Iowa's largest hospital system hopes to make inroads into more rural markets once its joint venture with Fargo, N.D.-based Lutheran Health Systems is off the ground.
Des Moines-based Iowa Health System last week signed a letter of intent to form a joint venture with Lutheran, which operates 32 rural hospitals in 17 states. The not-for-profit systems intend to link rural communities to Iowa Health through leasing, operating or affiliation agreements, as well as management contracts.
"This is a relationship that gives something besides lip service to these rural communities," said Sam Wallace, Iowa Health's president and chief executive officer. "We're going to try to embrace rural communities, and Lutheran can help us because they have better expertise in managing (rural providers)."
Executives said they haven't defined the capital needs of the new venture, but they will be creating a business plan. "We'll go in and see and decide jointly what we need to do in each community," Wallace said.
The deal is significant for Iowa Health because it would move the system beyond its base of six hospitals in the state's five largest cities into smaller, more rural communities. Meanwhile, Lutheran would instantly have a major presence in Iowa, where thus far it has managed just one hospital, Central Community Hospital in Elkader.
"In none of our other markets do we have a partnership with a major system in a state," said Steven Orr, Lutheran's president and CEO. Lutheran primarily serves hospitals and providers in markets with 20,000 people or fewer, Orr said.
Lutheran reported more than $1 billion in revenues last year. The system owns or manages 32 hospitals, 31 nursing homes, 43 home health agencies and many other related entities in 17 states.
Iowa Health had $700 million in revenues last year. It includes Iowa Methodist Medical Center, Iowa Lutheran Hospital and Blank Children's Hospital in Des Moines; St. Luke's Hospital in Cedar Rapids; Allen Memorial Hospital in Waterloo; and St. Luke's Regional Medical Center in Sioux City, which earned federal clearance to join the system last month (Aug. 19, p. 22).