Sandstone ends standoff over fate of hospital

  • Article by: LARRY OAKES , Star Tribune
  • Updated: May 16, 2012 - 8:54 PM

Health care corporation drops its option to buy the facility and offered to work with city on upgrading it.

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Sandstone's hospital

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Leaders in Sandstone, Minn., said Wednesday they were relieved that Essentia Health has abandoned controversial plans to buy the town's hospital. The Duluth-based health care corporation also apologized for how it dealt with town officials who had questioned its management of the hospital under a lease arrangement.

Two top Essentia administrators met Tuesday night with the citizen board that controls the hospital's land and building and promised that if the board extends Essentia's lease another three years, Essentia will not exercise its option to buy the hospital, a prospect that had alarmed leaders in the east-central Minnesota community.

In a letter to the board, Essentia acknowledged for the first time that the hospital needs to be improved or replaced, and it pledged to work with community leaders on a plan for an improved hospital and better health care in Pine County.

"We saw a couple things we hadn't seen in years, including a willingness to work with people locally," said Tim Schmutzer, chair of a committee appointed by the North Pine Area Hospital District board to negotiate new lease terms with Essentia. "It was a strong and powerful first step."

Schmutzer said that Essentia's chief administrative officer, Daniel McGinty, set the new tone at the meeting's outset by standing and apologizing.

"He said it was clear there was a failure of communication on their part, and [that] they had not paid appropriate attention to the community," Schmutzer said. "He said they were deeply sorry."

The board served notice last fall that it was canceling Essentia's lease, which expires in August. Board members said they were frustrated that Essentia, which has 17 hospitals and 64 clinics across the Upper Midwest, didn't seem interested in expanding or rebuilding the 56-year-old hospital, which has the only 24-hour emergency room and heliport for miles around.

Essentia responded by firing the hospital's two top local administrators, who had advocated upgrades to the facilities. Then it notified the community that it would exercise its option, spelled out in its lease, to buy the hospital and attached nursing home for the cost of their outstanding debt, which in August will be about $170,000.

The announcement raised a community outcry, as many feared the company would close the hospital or simply use it as a feeder.

The controversy, which caught the ear of state lawmakers and the state attorney general's office, came as more of Minnesota's small, so-called "critical-access" hospitals such as Sandstone's are being absorbed by health care corporations such as Mayo and Sanford, as well as Essentia.

Critical-access hospitals get full Medicare reimbursement, an advantage that helped enable similarly isolated hospitals in Aitkin, Cloquet and Mora to embark on major renovations.

Sandstone leaders said they're encouraged that Essentia now sees a similar future for the hospital in Sandstone, and they plan to negotiate a lease that will ensure a more equal partnership between the corporation and the local hospital board.

"There's a huge desire on the part of the board to find something that leads to a trusting relationship," Schmutzer said. "We hope that will ultimately mean better health care for the community."

Larry Oakes • 612-673-1751

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