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Essentia Health partnership spurs growth

FARGO -- More than 20 doctors have joined Innovis Health since it partnered with Duluth-based Essentia Health on Jan. 1. Consider it a sign of things to come. When Innovis announced its merger with Essentia Health -- the nonprofit that owns St. M...

FARGO -- More than 20 doctors have joined Innovis Health since it partnered with Duluth-based Essentia Health on Jan. 1.

Consider it a sign of things to come.

When Innovis announced its merger with Essentia Health -- the nonprofit that owns St. Mary's Medical Center, Duluth Clinic and Miller Dwan Medical Center in Duluth -- administrators at the Fargo-based Innovis said the new relationship would afford resources to expand and improve patient care.

Those opportunities are partially possible with taxpayer help.

By partnering with Essentia, Innovis now is armed with a nonprofit, tax-exempt status that probably will free money to re-invest in its buildings, technology and people.

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For the first time, the health-care provider will be on an even playing field with others in the region when it comes to recruiting doctors and serving patients, Innovis administrators said.

While the new status probably will take Fargo's second-largest property taxpayer off the rolls, it's a benefit to the whole community, not just Innovis, people in the industry said.

"The community is the shareholder for a not-for-profit health system," said Chip Thomas, executive director of the North Dakota Healthcare Association. "In the end, they're the ones who will benefit the most."

Before joining with Essentia Health, Innovis Hospital was a taxable, nonprofit entity, said Dr. Greg Glasner, CEO of Innovis Health. Dakota Clinic, which ran the hospital, was a for-profit organization owned by shareholder physicians.

Now the clinic and hospital are integrated under a tax-exempt, nonprofit status.

"The status allows us to be mission-focused while helping us sustain and grow our services," said Kevin Pitzer, chief administrative officer.

The health-care provider plans to add a wing to its Fargo hospital and expand some of its regional sites, Glasner said. The timeline for those projects has not been determined.

The organization also will be in a better position to hire physicians, especially non-citizens whose work visas make it more challenging for a for-profit health-care system to recruit, Pitzer said.

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"Before, we had to jump through a lot more hoops," he said. "We lost some good candidates because of that."

Innovis also plans to establish a foundation for charitable gifts, something it couldn't accept before.

Nonprofit status doesn't mean that an organization snubs profits. Instead, that money goes back to the organization rather than to private shareholders.

Nonprofit health systems receive local property tax breaks, corporate tax exemptions and are eligible for low-interest bonds. In exchange, nonprofits are required to provide community benefits.

"There are both advantages and responsibilities that come along with the status," said Dave Molmen, CEO of Altru Health System in Grand Forks, which is a nonprofit organization.

There is national debate over what counts as community benefit, but the definition typically includes things like care for people who can't afford it, education, community health programs, research and in-kind contributions.

Altru, which has about 3,700 employees, estimates its community benefit contributions at about $16 million in 2006.

MeritCare, the largest health-care provider in Fargo with more than 6,000 full-time employees, estimates that its community benefit was nearly $50 million -- or 7.3 percent of total revenue -- in 2007.

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Innovis is the last private health system in North Dakota to adopt nonprofit status.

The Forum of Fargo-Moorhead and the News Tribune are both owned by Forum Communications Co.

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