Rural Minnesota hospitals to form clinically integrated network

More than a dozen independent rural hospitals in Minnesota have teamed up to create a clinically integrated network, following the lead of providers in other states.

The collaboration is designed to coordinate care, reduce costs and improve treatment across the 19 hospitals, executives said in a Thursday news release. 

Related: Clinically integrated networks poised to boost rural healthcare

The alliance, known as the Headwaters High-Value Network in reference to the inlets of the Mississippi River, resembles the Rough Rider High-Value Network, which launched in North Dakota in October. Both organizations, for instance, aggregate shared services like recruitment and retention programs and facilitate group purchasing.

Leaders from Cibolo Health, an advisory firm that helped create the North Dakota and Minnesota networks, will manage Headwaters' daily operations. Nathan White, former chief operating officer at Sioux Falls, South Dakota-based Sanford Health and president of consultancy Newpoint Healthcare Advisors, created Cibolo last year. Headwaters' board includes seven CEOs from participating hospitals. 

Headwaters, with the clinically integrated network as its centerpiece, plans to use the alliance's scale and expertise to pursue alternative payment models with commercial insurers, executives said. The organization also intends to spread the cost of shared services in areas such as population health, data analytics and care management.

"Individually, these independent rural hospitals lack the critical mass to take on risk and dive deep into value-based care," White said. "To truly impact quality of care, you need multimillion-dollar investments in population health and data analytics tools, care managers and other resources that are out of reach for independent hospitals but collectively affordable as a group." 

One goal for the alliance is to form two value-based care payment models with commercial insurers by 2025, White added.

A clinical integration committee, comprising one medical practitioner from each of the 19 hospitals, will oversee clinical and quality initiatives.

"There is a high collaborative IQ among the members who recognize the best way to take care of our communities is to stay independent," said Ken Westman, chair of the Headwaters board and CEO of Riverwood Healthcare Center in Aitkin, Minnesota.

Many rural hospitals are pursuing acquisitions or affiliations as they struggle to keep up with declining reimbursement rates, higher staffing costs and recruitment challenges, among other obstacles. While federal programs such as the rural emergency hospital program has helped keep some hospitals afloat, many are losing money.

Half of rural hospitals were operating in the red in 2023, up from 43% in 2022, according to a March report from the consulting firm Chartis Center for Rural Health. Independent hospitals have tended to fare worse financially than system-owned hospitals, the report found.

"Relying on fee-for-service reimbursement to be the solution for rural healthcare going forward is a real big challenge," Westman said.

Typically, rural hospital operators seek the financial backing of larger systems through acquisitions. However, industry observers have noted in recent months that an increasing number of rural providers are considering clinically integrated networks and joint ventures as an alternative.

"We are certainly seeing strong interest from other states looking to learn more about this model," White said.