Monday morning brought a big announcement from the healthcare community in Iowa City.

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A hospital that has served the Iowa City community since 1873 has entered into a letter of agreement to be acquired.

Mercy Iowa City has filed a Chapter 11 bankruptcy reorganization petition with the intent to be taken over by the University of Iowa. Just five months ago, the hospital had its credit rating downgraded.

KCRG reports that Preston Hollow Community Capital, the financial investor for Mercy Iowa City, had asked that the hospital be put in a receivership appointed by the court. They asked that step be taken so the hospital could "stabilize itself" from unsustainable financial losses.

A letter of agreement signed between Mercy Iowa City and the University of Iowa would have the U of I "acquire all the operating facilities and key assets of Mercy."

Mercy Iowa City itself, as well as its employees, would become part of UI Health Care. That would not only allow the hospital and other facilities to stay open, but also keep doctors and other employees.

Mark E. Toney, Mercy Iowa City's chief restructuring officer, said in a Monday press release: "The recent actions of one of our largest creditors has significantly and negatively impacted the hospital and resulted in this bankruptcy filing. The board and management moved rapidly to secure a partner to maintain health care in our community."

University of Iowa President Barbara Wilson and Denise Jamieson, vice president for medical affairs and dean of the Roy & Lucille Carver College of Medicine, said in a statement: “We want you to know that leaders from the University of Iowa, UI Health Care, and Mercy Iowa City are working together to avoid significant disruption. Although many decisions will be in the hands of the bankruptcy court, we share a goal to preserve and enhance local and regional access to quality health care and jobs.”

Iowa Capital Dispatch says the Iowa Board of Regents will meet on Tuesday to vote on the University of Iowa's plan to purchase Mercy Iowa City.

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