Sanford takes medicine to new frontiers

  • Article by: JACKIE CROSBY , Star Tribune
  • Updated: October 19, 2011 - 8:06 AM

A benefactor's millions fuel efforts to build an elite medical institution rooted in the rural Midwest.


Peter Pederson of Walker loaded into the Linear Accelaerator which is a state of the art radiation device with radiation therapist Janel Olsen and Shannon Welk preparing for the radiation treatment . Pederson saves hundreds of miles in his commute to treatment because of Linear Accelerator.The Sioux Falls-based Sanford Health is expanding its reach into Minnesota, with an eye on gaining a toehold in the Twin Cities. It aims to be the new Mayo Clinic, and is giving the Rochester-based hospital a run for its money as a domineering force in rural health.

Photo: Richard Sennott, Star Tribune

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BEMIDJI, MINN. - Pete Pederson was facing a scenario he didn't much like. Diagnosed with prostate cancer in February, the 59-year-old accountant from Walker, Minn., needed seven weeks of daily radiation treatment after surgery. The closest major hospital was about 120 miles away, in Fargo, N.D.

But within a month of his diagnosis, the Sanford Health clinic in nearby Bemidji powered up a new linear accelerator, one of the most sophisticated cancer-fighting tools available. Pederson now drives just 35 miles for treatment.

"I set up my appointment for 3:45, at the end of the day, and go home," he said during a recent clinic visit. "It's easy and doesn't affect my work. I wouldn't have been able to work otherwise."

Few communities the size of Bemidji have the resources to invest in cutting-edge treatments such as a linear accelerator. The purchase of the machine is one of the more visible signs that Sanford Health is moving quickly to beef up health care services in this northwestern Minnesota city since taking over North Country Regional Hospital in February.

Sanford isn't stopping there. It plans future expansion in Minnesota, possibly including the Twin Cities, and nationwide. The ultimate goal: to build a system with the prestige of such icons as the Mayo Clinic, Johns Hopkins and Cleveland Clinic.

Sanford has headquarters in Sioux Falls, S.D., and Fargo, and considers Bemidji its third flagship location. The $2.6 billion organization plans to invest $70 million over the next decade to expand care for cancer, heart disease and orthopedics.

"We were already on our way to becoming a cancer center on our own," said Sanford Bemidji radiation oncologist Dr. John Bollinger. "This speeds up the process and makes it more effective. It's good for Bemidji and this region."

Sanford Health has been marching on an unprecedented growth path over the past two years. Fueled by a $400 million donation from St. Paul native T. Denny Sanford, the nonprofit health system has more than doubled in size since a 2007 merger with Fargo-based MeritCare.

"I've had a history of taking two or three steps forward and calling time-outs," said Sanford CEO Kelby Krabbenhoft, who has been leading the organization since 1996. "I'm having a hard time making that time-out happen right now."

With 130,00 square miles of continuous coverage, Sanford claims to be the largest nonprofit rural health care provider in the nation. It operates 34 hospitals and 116 clinics in seven states, mostly in rural and secondary markets in the Midwest. Sanford has more than doubled its presence in Minnesota from a decade ago, with 15 hospitals and 36 clinics.

"Sanford's growth model is to go into smaller, rural markets where maybe they have a local clinic with an independent hospital next door," said Minneapolis attorney Tim Johnson of Gray Plant Mooty, who represented Thief River Falls' Northwest Medical Center when Sanford acquired it in 2007.

"Hospitals and their boards are struggling with lack of capital for growth, and they're looking for care -- quality of care, access to care," Johnson said. "That's what Sanford can bring to them. They say, 'We have doctors, we have specialists.' They use them as a bargaining chip."

The approach is no different than that used by hospital systems Sanford competes with, including Rochester-based Mayo Clinic, Duluth-based Essentia Health, and Sioux Falls-based Avera. With health care reform legislation pushing "integrated care" among doctors and other health care providers as a way to curb costs, some independents welcome affiliations with deep-pocketed partners.

"Our board was looking at long-term financial data, and it didn't look good," said Sanford Bemidji CEO Paul Hanson, who shepherded the transition of the 112-year-old independent North Country into a Sanford-owned facility. "Why keep competing and wasting resources and duplicating services [with the clinic next door]?"

