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approved relinquishing control of the city-owned hospital,

 the city council in Virginia last night agreed to affiliate the hospital with Duluth-based Essentia Health.

Essentia won't own the hospital but will control it and promises to inject cash into the financially troubled institution. The deal is expected to close in the coming months, and Essentia will invest $7 million immediately, said Dr. Dan Nikcevich, president of Essentia Health in northeastern Minnesota and northwestern Wisconsin.

The hospital has been losing money and was short on cash. Cutting a deal with a larger organization had been presented to city residents as the only way to keep the hospital open for the long run and to hire physicians that would let patients stay in town for medical care.

But at the council meeting, Mayor Steve Peterson had strong words for the city's new partner, according to the 

. ""Essentia, I might not be here (as mayor) but if you don't take care of our hospital, by God, I'll be your worst nightmare," the newspaper quoted Peterson as saying.

Peterson was one of two votes against the partnership in a 5-2 vote, the paper reported.

The deal is the latest in an accelerating trend toward rural hospital consolidation in Minnesota. Most of the state's hospitals are affiliated with larger organizations. Essentia, Sanford, based in Sioux Falls, and the Mayo Clinic, have been the big players in either buying or otherwise affiliating with small hospitals.

Last month, Essentia signed a new three-year lease to run the hospital in Sandstone, Minn., after several years of acrimony between the company and some in the community. The company had leased the hospital for many years but was criticized for failing to invest in it. At the same time, the company also signed an affiliation agreement with the health care center in Deer River, Minn. Both those are smaller operations than Virginia's.

In Virginia, Essentia is promising to add 50 jobs over the next five years. It will upgrade the hospital's electronic medical records system, a key requirement under federal health care reform efforts. And, Nikcevich said, it will integrate operations with Essentia's existing clinic in Virginia to provide 24/7 service in general surgery and obstetrics.

In the end, Virginia's hospital will become what Nikcevich called a secondary hub that would serve residents from Ely, International Falls and Cook, for example, and let some patients in the area avoid having to travel to Duluth for care.

Nikcevich acknowledged the perception in Virginia that Essentia hasn't performed as well as some would like. Trouble has been bubbling in Virginia for years around the hospital. Even as residents worried about the long-time health of the hospital, some accused Essentia of failing to deliver on staffing level promises at its clinic and worried about the loss of local control.

Upgrading the hospital's status will make it easier to recruit doctors, Nikcevich said. He also said that in this environment communities ultimately have to make choices between local control and continued health care choices. "There's a give and take. I don't know how else to say it," he said.

Last November, a ballot measure allowing the city to enter into a hospital deal with another organization was approved by 86 percent of the city voters.

For more on rural health care in Minnesota, 

Minnesota News

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Dave Peters

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After years of controversy, the city council in Virginia, Minn., voted Tuesday to affiliate the city’s financially troubled hospital with Essentia Health in Duluth, a growing outstate Minnesota health care organization.

Virginia’s hospital becomes latest to affiliate with Essentia

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