The healthcare companies that came together in the past seven years to form the mammoth Allina Health System touted their mergers as cost-saving transactions that would be good for patients, providers and payers in Minnesota.
Now that Allina wants to build a hospital in a one-hospital town, it is extolling the virtues of competition, which it claims is a ticket to lower prices.
That flies in the face of the rhetoric of most merging hospitals, which usually argue that hospital competition drives up prices because of costly duplication of services.
Allina wants to build a hospital just outside St. Cloud, Minn., a community of 93,000 residents that has only one hospital, 616-bed St. Cloud Hospital.
But Allina can't build its hospital without first getting an exemption from state lawmakers because Minnesota has a moratorium on adding new hospitals or beds.
Allina said it believes St. Cloud residents are hungry for a competing local provider.
To test public reaction, Allina recently spent $7,500 on a consumer survey, which found that 66% of the 609 respondents wanted to see state law changed to allow the construction of another hospital.
The survey, done by two professors at St. Cloud State University, also found that 59% of those polled wanted the option of choosing between two local hospitals.
"We believe choice actually leads to better service, better costs," said Mark Dixon, administrator of Allina's 588-bed Abbott Northwestern Hospital in Minneapolis. The new hospital, if it's built, would be affiliated with Abbott Northwestern.
An official at CentraCare, the parent company of St. Cloud Hospital, sees the situation differently from Dixon.
Jim Davis, CentraCare's vice president of network development, accused Allina of wanting to have it both ways. "They changed their economic theory to fit their need of the moment," he said.
The issue over a new hospital has become a case of dueling surveys, as CentraCare has responded with its own poll, conducted by an Omaha, Neb., research firm. That survey showed almost 67% of 599 respondents didn't believe the area needs another hospital.
Davis said he can't explain the conflicting results.
Allina's history provides some contrasts to its stated positions in the St. Cloud controversy.
One of its predecessor companies, HealthSpan, was created in 1992 by the merger of two Minneapolis-based systems, LifeSpan and Health One.
LifeSpan's president and chief executive officer was Gordon Sprenger, who is president and CEO of 18-hospital Allina.
At the time of the LifeSpan-Health One merger, Sprenger said: "This (merger) will reshape healthcare delivery in this community. It will give us an opportunity to provide greater access to patients and more contracting options to payers and employers" (Jan. 20, 1992, p. 2).
HealthSpan, which had 17 hospitals in Minnesota and Wisconsin, then merged in 1994 with Medica, a managed-care company, to become Allina.
Sprenger said that merger was "pushing toward a single source of accountability and not a fragmented system" (Aug. 8, 1994, p. 56).
Dixon said Allina hasn't changed its tune on competition. "We've always been about competition," he said. "The mergers weren't to become less competitive, but more competitive in Minnesota."
St. Cloud, about 70 miles from the Twin Cities, is a desirable market because it sits in the middle of central Minnesota, which is home to more than 500,000 people.
St. Cloud Hospital serves a 13-county market that has 16 hospitals, Davis said. "We have lots of competition."
Davis said two forces are driving Allina's desire to build a hospital near St. Cloud: creating more business for its Medica health plan and reclaiming the patients who used to travel to Abbott Northwestern for specialty care but now stay at home in St. Cloud, which has developed specialty services of its own. "We're into their pockets, and they're very unhappy about that," Davis said.
In 1997, Allina earned $23.4 million on total revenues of $2.5 billion (Nov. 9, 1998, p. 28). Allina's latest financial figures were not available at deadline.
CentraCare earned $31.7 million on total revenues of $235 million for the fiscal year ended June 30, 1998, according to an official.
CentraCare has its own expansion drive: It plans to build a $30 million ambulatory-care campus across the street from where Allina hopes to build its new hospital.
Blue Cross and Blue Shield of Minnesota, which has contracts with both Allina and CentraCare, is paying attention as the debate over a new hospital unfolds, said spokesman Karl Oestreich. But the Blues so far hasn't taken a public stand, he said.
Employers throughout Minnesota are eager for more competition among health plans, said William Blazar, senior vice president of the Minnesota Chamber of Commerce, a statewide association representing 3,600 businesses.
"I don't know if the right way to add competition is to build another capital facility," Blazar said.
The next step for Allina is to work with local residents and state representatives to get an exemption to the state moratorium so the hospital can be built.
"This is the largest community in this state without any kind of a hospital choice, and we think it deserves an exception," Dixon said.