Across Minnesota, financial challenges and regulatory changes are driving hospitals and clinics to join forces with larger health systems like Duluth-based Essentia Health and Sioux Falls-based Avera. In the past 18 months, according to the Minnesota Hospital Association, eight hospitals have become affiliated, half with North and South Dakota-based Sanford Health.
Sanford, which merged with Fargo-based MeritCare Health System in 2009, is a growing force in the state. Today it owns, leases or manages 13 hospitals and 39 clinics here compared to a decade ago when Sioux Valley Health Care System (as it was then called) owned, leased or managed only 9 Minnesota hospitals and 11 clinics.
We asked Andrew Richburg, Sanford's executive vice president of marketing, to tell us a bit about the company, which bills itself as the "largest, rural, not-for-profit healthcare system in the nation."
MPR: Where does Sanford fit into the health care picture in Minnesota?
ANDREW RICHBURG: When you look at the footprint of our system, it falls equally to the east and west of the Minnesota and North and South Dakota divide. The I-29 corridor is the center point of our system. We cover a crescent starting in the northwest part of the state by Bemidji. We follow a big swooping arc to the northwest side of Iowa. We don't play in the Twin Cities or metro area. We're predominantly in small, rural communities. That is really our niche, our footprint, what we are good at.
We are in 31 communities in Minnesota on a variety of levels. We are the dominant presence on the western side. When you go up the middle of the state, up through St. Cloud and Sauk Centre, that's CentraCare-world. The northeastern side of the state, that's Essentia-world. There is some Fairview interplay in there. And a little Allina in there. In the middle, you really have the Twin Cities-based systems. The northwestern and southwestern parts are Sanford country. Avera has a footprint, too.
MPR: How do you choose when and where to buy or partner up with an existing hospital or clinic?
RICHBURG: There is a precedent we hold to. We don't go where we're not invited. We get calls all the time regarding the full continuum of affiliations. When we get those calls, we go and check it out. We are not out there moving into these communities in an aggressive manner. They are saying, 'This is what's best for our patients.'
MPR: Can a health care facility stand alone these days?
RICHBURG: It's so costly to be in health care as an individual stand alone, to have the advanced electronic medical records, the risk, the billing. I think they can still, but it's harder and harder. Right now, when you look at the horizon, all the conversation is about accountable care organizations. There is a real push toward a model of integration, physicians and medical centers under one umbrella.
All the margins get tighter. After a while, the small hospitals and physicians say, 'I didn't get into health care to do this. I wanted to provide care.'
MPR: It's a good time to be a growing system, sounds like.
RICHBURG: It's a really good environment for us. The integrated model is our model. We haven't had to change how we think about health care. The dynamics of the market and our history are closely aligned.
As we move ahead, we can extend our model effectively. We grow a patient base. We get better in terms of our scale and scope. We have more buying power so we can be more efficient. We can grow more specialty and subspecialty care as well. We want to be on the front edge. We don't want [service quality] to be any different in a rural community. A person shouldn't have to travel a long distance to get expertise.
It's good for the patients and for the providers. They do lose some of their autonomy. They have to use our medical records, for example. But it does allow them to stay in their communities.
MPR: What does Sanford gain by acquiring a hospital or clinic that's running in the red, as so many are in rural communities?
RICHBURG: It depends on what the factors are and what's going on in that community. Maybe it's a volume issue or a quality of care issue or they don't have the level of sophistication. Maybe it's their core billing practices, the ability to manage accounts payable and receivable. There are lots of factors we look at to optimize the business practice. It could be just a group purchasing agreement: They could save a lot of money on commodity purchasing, even just on toilet paper.
The really big savings are on physician preference items. It could be what type of knee the ortho surgeons want to use as a replacement knee, Johnson & Johnson or a Stryker knee. Because these are specialty items, you don't get the huge buy unless you say, 'We are going to be a Johnson & Johnson shop.' That takes more time and leadership, to get the synergies.
Certainly, sustainability is critical. We have to be able to make it work financially. It has to be what we call a fully funded model.
MPR: What's been the most difficult aspect of the recent merger between Sanford and North Country Regional Hospital in Bemidji?
RICHBURG: The starting point is during the merger discussions, when we're in that middle ground, we go through a process called a synergy process. We look at it from the perspective of patients and the community. Some things are determined. Branding is determined, so you go through renaming the system. Now it's Sanford Bemidji. It's no longer North Country Health Services. They are going to use the Epic system for [electronic medical records]. Some things are predetermined. But some things aren't quite determined. We take the best way and apply it. We spend a lot of time on the front side. We give them a voice.
Mergers are not smooth. There are always bumps.
In Bemidji, we've worked so closely with that medical center for so long, in terms of operationalizing the merger, there weren't many bumps. We're in union negotiations with the Minnesota Nurses Association. But that's not necessarily a bump. I think the cultures were very similar. The community has been fantastic. They very much embraced the merger.
MPR: Is it hard to rebuild the reputation of a hospital that's slipped? It seems that patients, advertised to as consumers, want the best equipment and the latest treatments.
RICHBURG: That's a real issue. I still think the consumer wants to get their health care locally. That's part of what we see as a concern with a merger. 'Will the rest of our infrastructure be pared down? If you have a big tertiary center, is that where all of our health care will have to go?' The big factor with that is developing the infrastructure to the extent you can and investing in those communities so they get the best care possible. There is a certain level of sophistication you won't be able to get in those communities, so you have to provide seamless access.
Solid care protocols, consistent standards across the system, strong primary care networks and relationships so the patients are tied to their providers. It's more than bling.
MPR: What are Sanford's plans for further expansion?
RICHBURG: More often than not, we're looking for opportunities to have integration. If we have a medical center, we want to have a clinic. If we have a clinic, we want to have a medical center. We have a hub and spoke model. Bemidji is a hub and we want to develop spokes outside of that. We wouldn't extend 200 miles from the core center. We're looking for continuous geography, concentric circles.
The opportunities that come to us, we'll continue to evaluate. We'll continue to grow in this area. We're always in conversations and there always will be growth. If you're not growing, you're dying.
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