Ely hospital has eye toward health-system partnership

Talk about it

A $1.2 million profit gives Ely-Bloomenson Community Hospital a little strength if it has talks about merging with a larger health group, its administrator said.

But the profit reported at the Sept. 30 end of the fiscal year should be considered as part of the big picture, John Fossum said.

“If you look at it over a four-year context, we had three years in a row that were terrible, terrible years,” Fossum said.

The difference: The community-owned hospital separated last year from the adjacent nursing home. Even with $1 million from the hospital to keep the nursing home afloat, the change brought the hospital’s books from red to black, he said.

Nonetheless, some sort of partnership with a bigger entity is likely to come, Fossum said. “I’d like to think that we could figure out something either with St. Luke’s or Essentia in a five-year span,” he said. “It’s not like it has to happen tomorrow.”

Both St. Luke’s and Essentia have a presence in Ely. Essentia operates a clinic there. St. Luke’s provides after-hours pharmacy services at Ely-Bloomenson.

Smaller hospitals allying with bigger partners from Duluth is a trend in Northeastern Minnesota health care.

Aurora’s White Community Hospital joined with Essentia in 2010 and became Essentia Health-Northern Pines. Hospitals in Virginia and Deer River reached affiliation deals with Essentia in September. Lakeview Memorial Hospital in Two Harbors is affiliated with St. Luke’s, and Cook County North Shore Hospital in Grand Marais has a management contract with St. Luke’s.

Affiliation talks between Mercy Hospital in Moose Lake and Essentia broke down earlier this year.

Talks also ended between Essentia and Ely-Bloomenson in March, but officials from the two hospitals met again in October.

“The talks have been cordial but slow,” said Dan McGinty, chief administrative officer for Essentia’s East Region.

The presence of an Essentia clinic in a community is a frequent precursor to hospital affiliations. Aurora, Deer River and Virginia all have Essentia clinics.

That gives Essentia an edge, Fossum said. “You need to have the physicians as part of the equation,” he said. “That’s helpful.”

But Essentia hasn’t promised Ely the sorts of investments it has been willing to make in Virginia and Aurora, he said.

“They essentially feel that we should turn over operational control to them — everything we have,” Fossum said. “There’s no promise of investment, no promise of services … no commitment to the community.”

But Essentia is willing to address a community’s concerns, McGinty said. With Deer River, for example,

Essentia agreed to keep the emergency room open and to transfer some money from the hospital’s balance sheet to its foundation.

“We’re not opposed to making commitments,” McGinty said. “We haven’t really gotten to that point with Ely yet.”

The statement from St. Luke’s didn’t directly address interest — or lack of it — in Ely-Bloomenson.

“It’s about what’s best for the patients, what’s best for the community, and what’s best for the organizations,” said John Strange, CEO of St. Luke’s. “You start from the basic premise of that, and work out.”

Fossum said a Dec. 3 vote at Ely-Bloomenson’s annual meetings approved structural changes that would make it easier for the hospital to merge with another organization. The hospital’s shareholders approved the changes on a 108-7 vote, he said.

“It’s a very preliminary step,” Fossum said. “I would expect that if we come to (an affiliation) agreement with one of the principals, it would be a much closer vote.”

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