As part of Iowa City-based University of Iowa's takeover of Mercy Iowa City, the system will assume more than 1,000 of Mercy's contracts with vendors, suppliers and more, according to a Feb. 1 report from The Gazette.
While UI will take over 1,006 of Mercy's contracts, including those with equipment manufacturer Smith & Nephew, healthcare asset manager Renovo Solutions, and MidAmerican Energy, it will not take on agreements with Iowa City-based Steindler Orthopedic Clinic, with which Mercy collaborated for 70 years.
"The university has already determined that it will not seek assignment of the Steindler executory contracts," read a motion Mercy filed last week with the bankruptcy court seeking approval to reject its ongoing agreements with Steindler. "(Mercy) will not need the Steindler-related executory contracts identified in this motion following the closing date since (Mercy’s) operations will effectively cease."
"Following the closing, the Steindler-related executory contracts that are not assumed and assigned to the university will only serve to potentially burden the (Mercy) estates."
Mercy has requested that Steindler assert "rejection damages" claims by March 1, according to the report.
In September, Steindler was connected to 13 Mercy contracts. When the university won the bid to purchase Mercy for $28 million, Steindler objected to its contracts being assigned to UI.
Steindler was concerned about agreements tied to its new $525.6 million orthopedic ASC in North Liberty, Iowa.
Before Mercy's purchase, Steindler revealed a new contract with the system to collaborate on developing the 36 acres of land Steindler owns in North Liberty. With the new agreement, Steindler included restrictions barring Mercy from assigning the agreement to any "third party" without Steindler’s consent.
In excluding Steindler from UI contracts, Mercy is giving the system what it asked for, according to the report.
Though Steindler will continue to operate on the former Mercy Iowa City campus for the time being, by keeping its control in North Liberty, Steindler can continue talking with potential collaborators about future projects on the site.
In court documents, Steindler laid out why it was opposed to UI taking over its contracts.
"Mercy should not be allowed to use the bankruptcy filing to attempt to dictate to Steindler that other entities may have an opportunity to interject themselves into Steindler’s ambulatory surgical center’s development and operation," the system wrote. "This is of particular importance because in June of 2022, Steindler was approached by Mercy and its representatives, who provided Steindler with ‘UIHC Requirements and Mitigating Alternatives’ and stipulated that UIHC’s offer to acquire Mercy would fail if Steindler would not alter the North Liberty Ambulatory Surgery Center Agreements, including modifying the restrictive covenants in the North Liberty Ambulatory Surgery agreements and agreeing to grant 51 percent ownership of Steindler’s North Liberty ASC to UIHC."