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"I strongly still believe in being totally independent," said Tim Rice, president of Lakewood Health System in Staples. "We want to maintain our culture and our ability to make our decisions ourselves about what we want for our community and our patients. That is the key thing that we do not want to give up."

Rice's determination stands out in a climate where more rural hospitals are joining larger health system just to survive.

Supported by its four small-town clinics, Lakewood is highly regarded.

It ranks near the top when compared to other Minnesota hospitals in patient surveys. It was among the first to adopt a concept called "medical home," a team-based approach that seeks to serve the whole patient under the supervision of a coordinator while reducing costs. The facility itself, built in 2006, sits on an expansive property with views of preserved wetlands on the edge of Staples about 140 miles northwest of the Twin Cities.   It serves local foods in the cafeteria and hosts a farmers market in the parking lot.

These days, it's hard for either hospitals or doctors to stand alone. The rural healthcare equation is changing. Federal reform is pushing new technology and accountable care organizations, which reward positive outcomes and a collaborative approach to care. Sixteen hospitals have joined systems like Sanford Health, Essentia Health and Mayo Clinic Health System since 2005.

At the same time many physicians are becoming employees of those systems rather than working in their own clinics.


Joining a system can bring expertise and savings on overhead and purchases. It can help with physician recruitment and implementing expensive technology like electronic medical records. Increasingly, hospitals believe they must join or die.

So far, Lakewood is bucking the trend. "For the best of the hospitals, like Staples, they have created their own little system in that part of the state," said Terry Hill, Executive Director of the National Rural Health Resource Center in Duluth. "If you are an exceptional hospital or clinic, you could survive. Those are the ones that have outstanding leadership and access to the needed technical expertise that could play a role in a partnership. There are a small number that could survive that way."

Even for stand-alone hospitals, partnerships with systems have become increasingly important, according to Rice, who has run Lakewood for 32 years. "It means that instead of looking at systems as adversaries, we have to collaborate with them," he said.

That might involve striking up an agreement to refer patients or to share doctors, expertise or technology. Lakewood works with Essentia doctors and is receiving electronic medical records assistance from Sanford, for example. "Looking at how reform is going, we're going to be involved with working with these organizations and payers differently than in the past. Honestly, I'm not sure how it will all look yet." 

Some doctors are also trying to remain independent by banding together. The Duluth-based Integrity Health Network is a group of 211 independent physicians and 47 clinics in Minnesota and Wisconsin that share medical expertise and save on everything from supplies to software to malpractice insurance. "The independents don't feel they can stay in business anymore by themselves," said Integrity's chief executive officer Jeff Tucker.

"They need the shared resources," he said of the network, which formed in 2010. "They don't know how to cope with electronic health records and accountable care organizations and recruitment when they are up against the big corporate systems."

The situation is complicated by the fact that more hospitals now employ the doctors who work in them. When a system affiliates with a local hospital, it tends to favor the doctors in its system over independents. There are exceptions, like the Sanford hospital in Wheaton, in far western Minnesota. When the facility sold to Sanford in 2011, local hospital staff made sure they would be able to continue working with the independent doctors who had practiced there for years.

Systems can offer doctors more predictable hours and less on-call time. But some physicians don't like the corporate approach, Tucker said. "We offer flexibility, input, more control over their destinies," he said. Tucker thinks independent doctors are better able to forge lasting relationships with their patients and communities.

 "If things don't change and the market doesn't allow us to compete, we will just have a couple of mega systems and homogenized care at the state level. I don't see that as very competitive," he said.

Rice said Lakewood's independence allows the facility to be agile and local. "We love our freedom to make choices for what's best for our patients," he said. "When we want to do something for our patients, we don't have to go to corporate or go to someone else, we can just make that decision."

That culture attracts physicians, he said, which lets the hospital provide new services and that brings in more patients and dollars. It's an approach Rice hopes will equal long-term viability. "You have to have your financial standards and you have to meet them," he said. "If you are able to do that, you can maintain your independence. We are working on our culture and relationships so that together we can respond to whatever comes forward."

A big question is how some federal healthcare reform provisions will play out. "I just think the future is too uncertain to determine whether to jump into relationships yet," Rice said. "Even if you look back at the mid 1990s, everybody said capitation (a system of fixed, per-patient payments for care) was coming. All these mergers occurred and then it never happened."

"Reform was confirmed by the Supreme Court but there is an election coming up," he said. "That could change everything."

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Jennifer Vogel

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In an environment that increasingly rewards mergers, some hospitals and doctors are taking steps to maintain their independence.

Trying to go it alone in rural healthcare

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