Care is building its own 469,000-square-foot, $525.6 million hospital campus.

Steindler also has aired plans to build an orthopedic clinic on that site and, eventually, collaborate on a new hospital and bring in a hotel chain.

Magallanes said the university, in buying Mercy, could create new opportunity in Iowa City through “urgent and thoughtful investment” in the former community hospital campus.

“What the future holds and how we coexist with the exceptional orthopedic providers at UIHC will soon be defined and subsequently refined through experience,” he wrote. “I can tell you that the Steindler Orthopedic group will remain independent.”

Vanessa Miller covers higher education for The Gazette.

Comments: (319) 339-3158; vanessa.miller@thegazette.com