Medcenter One and Sanford Health are moving forward with discussions that may culminate in a merger this summer.
“I think it will benefit Medcenter One patients,” Medcenter One CEO Dr. Craig Lambrecht said Monday morning. “This is pretty exciting.”
The two hospitals have signed a letter of intent and a memorandum of understanding, according to their joint statement. Both agreements are non-binding.
The boards of Medcenter One and Sanford Health will make a final determination about the merger this summer with a possible effective date in late summer or the fall, said Sanford Health CEO Kelby Krabbenhoft. Regulatory filings with the Federal Trade Commission and North Dakota Attorney General’s office are moving forward, Krabbenhoft said.
If the two hospitals merge, Medcenter One will change its name, Lambrecht said.
“Our name in all likelihood will have a Sanford connotation and the one we’re grappling with a little bit is ‘Sanford West,’” Lambrecht said.
“We take the approach of being very sensitive, very honorable about our histories and our names,” Krabbenhoft said, adding that having one common name is important for people to be clear with their insurance and patient referrals to doctors within the system.
Lambrecht said the hospital wants to expand and is looking at properties in north Bismarck. No final purchases have occurred yet, he said.
“We feel pretty strongly that Bismarck is going north. And if it’s going north, we have to figure out how to be there because that’s where our patients are,” Lambrecht said.
Krabbenhoft said he sees an opportunity for the hospital to “differentiate” from the other hospital in Bismarck.
“There’s been so much commonality and similarity provided within about a six-block area (of downtown Bismarck), it will be a really exciting and fun conversation for us to have about where’s the future,” Krabbenhoft said. “Ten years from now, do we have to be co-located with the other health system in the community?”
Medcenter One has clinics in Dickinson and Minot and would like to expand more in western North Dakota, Lambrecht said.
“In order to do more, we’ve got to have a partner,” Lambrecht said.
Lambrecht said Medcenter One employees should not be concerned about losing their jobs.
“We’re going to need more people ... There’s not going to be cuts. In fact, there’s going to be more opportunity and more resources to do more together,” Lambrecht said.
Krabbenhoft said in the 16 years Sanford had been
in Sioux Falls, S.D., the hospital has grown from 4,000 employees to 12,000 employees. The merger of MeritCare in Fargo and Sanford added 1,300 jobs in the course of
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Krabbenhoft referred to the present as a “consolidating period in the world of health care,” adding that there were 83 mergers in the health care industry last year. Krabbenhoft said the consolidation of services means better coordination of care and better economics. If Medcenter and Sanford merged, there would be somewhere between $4 million and $11 million in savings in purchasing supplies.
“Those are the kinds of savings that we as leaders can’t just turn our heads away from,” Krabbenhoft said.
Jerry Jurena, president of the North Dakota Hospitals Association, said the agreement between the two hospitals is probably a formalization of a relationship that already has been established.
“I had known for some time they had been working together ... it was informal,” Jurena said. “It’s nothing new.”
Jurena said he understood the benefits of the two hospitals working together but didn’t know the advantages of formalizing the agreement.
“You have a town of 40,000, maybe 60,000, you barely get some specialties let alone sub-specialties,” Jurena said, adding that the larger hospital could say, “‘I’ll hire them if you send me all your patients.’ That makes sense.”
Jurena said he couldn’t imagine a negative aspect to the situation.
“It makes sense that the six tertiary hospitals are working together formally and informally so that North Dakota can share the same type of services other parts of the country has,” he said.
Sanford Health is an integrated health system headquartered in Fargo and Sioux Falls, and consists of Sanford and MeritCare Health Systems, which merged in 2009. Sanford Health is now the largest, rural, not-for-profit health care system in the nation with locations in
112 communities in seven states. Sanford Health is in the process of developing international clinics in Ireland, Ghana, Israel and Mexico.
Bruce Pritschet, director of the Division of Health Facilities within the North Dakota Department of Health, said the department would not get involved with the merger unless there was a change in the hospital’s ownership.
“That’s for legal people to work out,” Pritschet said. “If there is a change of ownership, we help file the paperwork and make that happen.”
According to an article published in the Minneapolis Star Tribune, Sanford Health has had unprecedented growth over the past two years. The hospital plans future expansion in Minnesota, possibly including the Twin Cities, and nationwide. The nonprofit health system has more than doubled in size since 2007, fueled by a $400 million donation from St. Paul, Minn., native T. Denny Sanford, according to the Star Tribune article, published Oct. 17.
The article quoted Minneapolis attorney Tim Johnson of Gray Plant Mooty as saying, “Sanford’s growth model is to go into smaller, rural markets where maybe they have a local clinic with an independent hospital next door.” Mooty represented Thief River Falls’ Northwest Medical Center when Sanford acquired it in 2007.
“We think Sanford is just a good fit for the culture we have here and will help us be stronger,” Lambrecht said.