Can a small, independent hospital survive? A tale of two northern Minn. hospitals

Virginia and Bigfork hospitals
Virginia's hospital, left, is negotiating with a large health care company to deal with its red ink and try to improve its patient satisfaction. Bigfork's hopsital is financially healthy and set to expand.
MPR Photos/Jennifer Vogel

The hospitals in Virginia and Bigfork are only 80 miles apart in northern Minnesota, but they occupy different worlds. The Virginia Regional Medical Center is much larger, for one thing, with 83 beds plus 116 nursing home beds compared to Bigfork Valley's 20 beds plus 40 nursing home beds.

Both are publicly-owned and serve the region around them. Both are in transition, trying to find the way forward in a difficult and changing rural health care landscape. What's striking is how divergent the paths are these two facilities have chosen.

Bigfork Valley has stubbornly remained independent. With ardent support from its aging constituency, it's in the process of turning itself into a hospital-based retirement community, complete with senior town homes. Conversely, Virginia, controversial and laden with debt, is working to negotiate a sale or collaboration with Duluth-based Essentia Health. Its fate likely will be determined by a company that's not based in the city it serves.

Touring the two hospitals in May, the difference in atmosphere was palatable. While Bigfork felt busy and like a place with a mission, Virginia seemed somewhat empty and subdued, a place waiting for something to happen.


OPENED: 1941

SIZE: 20 beds, plus 40 nursing home beds. Its size and location make it a "critical access hospital," which means it draws additional funding from Medicare. It has an annual operating budget of a little more than $20 million.

STAFF: 200 full-time equivalents

HOW IT RUNS: It's owned by a "hospital district" that includes Bigfork, Effie and Big Falls, along with the surrounding townships and unorganized areas. The board levies funds from these communities to help support the hospital.

Dan Odegaard
Dan Odegaard, chief executive officer of Bigfork Valley Hospital.
MPR Photo/Jennifer Vogel

ON INDEPENDENCE: Dan Odegaard, hospital CEO since 2003, says, "We are doing everything in our power to remain independent. It's extremely important to remain in control of the local health care services. If we aren't in control, someone else from somewhere else will dictate what kind of services will be provided in our local community."

BIGGEST OBSTACLES: Cuts to Medicare and other public reimbursements, along with the recruitment of specialists.

BIGGEST ASSETS: A beautiful setting on the Big Fork River, and inventiveness. Bigfork's nursing home follows a philosophy called the Eden Alternative, which puts seniors at the center of decision making. "Bacon and eggs at 2 a.m.?" Bigfork's website asks. "We will do it."

PATIENT SATISFACTION: Best in Minnesota, with 94 percent of patients saying they would "definitely recommend" the hospital, compared to a statewide average of 72 percent.

ON TECHNOLOGY: Odegaard serves on the board of SISU, a Duluth-based cooperative of hospitals collaborating to save money on electronic medical records. "We're doing our best to maintain a high level of technology in our facilities," he says. "We just acquired state-of-the-art scopes and surgical equipment in our surgery center. We're also highly involved in telemedicine."

IN THE WORKS: A cluster of senior town homes and a "commons," which will include an expanded kitchen, a cafeteria, a conference room and a gift shop. "Our local market is full of retirees, people who want to live here and move here," says Odegaard. "We understand that. So what we're trying to do is position ourselves to meet their needs."


OPENED: 1936

SIZE: 83 beds, plus 116 nursing home beds. Virginia Regional's size and proximity to Fairview University Medical Center-Mesabi in Hibbing prevent a "critical access hospital" designation, which would bring additional Medicare funding. It has an annual operating budget of around $55 million.

STAFF: 435 full- and part-time employees

HOW IT RUNS: The hospital is owned by the city of Virginia, so the board of commissioners is appointed by the mayor and city council. The council and mayor also have veto power over CEO selection and otherwise influence the running of the institution.

ON INDEPENDENCE: According to Virginia Mayor Steve Peterson, "A stand-alone hospital just doesn't work anymore. You just don't have the networking capabilities. You don't have the affiliations. You don't have the benefits when buying medical supplies and pharmaceuticals. Unless you can collaboratively work with other hospitals — and we are trying to do that with other independent hospitals — you just can't be competitive."

Steve Peterson, Virginia mayor
Steve Peterson, mayor of Virginia, Minn., thinks small stand-along hospitals simply aren't viable anymore.
MPR Photo/Jennifer Vogel

BIGGEST OBSTACLES: More than $7 million in debt, an aging facility, physician recruitment, and local clinics owned by health systems that refer patients to hospitals within those systems. "We've lost 35 percent of our market share in the last two years," says Peterson. "We need to get that back, or a portion of that back. I think we can do that with the right partner."

BIGGEST ASSETS: A state-of-the-art medical arts building completed in 2000, a seasoned staff, and a rejuvenated mining industry that could bring young families to the area.

PATIENT SATISFACTION: Just 63 percent of patients say they would "definitely recommend" the hospital, compared to the state average of 72 percent.

ON TECHNOLOGY: VRMC has largely gone it alone on the implementation of electronic medical records and is expected to reach "meaningful use" by the fall. "EMR is a huge obstacle," says Peterson. "We have some of it in place. We have an IT team in there that has done a lot. It's a very expensive expenditure."

IN THE WORKS: The hospital just finished revamping its surgery units, installing new equipment and adding new procedure rooms. It has entered into a letter of intent with Essentia, though the details of a sale or partnership are still being negotiated. "Everyone has assured us that this hospital, because of its location, will be a valuable asset for whoever comes in here. Virginia is the retail hub of the Iron Range. We have a bright future ahead. It's a new day tomorrow."

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