– As Colleen Spike walks the polished floors of the city-owned hospital here, she proudly shows off the private rooms with state-of-the-art whirlpool baths, healing sunlight and the latest in modular designs to accommodate families.

After 16 years as head of River’s Edge Hospital and Clinic, Spike has become a hero to some for fiercely defending its independence as giant medical centers have bought up similar facilities across the country.

In southeastern Minnesota, the giant is the rapidly expanding Mayo Clinic. And the fight has grown contentious, with Spike complaining to the state attorney general about Mayo’s “dangerous monopoly” and “predatory threats” in steering patients toward its own facilities.

“It’s been going on for years,” said Spike, who is retiring as CEO of River’s Edge at the end of December. “They are the elephant in the room that no one will address. Well, I am addressing it.”

Spike, 62, a soft-spoken redhead with Irish roots, frames it as a David and Goliath story, with her 17-bed independent hospital defending itself against one of the nation’s largest and most-lauded hospital systems, one “that is used to getting its way.”

Mayo doctors and hospital officials see it differently. They deny any concerted effort to direct patient care to Mayo’s facilities in Mankato or elsewhere for financial gain, pointing out that more than 75 percent of River’s Edge patients come from referrals from a nearby Mayo facility.

“It’s distressing to us to be accused of sabotaging River’s Edge,” said the Mayo Clinic’s Dr. Elizabeth Osborne, who has been a family doctor in St. Peter for 21 years and is a former member of the hospital commission. “The hospital has been struggling, and it’s only natural to look for someone to put the blame on and say who’s at fault.”

The conflict is happening as independent hospitals in rural as well as urban areas feel pressure to align with bigger systems. That worries some patient advocates, businesses, doctors and insurers who fear that more consolidation in less-populated regions will lead to fewer services at a higher cost.

The number of independent hospitals in Minnesota has been shrinking for 25 years, according to state figures. In 1987, about 61 percent of the state’s 128 hospitals were independent. By the end of last year, just 37 percent remained unaffiliated with a larger hospital system.

“It’s not just the Mayo Clinic and St. Peter,” said Angie Franks, president of Minneapolis-based Healthland, which works with rural hospitals to install computerized medical records systems and other management software. “It’s happening all over.”

Mayo Clinic owns the primary care clinic in St. Peter that is attached to the River’s Edge Hospital through a hallway and light-filled atrium. Mayo also owns a 272-bed hospital 12 miles down Hwy. 169 in Mankato. The Mankato hospital is vastly better-equipped to take on complex medical cases, but also offers many of the same services as River’s Edge, including basic lab and diagnostic work.

Spike asserts that patients seen at the Mayo primary care clinic “were being lied to” and told that River’s Edge was full, or didn’t offer certain services, such as mammograms, knee surgery and cardiac care. River’s Edge lost $727,000 last year, its fourth straight in the red. Spike pointed to Mayo as a key factor.

She highlighted a drop in admissions for swing beds, a Medicare program for patients who need extra care after hospital stays, and accused the Mayo hospital in Mankato of diverting patients who wanted to go to River’s Edge for recovery to its own facilities in Waseca and St. James.

In an October letter to Attorney General Lori Swanson, Spike and former Mayo family physicians Randeep Dhami of Springfield and Lael Luedtke of Fairmont didn’t parse words. They described Mayo as an “invasive species” that is driving away good doctors and increasing the cost of medical care.

Spike said she met twice with state officials but doesn’t know the status of her complaint. The attorney general’s office doesn’t comment on investigations.

Mayo’s strategy

Mayo is undeniably on a growth march, expanding its network of rural hospitals and primary care clinics and pushing out from its flagship complex in Rochester. Recent Minnesota acquisitions include Queen of Peace Hospital in New Prague and a clinic in Red Wing.

Mayo owns 13 of the 19 hospitals in southern Minnesota. Nearby communities with independent hospitals, such as Blue Earth and Sleepy Eye, are surrounded by Mayo and feeling similar pressures to align. In Madelia, the hospital board voted in 2011 to end a lease arrangement with a Mayo primary care clinic.

Mayo officials see their growing network of hospitals and clinics as a way to pull all levels of medical care under one roof, making it easier for doctors and specialists to share patient records and consult on the most effective treatment.

“This is very exciting, frankly,” said Dr. Robert Nesse, CEO of the Mayo Clinic Health System. “What we’re doing is considering our hospital capacity as a system.”

A patient who is treated in Rochester may be sent to recover at a Mayo facility in Lake City, Waseca, Osseo, Wis., or Decorah, Iowa, for specialty wound care, orthopedics or to be on a ventilator for two or three weeks. The strategy, Nesse said, has doubled the number of patients at these rural hospitals, and stabilized facilities that often are a community’s top employer.

“It has been a huge success,” he said. “This is the future. But it requires complete alignment.”

These new collaborative models may be more difficult for hospitals in sparsely populated areas, and some fear a “Wal-Martization” — where health care services are provided efficiently but people may have to travel farther to see a doctor.

Eric Shell, a rural hospital consultant with Stroudwater Associates in Portland, Maine, said forthcoming changes will upend the way providers are paid, and hospitals can no longer operate as islands.

“The push toward more integrated models will continue to occur,” Shell said. “It’s being pushed by market forces, not just Obamacare.”

But the shake-up creates opportunities, he said. Large hospital systems that have invested in expensive specialty practices will need rural hospitals and their expertise in primary care to keep costs down and focus on prevention.

“Rural hospitals have incredible value in this new health care world,” he said.

Community asset

In the past decade, Mayo has made several offers to buy River’s Edge Hospital, Spike said, but the hospital board has voted to stay independent. The most recent vote — unanimous — came last year, prompted by Spike’s retirement.

Residents feel a sense of pride about the hospital as well. When a tornado tore through the area in 1998, more than 80 percent of citizens voted to rebuild.

A new $15.6 million facility opened on a sprawling 26-acre site in 2004, and drew $1.3 million in community pledges.

“I want to stay in my town and support our little hospital here,” St. Peter resident Sandy Grochow said. “People should work together and share things. A town without a hospital really dies, I feel.”

Mayo spent nearly $5 million to relocate its primary care clinic inside the new complex. While Spike and some others fear it was a prelude to a takeover, Mayo officials say it proves their commitment to the future of River’s Edge.

Spike, who has spent her career in health care as a nurse, consultant and administrator, acknowledges that the hospital must be self-sufficient in the face of health care reform and growing financial pressures.

It is looking for ways to shore up its patient base. It opened a primary care clinic in the hospital complex in 2009, and one 13 miles east in Le Center in June 2010, and is creating exclusive alliances to provide primary care for employees of local businesses.

Spike said she’s not advocating independence at any cost, but defends its advantages.

“Your Number One focus is your community,” she said. “You can make decisions quickly. There aren’t a lot of other outside forces.”

She acknowledges that ruffled feathers may be smoothed when she retires, and that partnership discussions with Mayo or some other system could begin anew.

“When and if a partnership does develop,” she said, “it needs to be a partnership. It has to be mutual respect for both parties in order for it to work. If you haven’t liked dating, then certainly don’t marry them.”