As leaders who are most knowledgeable about healthcare delivery, hospital administrators should help educate people in their communities and elected officials on key issues. Avoiding that duty can cause crises.
Itasca Medical Center was facing a crisis in the mid-'90s. The 84-bed county-owned and -governed hospital is in Grand Rapids, Minn., which has a population of 7,500 and is located in Itasca County. The county has a population of 40,000 and is larger than Rhode Island. The closest tertiary medical facility to Grand Rapids is 80 miles away.
Among the problems at Itasca Medical Center was its age. The core facility was built in 1916, and several incongruous expansions had been added over the years. The building was inadequate and needed to be replaced. But in 1994, voters turned down a bond referendum to modernize it.
In early 1995, the hospital projected its first budgeted loss. The cost of care was higher than at facilities of comparable size. Although the hospital was geographically isolated, it faced competition from other providers in the region and the state.
In addition to Itasca's financial troubles, the county board and physicians distrusted each other. Doctors thought board governance was politically motivated. And board members thought that if they didn't keep tabs on physicians, the doctors would do something wrong.
Furthermore, most employees belonged to one of three unions. Each had rules that reduced the hospital's flexibility and incurred extra costs. For example, a worker who came in on a weekend to change a light bulb had to be paid for a full eight hours.
Another major problem was that many area residents were leaving the community for care-perhaps because they thought the facility's structural problems indicated quality problems inside.
That migration caused the business community to worry that the hospital might fail, which would affect economic development in the community.
One option would have been for the county to create a truly independent board that could focus objectively on what was best for the hospital. But the county was unwilling-and perhaps unable-to do that. The board didn't listen to a task force it had appointed, which recommended an immediate change in ownership and governance.
All those problems caused physicians, business leaders and community leaders to form a group to explore conversion to a 501(c)(3) not-for-profit hospital.
As the group, which was eventually called Itasca Health Systems, worked to advance its cause, its membership grew from six to 1,100. But it made some mistakes, such as under-estimating the political nature of its mission. As a result, IHS members faced public rejection by the county commissioners at an open county board meeting in early 1995.
After that, IHS retrenched, developing goals for a countywide integrated delivery system and communicating the need for such a change.
Because there were two smaller hospitals in Itasca County, IHS knew Itasca Medical Center would have to deal with the county's total healthcare needs to be competitive. Studies had shown countywide problems with alcohol, heart disease and juvenile delinquency, so those problems needed to be addressed.
IHS knew it needed funds for legal help, market research, public meetings and financial consulting, among other activities. Seed money was contributed by 50 business leaders, each of whom gave $100. IHS also submitted a proposal to the local Blandin Foundation, which deals with rural issues, including healthcare. It too contributed to the cause.
Community members joined IHS on their own and attended public hearings. They also donated money to publish a large newspaper ad telling elected officials that they wanted a not-for-profit, locally controlled hospital, and they didn't want the county board to accept a bid from a for-profit hospital chain in Texas.
This citizen involvement came at a key point in the county board's deliberations and convinced board members that the hospital would be the main issue in an upcoming election.
In early 1996, the county extended a public request for proposals to buy the hospital.
IHS realized it needed a strong partner with a compatible mission to respond to the RFP, help turn the hospital around and provide capital. The group invited several systems to present bids.
Three large regional systems-Allina Health System, based in Minneapolis, and Benedictine Health System and St. Mary's/Duluth Clinic Health System, both based in Duluth, Minn.-joined to submit one bid and were selected.
Benedictine and St. Mary's were natural choices because most local physician referrals were to their facilities. Allina fit because of its partnership with a hospital that has expertise in treating heart disease.
Negotiations with the county centered on transitional issues: how hospital employees would be protected, how much time and money would be devoted to the replacement facility and how the county's debts would be handled.
After nine months of negotiation, hospital ownership was transferred to a local 501(c)(3) organization on May 1, 1997.
Since the hospital's ownership changed, the local board has negotiated contracts with three unions, supported an administration that has turned financial problems into positive earnings and started planning a replacement hospital.
The community has a better understanding of the environment in which rural hospitals operate, the needs of an old hospital and the benefits of partnering with regional systems.
Bast is vice president of Health Dimensions Consulting Group, Minneapolis. He worked on the conversion of Itasca Medical Center.