Winsted-Lester Prairie Journal, March 29, 1999

Glencoe hopsital, clinic looking to consolidate

The possible consolidation of Glencoe Area Health Center (GAHC) and the Glencoe Medical Clinic (GMC) into one entity took a step closer to reality Monday when the two mutually agreed to continue to pursue merger of the two health care facilities.

The GAHC board accepted a strategic task force study and then agreed to a non-binding letter of intent with GMC to continue the process.

"Now we're getting to crunch time," said GAHC board member Mike Long. "It's time to move ahead."

Long said the mission of GAHC has been to provide quality medical care in Glencoe. "We can't sit and do nothing."

He said doing nothing may force the clinic to go its own way or cause GAHC "to shrink, dry up and go away, which is not our mission.

"We can't stay neutral," Long said. "We have to either grow or die."

That issue came out in the strategic task force study that indicated GAHC captures only about 31 percent of its market share. It needs to maintain 51 percent of that market, according to the study.

That market includes a 12-community area that takes in parts of McLeod, Sibley, Renville counties, according to Leigh Hantho, the consultant who did the study.

The primary competition for GAHC is from Waconia, Hutchinson and the Twin Cities.

In order to remain competitive, costs need to be cut, additional physicians need to be recruited and facilities expanded at the clinic to house those extra physicians.

Hantho estimated the expansion could cost $7 million to $10 million over a five-year period.

He said admissions need to be increased by 25 percent in the years to come to justify the new capital projects. "It can be done."

But to do that will require more physicians, Hantho said. The addition of another physician has "significant impact on retail by increasing market share."

He estimated that each addition of another physician to the clinic creates an additional six jobs and $250,000 a year in salaries.

Hantho said the main objectives of a consolidation would be to expand physician and hospital services; grow GAHC's market share; maintain costs to be competitive; and to continue to improve quality of medical care and patient satisfaction.

"The consolidation will reduce costs long term, " Hantho said, but not in the short term.

Hantho said the integration of the two health care facilities could be accomplished in the next four to six months. "But it's more important to do it right than to do it fast."

Jon Braband, GAHC's chief executive officer, said accepting the strategic plan is not agreeing that it is the "exact game plan."

Braband said the letter of intent is non-binding, but it does indicate both sides agree to work with each other to design an integration plan.

"A lot of time and effort has been put into this," said GAHC board chairman Jeff Grant. "It is a work in progress. There are still things that need to be looked at, worked out."

GAHC board member Jim Waters, who was part of the committee working on the plans, said he went into the process because of the duplication of services between the hospital and clinic. But he said he learned there were a lot more important issues involved.

Dr. John Bergseng, who is a clinic member and sits on the GAHC board, said there is pressure on the clinic to expand, because the building is full.

He said the clinic and hospital began competing, and it was a touchy issue "that neither likes.

"Expanding quality care in the community and keeping patients in the community were driving issues for us at the clinic," Bergseng said.

Bergseng said the letter of intent is looked at by the clinic doctors "as an engagement ring." He said it will be a trial period to see if it will work out. "I think positive. It will work, but there is still a lot of work to do."

Braband said the other interested party is the city of Glencoe, which owns GAHC.

He said Glencoe City Council is being updated on the process, and to date there have been no objections to the possible merger. He said the next update could be the April 19 council meeting.

Grant said GAHC and GMC are not breaking new ground by becoming a community-based, not-for-profit facility. He said this idea is picking up steam throughout the state because of the changing nature of health care.

'This decision is a big one, not to be taken lightly," Grant said.

Hantho said GAHC and GMC are unique in such mergers because they are dealing from strong financial and physician positions. Most of the other mergers are based on dire need and financial problems.

"You're dealing from a position of strength, not desperation," Hantho said.

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