Fairview takes over Grand Itasca

Grand Itasca Clinic and Hospital CEO Mike Youso shakes hands with Fairview System CEO James Hereford in announcing the Fairview partnership.

The Grand Itasca Clinic and Hospital in Grand Rapids, Minnesota, is now under new ownership.

The Fairview System officially took over Grand Itasca on Jan. 1. Fairview is affiliated with the University of Minnesota Health system in Minneapolis. Fairview also operates the Range Regional Medical Center in Hibbing, the Iron Range’s largest hospital.

According to press reports and anecdotes I’ve heard from Grand Itasca employees, not much has changed at Grand Itasca. Naturally, it’s possible, perhaps likely that some new efficiency measures or reorganization might happen in the future. But for now there are no plans for layoffs or significant changes in service, according to a Grand Itasca press release.

One by one, Northern Minnesota medical institutions seek financial security in consolidation. The Virginia Regional Medical Center joined the Essentia system two years ago, ending city management of the hospital.

Such arrangements allow rural clinics and hospitals better access to recruiting resources for doctors and medical staff. It can also create better systems for handling the byzantine health insurance system, which is only going to become more confusing in coming years. Rising costs and uncompensated care continue to dog hospitals, especially in rural and relatively low-income areas like Northern Minnesota. For some local clinics, independence means risking closure.

But with consolidation comes less local control and, in the long run, the potential for job losses and changes in service. Hook up with a good company and things work out fine. Hook up with a bad one and you risk losing patients to other systems.



  1. All of what you say is true, as is the necessity of complying with new rules from Medicare and other programs which incentivize formation of larger, more comprehensive groups; but the biggest incentive in this type of consolidation is increasing the power of hospitals and health systems in dealing with private insurance companies in negotiating payment rates. Although Medicare, Medicaid, and Minnesota Care rates are set by the insurers themselves, rates paid by private insurers are set by negotiation with the providers and hospitals. There is very striking variation in rates paid from system to system, often varying by over 50%. The power of the health care system in the negotiation is based on the number of patients the system has that can be incorporated or withheld from insurance company networks and the prestige of the system as reflected by patients’ desires to have it included in their in-network providers. In these negotiations small hospitals and systems and small private practice medical groups are often losers, getting paid a fraction of the rates of larger, more powerful systems.

    This change all by itself can greatly increase the income of hospitals. I personally know of systems which have gone from having operating surpluses (that’s what they call profits in non-profit organizations) that were in the 1-3% range, or even from losing money, to having operating surpluses in the 12-14% range by affiliating with larger groups that can negotiate much greater payments from the private insurance companies.

    Insurance companies, faced with rising costs due to increasing utilization of services in general and of expensive high tech resources in particular, and especially to skyrocketing drug prices, have been becoming more and more aggressive in their negotiations, driving smaller hospitals into the arms of larger partners with more power, better information about pricing, and more experienced negotiators.

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