Moose Lake Star Gazette - Serving Carlton and Pine Counties Since 1895

By Lois E. Johnson
Moose Lake Star-Gazette 

Mercy Hospital seeks partnership with larger health care system

Board passes vote to levy property taxpayers in hospital district


August 29, 2019

Bethany Helwig

The Mercy Hospital Board of Directors voted unanimously to request proposals to partner with a larger health care system, at the monthly meeting of the board on Monday, August 26. The proposals are due in six to eight weeks.

Earlier in the meeting, Maureen Swan of Medtrend, Inc. of Minneapolis gave a presentation about the market trend in rural healthcare in Minnesota.

"This is an overview of what has been happening in Minnesota since 2008," she told the board.

Swan said that there have been three waves of rural hospitals joining larger health care systems.

"At first, there were six or seven merger acquisitions," she explained. "And there were many more in 2010. Today, 75 percent of the rural hospitals have merged with larger health care systems. A lot of the mergers are driven by economics."

Swan explained that a lot of the mergers in the southern part of the state partnered with the Mayo health care system, while hospitals farther north partnered with Center Care or Essentia.

"Now we are seeing billion-dollar companies merging with other billion-dollar companies," she added. "A lot of consolidations are happening in the nation and the state. It simply comes down to the economics of health care."

Swan said that the rising health care costs are forcing hospitals to become more efficient.

"When doctors and hospitals are being asked to take on more financial burden, they need to get bigger," she said. "To manage financial risk, the system needs to be bigger. Money drives the need for rural partnerships."

Health care costs go up 3 to 6 percent every year, and projections are that pharma costs are going up, Swan explained. Other expenses are increasing also.

"We're not surprised that those costs aren't going in the right direction," she said. "Inpatient admissions have gone down, the number of inpatient surgeries is lower, and the number of births is down. The aging population forces you to recruit staff but it is more difficult for you to recruit and retain staff."

Insurance reimbursements also play a role in the operation of a rural hospital.

"There are less commercial insurance reimbursements in the rural area and more Medicare and Medicaid reimbursements," said Swan. "The Medicare and Medicaid reimbursements for the different procedures are lower than commercial insurance reimbursements."

Swan said that some hospitals have had to close because of the high number of Medicare and Medicaid reimbursements and bad debt.

"Rural hospitals have been facing a slow-moving crisis in the last 10 years," she said. "There have been four hospital closures, all in the rural area. Rural hospitals are the toughest to keep operating."

Swan said that hospital board members fear losing control of the hospital if it is merged with a larger system and they also fear that the hospital will be closed.

"That (closing small hospitals after they are acquired) doesn't happen," she explained. "Your value is if the larger system is interested in you. You need to talk to the people in the larger system to see if they are interested in you. They will just say no if they aren't interested."

Swan explained that larger systems are now saying no when rural hospitals are asking for a merger.

"The larger systems are no longer saying that we'll take anything," she said. "Essentia and St. Luke's know what towns that they are most interested in. They won't invite you to join them if you are not on their lists."

There are many aspects of the rural hospital that are examined by the larger health care systems, Swan told the board members.

"We think that we've identified a lot of strengths that you have here," she added.

In other business, the board voted to again levy the property taxpayers in the hospital district $500,000.

"There are four indicators," explained CEO Mike Youso. "We are not meeting three of them."

Board Member Sue Peterson asked that the taxpayers be given a break for a year but the board voted 6-2 to implement the levy, as had been recommended by the Finance Committee.

The next meeting of the Mercy Hospital board is Monday, September 23, at 5:30 p.m. in the board room.


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