Duluth-based Essentia Health is investing $14 million to expand its clinic in Grand Rapids and become partial owner of a surgery center that has operated in the northern Minnesota city for roughly a decade.
The moves come less than a year after Minneapolis-based Fairview Health Services took over the hospital in Grand Rapids through a merger agreement designed to preserve and expand health care services in the community.
With a population of about 11,000 people, Grand Rapids is emerging as another example of how health care in greater Minnesota increasingly is being shaped by competition among big regional networks of hospitals and clinics.
"Essentia, which is already present in that part of north-central Minnesota, has determined that it's in its interest to expand that presence — no doubt motivated in part by the new competition from Fairview," said Allan Baumgarten, an independent health care analyst in St. Louis Park.
Large health systems are willing to make the investments, Baumgarten said, so that patients from smaller towns travel to the system's large regional hospitals for specialized care.
"You would rather have them come into your system," he added, "than go to your competitor."
Essentia Health operates 15 hospitals, 75 clinics and seven long-term care facilities across northern Minnesota and portions of North Dakota, Wisconsin and Idaho. The system operates the largest hospital in Duluth, and employs about 15,000 people.
Fairview is one of the state's largest operators of hospitals and clinics, including the University of Minnesota Medical Center in Minneapolis and a recently completed merger with the St. Paul-based HealthEast system. Fairview also runs four clinics in northern Minnesota plus a hospital in Hibbing.
When Fairview announced in January that it was taking over Grand Itasca Clinic and Hospital in Grand Rapids, officials said they would develop a specialty health care center in the northern Minnesota town.
As part of the agreement announced Wednesday, Essentia Health becomes a minority owner in Lakewood Surgery Center, said Marsha Green, chief operating officer at Essentia Health's hospital in nearby Deer River. The surgery center is located across the street from the Fairview-owned hospital.
Construction work on the 25,000 square-foot expansion to the Essentia Health clinic in Grand Rapids is set to begin next month with planned completion in late spring 2018. Currently, the primary care clinic spans just 3,000-square-feet, said spokeswoman Maureen Talarico, adding that the number of exam rooms will grow from six to 24.
"We're going to be able to serve our growing patient population with the new access to specialties and primary care this will offer closer to home," Green said in a statement.
Lakewood Surgery Center has operated in the Grand Rapids area for 11 years, according to a news release that said Lakewood physicians approached Essentia Health about creating a partnership to offer patients more options.
"This new partnership will give our patients much better access to low-cost, high-quality care and expanded services," said Dr. Dan Margo, a general surgeon and the board chair at Lakewood, in a statement.
Green of Essentia Health said in an interview: "This is how we're going to lower the cost of health care — by having more partnerships."
Over the past decade, many hospitals and clinics in greater Minnesota have merged or affiliated with large regional health systems. The trend has continued this year with the developments in Grand Rapids as well as a proposed affiliation announced in May between doctors and the hospital in Willmar and the St. Cloud-based CentraCare network of hospitals and clinics.