Mercy Iowa City proud of service, independence

IOWA CITY - Mercy Iowa City, a private hospital started by nuns in 1873, has managed to stand alone without joining a hospital network and, in its own way, compete with the crosstown goliath, the University of Iowa Hospitals and Clinics.

But it's been a rough couple of years for Mercy Iowa City as the UI bought two private practices with long Mercy ties, taking doctors and patients and causing Mercy to borrow to rebuild its medical staff.

'This hospital is financially strong and has been forever,” said Mercy Iowa City President and Chief Executive Officer Ronald Reed, who has led the 234-bed hospital for 20 years. 'That allows us to do the things we just did, replace the clinics.”

And yet, Mercy Iowa City's inpatient beds were about one-third full, on average, for 2014 and 2015, according to the hospital's most recent state licensure reports. Low inpatient occupancy has been linked to hospital closures, with the 25 acute-care hospitals nationwide that closed in 2013 having an average inpatient occupancy of 34 percent, the Medicare Payment Advisory Commission reported.

But Mercy Iowa City's profit margin remains strong, with a median 7.3 percent for the last five years - higher than the 6 percent median for UIHC, according to data reported to the Iowa Department of Public Health. At a time when UIHC and hospitals in Cedar Rapids are in a building frenzy, Mercy Iowa City has made small-scale investments in emerging specialty services that have paid off for the Catholic hospital.

Since Mercy Iowa City doesn't focus on research or education of medical students, service is the top priority, Reed said.

The hospital had higher patient satisfaction scores in every category than UIHC, Mercy Medical Center in Cedar Rapids and UnityPoint Health-St. Luke's in Cedar Rapids, according to Medicare.gov's Hospital Compare.

'Mercy is always going to be my institution of choice,” said John Rutherford, of Iowa City, whose wife, Kris Kluseman, was recovering from a blood infection at Mercy Iowa City last week.

'Saturday morning, we called 911,” Rutherford said. 'They wanted to know where we wanted to go. I said, ‘Please, let it be Mercy.'”

Friends across the river

Rutherford's and Kluseman's children, Aaron and Claire, were born at Mercy Iowa City and grew up going to doctors at Pediatric Associates, Rutherford said. When he learned in April 2014 the UI bought the pediatric clinic for $4.1 million, he was surprised and disappointed.

'We decided not to follow them to the University of Iowa,” he said.

Pediatric Associates, founded by Mercy Iowa City doctors in 1974, moved to UIHC because doctors wanted to be able to admit patients to the UI Children's Hospital, according to Dr. Stanley Hackbarth, quoted in the Daily Iowan on April 29, 2014. Before that, Pediatric Associates patients who needed hospital care could go only to Mercy Iowa City, the UIHC reported.

'It was our intent to maintain existing relationships with hospital and physician groups within the Iowa City and Coralville area,” Hackbarth wrote in a UI ad about the move. 'However, our request to continue privileges was denied by Mercy Iowa City.”

Mercy Iowa City hired six new pediatricians to replace the lost clinic, Reed said.

Ten months later, the UIHC bought the Iowa City Heart Center for $1.17 million, which meant Mercy Iowa City had to hire four new cardiologists, Reed noted. He won't say how much the hires cost, but the 'acceleration of a physician employment strategy and additional debt related to this strategy” was cited as a reason Moody's Investors Service downgraded Mercy Iowa City's bond rating in November.

'The hospital is challenged by a competitive service area with a sizable academic medical center that is also seeking to integrate more closely with physicians,” Moody's wrote.

Just as Moody's doesn't name the UIHC, Reed rarely refers to the 715-bed academic medical center by name, instead calling it 'a very large teaching and research organization” and 'our friends across the river”. He says Mercy Iowa City doesn't compete with UIHC, but collaboration between the hospitals is limited.

Niche markets

Mercy Iowa City isn't afraid to tout advantages.

The website for the Mercy Wound and Vein Center, opened in 2010, says it's the 'only facility of its kind in Johnson County” for outpatient treatment of chronic and non-healing wounds.

'It's a very big niche,” said Dr. Mark Gomez, who treats wounds that include diabetic ulcers and bone infections.

Among treatment options is hyperbaric oxygen therapy, in which patients undergo a 20-day to 40-day course of 90-minute sessions inside a chamber pressurized with 100 percent oxygen. The pressure helps reduce swelling and discomfort while providing the body with 10 times the normal supply of oxygen to heal damaged tissue, according to the website.

The investment for the two chambers was about $300,000, Program Manager Judy Bennett said.

Mercy Iowa City also introduced a new bariatric surgery program earlier this year for people who are obese and have medical conditions, such as diabetes or hypertension.

'Bariatric is one area contributing to increased revenue,” Reed said. 'We've done something like 36 cases in the past year.”

Change, consolidation

The past five years have been turbulent for American hospitals struggling to adapt to the federal Patient Protection and Affordable Care Act.

Mercy Iowa City is considering joining the Mercy Health Network, which owns hospitals in Des Moines, Dubuque, Clinton, Mason City and Sioux City, Reed said.

'In Iowa, you have UnityPoint and the Mercy Health Network. We're currently outside of both of those networks,” he said. 'All hospitals will be evaluating this over time.”

So far, most patients who want to visit Mercy Iowa City haven't been prohibited by their insurance - but that could change if large insurers sign contracts with hospital networks that limit choices, Reed said.

Mercy Iowa City hasn't signed a contract with any of the four out-of-state managed care companies chosen to manage Iowa's 560,000 Medicaid managed-care recipients starting March 1. Reed said he first wants to know more about what the companies would provide.

Mercy Iowa City's low inpatient occupancy is a challenge because the hospital gets half its revenue from inpatients, Reed said. While all hospitals are seeing a shift to outpatient care, the national average hospital bed occupancy in 2013 was 60 percent - nearly double Mercy Iowa City 's, reported the Medicare Payment Advisory Commission, an independent Congressional agency.

But Mercy Iowa City has taken the opportunity to convert two-person rooms to singles and uses some inpatient beds for observation of patients who have had outpatient procedures. Without costly building projects, Mercy Iowa City has capacity for more patients as the population of Johnson County grows and more patients are covered by the ACA, Reed said.

'Our hope is we can continue to provide choice in the community.”