Written by: Matt Bunk
Medcenter One and Sanford Health are two steps closer to a merger that could be completed as soon as this summer.
The health care companies have signed a letter of intent and a memorandum of understanding that defines what the combined organization “would look like,” according to a press release issued Monday. And that new look will likely include a name change for Medcenter One.
The organizations are also preparing filings for the Federal Trade Commission and North Dakota Office of Attorney General.
The Great Plains Examiner was first to report late last year that Medcenter One and Sanford Health were discussing a merger. The two organizations began discussing combining services two years ago after initially working together on health care insurance issues as Sanford Health expanded its network across North Dakota.
Sandford Health President and CEO Kelby Krabbenhoft said in an interview Monday that the organizations are sharing financial, legal and business information to find ways to lower operational costs, create more purchasing power and expand services and staff.
“We started talking about two years ago about things like insurance and health care reform, and we took some actions together,” Krabbenhoft said. “Those things went so well that the trust we had established really kind of took root.”
Medcenter One CEO Craig Lambrecht said the merger would create new opportunities for expansion across western North Dakota.
“With Kelby’s leadership and Sanford being what it is, this is a game-changer for central and western North Dakota,” Lambrecht said. ”This allows us to partner with an elite organization that we are very comfortable with.”
The boards of Medcenter One and Sanford Health are expected to make a final determination about a merger this summer with a possible effective date later in the year.
If the merger is completed, the name Medcenter One would likely be changed to Sanford Health West. That change would take place soon after the merger, Krabbenhoft said.
“All parties agree is that the name Sanford is the name we need to end at,” Krabbenhoft said. “Patients want to be associated with one name, one brand. And employees are required to work together across this whole system, and they don’t want different identities and different names.”
The merger would also create a $3 billion company with more than 25,000 employees across at least five states in the Midwest.
Sanford Health is the largest rural, nonprofit healthcare system in the nation, with 31 hospitals and a presence in 111 communities across the Midwest. It’s also the largest employer in North Dakota and South Dakota, with headquarters in Fargo and Sioux Falls.
Sanford Health established a presence in North Dakota when it merged with MeritCare Health System of Fargo in November of 2009. Until that time, Sanford Health operated in South Dakota, Minnesota, Iowa and Nebraska. The combined health care system operated under the name Sanford Health-MeritCare for about nine months until it was changed to Sanford Health in July of 2010.
Sanford Health now has more than 17,000 employees and 900 physicians in its network, making it the largest rural, nonprofit health care system in the nation. It began offering health insurance in North Dakota last year through the Sanford Health Plan, which Lambrecht helps oversee as a member of its board of directors.
Medcenter One, which was founded as the Quain & Ramstad Clinic in 1902, is a nonprofit health system headquartered in Bismarck where it operates a 228-bed hospital downtown, a nursing school and several clinics. It also has clinics in Dickinson, Jamestown, Mandan and Minot.
Both Krabbenhoft, who was born in Northwood, and Lambrecht, who grew up in Wishek, stressed that the merger would lead to further growth as the need for medical services increases in western North Dakota. They said the merger would not result in downsizing of staff or services.
“We’re going to take care of the people we have, they’re going to have jobs,” Lambrecht said. ”We’re going to grow. We will need more employees. In fact, we’re going to have more problems hiring new people in the future because we’re going to be providing more services as this economy grows. Our employees should be excited about this opportunity.”
Krabbenhoft said a consulting firm reported the merger would create $4 million to $11 million in savings without staff downsizing. He said the 200-mile distance between Medcenter One in Bismarck and Sanford Health in Fargo means the combined organization will continue to need full administrative, support and medical staffs at both hubs.
The key to the savings, Krabbenhoft said, is that the combined company would have more purchasing power.
“That’s why we like these mergers and consolidations,” he said. “They’are all about opportunity and expansion.”
-Matt Bunk is publisher of the Great Plains Examiner.
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