A benefactor's vision

In the eyes of Sanford's influential benefactor, Denny Sanford, the operation's growth story to date has already "surpassed everything they ever suggested they might be able to do."

Sanford, 76, who became a billionaire in banking and credit cards, told Krabbenhoft early on he didn't want to be just another Mayo Clinic. His first gift to the organization, which was then known as the Sioux Valley Health Care system, was $16 million for a children's hospital, which opened two years ago, that is built like a castle.

A $400 million gift in 2007 was the largest cash gift to a U.S. health care facility. But the 75-year old CEO of the Sioux Falls bank holding company United National Corp. continues to invest in Sanford Health, including a $100 million gift for a center to do genomic research on breast cancer. It will be named after his mother, Edith Sanford, who died of the disease when he was 4.

"I place my bets where I can get bang for my buck," he said.

Denny Sanford's presence looms large across the sprawling Sioux Falls campus, where statues and quotes adorn buildings near the University of South Dakota Medical Center, the children's hospital and a nearly completed cardiac hospital.

Employees and executives talk of the "transformative" nature of Sanford's donation, which was roughly one-third of the state of South Dakota's annual general budget.

"It was more than a springboard to national prominence," said Andrew Richburg, Sanford's executive vice president of health marketing. "The gift really changed the mind-set of the organization."

There's more moxie, more adventure and strong sense of play in the organization, Richburg said. Sanford created a character named "Flu Man" -- a Spandex-clad middle-aged guy -- to urge employees to get flu shots.

During the week, Wi-Fi-enhanced luxury buses move Sanford executives, doctors and staff up and down Interstate 29 between Sioux Falls and Fargo. The buses leave from each end at 7 a.m. and 3:15 p.m., a seven-hour trip that ensures employees are home every night with their families.

Eyeing the Twin Cities

Sanford execs like to say they're entering their junior year since the merger, and are starting to think about life after college. Being a well-financed and relative newcomer on the national scene, Sanford can be more nimble than more established organizations, such as the Rochester-based Mayo Clinic.

The five-year forecast calls for $1 billion in capital expenditures, which includes getting the system outfitted with electronic medical records and breaking ground this spring on a $60 million hospital and clinic in Thief River Falls, Minn.

Sanford also is looking to expand its health insurance plan, already the second-biggest in North and South Dakota. And its scientists are at work trying to unlock cures for Type 1 diabetes and breast cancer in an expansive 71-acre clinical research facility at the site of a former Hutchinson Technology plant in Sioux Falls.

Sanford also is flexing more muscle around public policy, having helped to craft legislation that gave relief in Medicare reimbursements for sparsely populated "frontier states." At least 20 U.S. senators represent areas with a Sanford facility, Krabbenhoft said. Last session, Sanford listed four lobbyists in Minnesota.

Rumors persist that Sanford will push into the Twin Cities, fanned by a gutsy move to hang its logo on Target Center in downtown Minneapolis, where fans at the Twins ballpark would see it.

Two weeks ago, Sanford Health signed a letter of intent to buy Broadway Clinic in Alexandria. That region draws patients from the St. Cloud area and Twin Cities exurbs, and represents Sanford's closest metro-area alliance to date.

Krabbenhoft said Sanford will probably have a Twin Cities presence "beyond a billboard ... in the next 24 to 18 months."

Yet Krabbenhoft said he is wary of violating the organization's cardinal rule of growth: to add markets of touching concentric circles. Sanford is experienced in rural and small market, where it aims to have everyone in a service region be within 45 minutes of one of its facilities.

"Minneapolis-St. Paul is a different dynamic altogether," Krabbenhoft said. "It could affect our culture and what's perceived to be the center of the system. We proceed with caution in that regard."

Sanford also has a policy of "not going where we're not asked," Krabbenhoft said.

Gray Plant Mooty's Johnson said he experienced Sanford as "straight shooters, honest."

"They get it," he said. "It's a small world. You have to be good to the local community."

Jackie Crosby • 612-673-7335

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