Sandstone hospital board approves lease with Duluth's EssentiaConstruction of a new hospital in Sandstone must begin by Sept. 1, 2014, under terms of the lease deal approved Tuesday evening by the North Pine Area Hospital District’s board.
By: John Lundy, Duluth News Tribune
Construction of a new hospital in Sandstone must begin by Sept. 1, 2014, under terms of a lease deal with Essentia Health approved Tuesday evening by the North Pine Area Hospital District’s board.
The board holds the lease for Essentia Health-Sandstone, a 25-bed critical access hospital.
The board voted unanimously to approve the three-year lease agreement. Although the lease is approved, it won’t be official until it’s signed. That likely will come within a few days, said Don Henkel, a district board member.
“This lease assures that there is real, tangible investment,” said Tim Schmutzer, chairman of a transition committee appointed by the board to work toward a new agreement or break away from Essentia.
Dr. Dan Nikcevich, president and chief medical officer of Essentia’s East Region, said the agreement would make high-quality and sustainable health care available to the community well into the future.
“I think new relationships were built and trust established,” Nikcevich said. “And, ultimately, the patients in the Sandstone community and in Pine County are the winners here.”
The original lease, signed in 1997, was due to expire at the end of this month and has been in question since last fall, when board members said they would cancel it. That led Essentia to fire the hospital’s top two local administrators and announce it would exercise a clause in the lease allowing it to buy the hospital and an attached nursing home.
The two entities had been moving toward a solution since talks began in May. But just a month ago, Schmutzer and other committee members said they were “devastated and bewildered” by what they called Essentia’s renewed threat to exercise the buyout clause.
There’s no such clause in the new lease, Schmutzer said.
Essentia held its ground on two sticking points that arose in July, Schmutzer said. The district’s proposal for an “independent management group” to run the hospital is out, as is the district’s proposal to keep its present provider for electronic medical records.
But the new deal does give the district a voting membership on the Pine Medical Center Board, which operates the hospital, Henkel said.
“The local board will have a greater degree of input than they’ve ever had since we started leasing,” Henkel said.
Also, the district is guaranteed access to electronic medical records should the lease agreement end, Schmutzer said.
The lease is for three years, with an opt-out provision for the district at 18 months should certain benchmarks not be met, Schmutzer said. That includes having a timeline in place for construction of a new facility.
“That was huge,” Schmutzer said. “Because that was the whole point. … That was what precipitated the vote to not renew the lease in the first place. This lease assures that there is real, tangible investment.”
Henkel said the stalemate between Essentia and the district goes back almost to when the original lease was signed. But he believes the hospital’s negotiators are acting in good faith, he said.
“They have been very, very cordial, very willing to work with us and willing to correct the wrongs that have occurred,” Henkel said. “We feel very comfortable with them.”
Schmutzer said he hopes the lease will be mutually beneficial, improving health care in Pine County and increasing revenue for Essentia Health. The agreement, and the joint board it establishes, could even be a model for large health systems collaborating with rural health systems, he said.
“Unlike the original lease, this one has been combed over incredibly carefully,” Schmutzer said. “This will be really great. This is so huge for health care here. I’m excited for it.”