Sanford Health grows,

Sanford Health, the $2 billion health care organization spread across North Dakota and the Upper Midwest, skipped the opportunity to purchase a Grand Forks hospital now owned by Altru Health System.

“We never responded to the RFP,” said Jeff Sandene, chief operating officer for Sanford’s Fargo division. He was referring to a request for proposals that he said the owners of the Aurora Medical Park in south Grand Forks issued in 2011 to prospective buyers of the facility after their effort to open a hospital stalled and before an Indiana group signed on to open Doctors Hospital in the building. The facility was then purchased by Altru in February.

“It just didn’t fit our model in how we like to come into a community,” Sandene said.

That does not mean Sanford is not interested in Grand Forks. It would be interested in a merger if Altru wanted one.

“Grand Forks is a great community. That knock on the door has not come from Altru,” he said. “We would be open to it.”

Since Sanford Health of Sioux Falls, S.D., merged with Fargo’s MeritCare in 2009, the organization has built itself into the largest nonprofit rural health care system in the country, with facilities spread across North Dakota, South Dakota, parts of Minnesota, Iowa and Nebraska, and a market population of 2 million people.

On April 30, Sanford and Bismarck’s Medcenter One announced the two entities were pursuing a merger, marking a significant step into western North Dakota and the state’s second-largest city.

Regional presence

In light of Sanford’s rapid expansion and wide reach, Sandene said the organization’s aim is not to conquer and pillage.

“We’re not Attila the Hun coming into town,” he said. “Typically, Sanford expands to where we’re asked to go.”

Sanford follows a “knock on our door” philosophy, expanding where existing facilities initiate mergers. While Altru has not knocked, smaller facilities in the northern Red River Valley have.

Sanford owns hospitals in Mayville, N.D., Bemidji, and Thief River Falls and recently began steps toward a merger with Hillsboro Medical Center in Hillsboro, N.D. It manages hospitals in Northwood, N.D., and in Crookston, Bagley, Mahnomen and Hallock, Minn. The group also owns or manages clinics, nursing homes and other facilities in and around the Grand Forks market, including Sanford Clinic in East Grand Forks.

Sandene said Sanford has about a 20 percent share of the Grand Forks regional market and has seen its volume grow 11 percent in the past year alone.

Altru management, citing data from Blue Cross Blue Shield of North Dakota, said its facilities captured 83 percent of in-patient care in its primary market of Grand Forks County in 2011 and 57 percent of care in its broader market. Those numbers were 82 percent and 51 percent, respectively in 2006.

If Sanford’s expansion seems aggressive, Sandene said that it is constrained by a need to not stretch too far beyond its core. He used the metaphor of a concentric circles radiating from a stone dropped in a pond.

“Our goal is never to jump out of those circles,” he said. “If Montana knocks, we’ll figure out whether it makes sense for us.”

Competitive comparison

Public debate over Altru’s purchase of the Doctors Hospital facility put it in a defensive posture regarding competition. Altru President Casey Ryan said in April that there were worries in town about an outside group moving in.

“This way, the community would be in control of it and not an outside interest,” Ryan said.

Comparing the two entities, Altru’s system of one full-service hospital and several rural clinics is dwarfed by Sanford’s vast network that includes ownership of or management contracts with large hospitals spread across five states.

Altru operates 10 facilities in Grand Forks and 10 clinics in the region and employs 3,888 people. In 2011, it had revenue of $407 million, according to its annual financial statement.

In 2011, Sanford operated 36 hospitals (not including Bismarck’s Medcenter One), 225 clinics and 17 nursing homes and employed 20,858 people. Sanford had revenue of $2.3 billion last year.

Sanford President and CEO Kelby Krabbenhoft’s 2009 compensation was $1.87 million, according to Sanford’s federal 990 form, the tax statement filed by nonprofit organizations. Its highest-paid employee listed on the 990, a doctor, earned $2.68 million that year.

At Altru, system president Ryan earned $482,691 in 2009, according to Altru’s 990 form. CEO Dave Molmen earned $420,142. Altru’s highest paid doctor listed on the form made $1.65 million.

Another comparison between the two systems is in their building plans. Altru this year announced a $200 million plan to rebuild and expand its facilities in Grand Forks between 2016 and 2024. According to Sandene, Sanford invests an average of $200 million in capital projects every year.

Molmen acknowledges that the health care industry has grown more and more competitive but said Altru focuses on its service rather than others in its market.

“Every successful business I knew focuses first on the people they serve,” he said. “We can’t control whatever happens competitively for the world.”

Room to grow

Sandene said Sanford offers communities efficiencies gained through the size of the network as well as more services and more sophisticated care. One of the chain’s goals is to reduce “fly-over” care — patients seeking specialized care in markets such as Minneapolis or Rochester, Minn. — by increasing its hospitals’ capabilities in North Dakota.

Sandene said the chain’s plan for growth is not pegged to a special size, but expansion to a $6 billion or $7 billion organization could be possible.

“We could effectively double our size and still feel we are capable for handling that kind of organization,” he said.

Sandene said Sanford would stick to its strategy of going where it is wanted. That could mean closer to Grand Forks if facilities ask them.

Christopher Bjorke is a

reporter at the Grand Forks

Herald, which is owned by Forum Communications Co.

Tags: news, health, business