Cloquet takes pride in independent hospitalAfter years of relying on other hospital systems, today observers say Cloquet’s Community Memorial Hospital is thriving.
By: John Lundy, Duluth News Tribune
Rick Breuer interviewed for a job at Cloquet’s Community Memorial Hospital at a dire time.
It was 1999, and the hospital was in the second year of a management agreement with St. Luke’s hospital of Duluth and Fairview Health System of Minneapolis in hopes of reaching financial stability.
The nonprofit hospital, which opened in 1958, was barely breaking even when that deal was reached, Breuer said. In 1996, it had ended in the black by just $7,000.
Breuer, then chief financial officer for a hospital in Cannon Falls, Minn., and seeking the same job in Cloquet, recalls wanting to make sure Community Memorial’s board wasn’t planning to move into a more entangling relationship with a larger system.
“That was a red flag for me,” Breuer said. “I was interested in working for an independent facility.”
Two years later, Community Memorial ended its agreement with St. Luke’s and Fairview, and Breuer was promoted to CEO. Today, observers say the independent hospital is thriving.
“The community is very proud of our hospital, extremely proud,” said Mayor Bruce Ahlgren of Cloquet, where the hospital is one of the area’s largest employers. “We’re lucky to have one that’s so good.”
In recent years, Community Memorial has added orthopedic surgeons, a women’s health specialist and a pain clinic, among other services. There are new outpatient facilities, and a new inpatient wing is almost finished, more than doubling the current space. The number of employees has doubled also, from about 220 to 440. Net revenue has grown from $12 million to a projected $48 million. It had a 2.5 percent profit margin last year.
Independence matters, Breuer said, because it gives local people control over local decisions.
“If you are part of a larger organization, many times there is a voice for the local people but the final decisions are going to be made at a higher-up level,” he said. “The significant strategic decisions that an organization makes are no longer being made by the people in that community.”
Breuer credits his predecessors for guiding the hospital through its perilous times. When he became CEO in 2001, it was time to think about growing, he said.
“People can always work on cost control, and we did, but I really felt all along what we needed to do was put new services in here — services that could serve more people and drive more revenue and grow the bottom line and serve patients at the same time,” Breuer said.
His staff looked at why people were being transferred from the hospital’s emergency room to Duluth and found the No. 1 reason was orthopedics, he said.
“So the first physician we hired was an orthopedic surgeon, and actually now we’ve got three orthopedic surgeons,” Breuer said. “And now you could probably count on one hand the number of patients that go to Duluth out of our ER each year.”
Meanwhile, Breuer wondered if Community Memorial could be a critical-access hospital — one of a number of small-town hospitals that receive Medicare reimbursement to improve their financial performance in a federal program to stem hospital closures.
Hospitals must meet certain criteria to qualify, including a distance requirement. In Minnesota, if another hospital is within 21 miles, the critical-access designation can’t be applied. The Minnesota Department of Transportation was assigned the task of measuring the distances and determined that Cloquet was too close to Duluth to qualify.
Breuer was skeptical.
“I had been to every hospital around me,” he said. “I knew that the closest one was 22 miles. I knew it.”
He discovered that instead of measuring from hospital to hospital, MnDOT had used city-to-city differences, and objected. “They recalculated it, and I think there were four or five hospitals in Minnesota that suddenly became eligible” — including, ultimately, his own.
The clinic next door
Community Memorial isn’t the only independent hospital in the region. Cook Hospital is independent, as are Mercy Hospital in Moose Lake and Ely-Bloomenson Hospital in Ely. Cook County North Shore Hospital & Care Center in Grand Marais is owned by the county, although it has a management contract with St. Luke’s.
Breuer acknowledges that it’s easier for his hospital to stay independent because the Raiter Clinic across the street is also independent.
“They take great pride in telling people they were the first clinic to turn down the Duluth Clinic back in the ’70s or ’80s when they were buying clinics up,” Breuer said. If an Essentia clinic were across the street, “I have no doubt it would be a totally different circumstance.”
Community Memorial will explore partnerships, Breuer said, but not at the cost of independence.
“I think some people mistake independence for the belief that you can wholeheartedly go it alone,” Breuer said. “In health care, I think independence is really about relationships and partnerships and being interdependent with each other. We are very interdependent with the clinics, with the physicians, but we don’t own anyone. They don’t own us.”
As an independent, Community Memorial has access to physicians from Essentia and St. Luke’s and Mercy Hospital in Moose Lake as well as independent physicians from throughout the region, Breuer said. “If we were part of a system, all of our providers would be from that system.”
With 30,000 people in its primary service area, Community Memorial has a big enough community to support an independent hospital, Breuer said. It has added services that people used to have to go to Duluth to get. It has gone from being a break-even organization to financial stability.
The $15 million that was spent in 2004-05 on the outpatient facility was more than all of the spending in the hospital’s previous history put together, Breuer noted. The current project, which will be completed in phases beginning next month and continuing until February, is even bigger.
“We have the U.S. government and lenders willing to partner up and loan us money for this $27 million building project,” Breuer said. “That should be some reassuring sign right there. The people who do nothing but look at numbers say you’re a good risk for that kind of project.”
But with a hospital, the bottom line isn’t financial, he said.
“You have to run health care like a business, but only kind of,” Breuer said. “If you start running it like you’d run Coca-Cola, I think you’ve strayed.”