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Kirby Johnson, administrator of Clearwater Health Services, speaks at a gathering Tuesday to celebrate an agreement signed by Sanford Health to purchase the operations of Clearwater Health Services. At right is Paul Hanson, president of Sanford Health of Northern Minnesota. Anne Williams | Bemidji Pioneer

Clearwater, Sanford sign agreement

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BAGLEY - It was a move Clearwater County Commissioner John Nelson called "a sigh of relief" because it means health care and local jobs will stay in Clearwater County.

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Nelson signed an agreement Tuesday to allow Sanford Health to purchase the operations of Clearwater Health Services, based in Bagley. As of Feb. 1, Sanford Health will take full ownership of the staffing and management operations of Bagley's Memorial Hospital and attached clinic, Clearwater Ambulance Service and the clinic in Clearbrook.

While Sanford Health will be in charge of the operations, Clearwater County will still own the medical facilities and collect annual lease payments from Sanford Health for three years.

The agreement will be finalized effective Feb. 1, pending approval by the Sanford Health Board of Trustees.

Clearwater Health Services is one of Minnesota's last county-owned hospitals and clinics. Memorial Hospital, a 25-bed critical access hospital, had been owned by the county since 1949. The health system employs approximately 80 people and mainly serves residents of Clearwater County, which has a population of around 8,200.

Nelson said the county had lost money in past years owning Clearwater Health Services. He admitted he thought the new purchase agreement would reflect positively on the county.

"It was tough to stand independently and stay in the black," he said. "The fact that we're able to retain the jobs through this transition is huge. It's a very positive impact on our community. Hopefully it will also draw more people into our community, not only for health care but to our businesses."

Starting in February, the system will be known as Sanford Bagley, and will include Sanford Bagley Medical Center in Bagley, with the attached Sanford Bagley Clinic, Sanford Bagley Ambulance Service and the Sanford Bagley Clearbrook Clinic in Clearbrook. Sanford Bagley will have a total of seven physicians and advanced practice providers and more than 80 staff members.

Paul Hanson, president of Sanford Health of Northern Minnesota, said Sanford Health agreed to purchase the operations in Bagley and Clearbrook for three reasons.

The first reason, he said, is because the county asked for help.

In March 2011, the Clearwater County Board of Commissioners asked Sanford Health for management help after the county failed to reach a deal with a Grand Forks physician-owned group.

For more than two years, the county had been dealing with Dr. Tom Peterson of Grand Forks and his Aurora group - including Monarch Management and Cocoon Holdings, and his brother, Dr. Mark Peterson - which signed a contract for deed in 2009. The county called the deal in default earlier that year after Peterson failed to pay the $3.8 million owed.

Sanford Health and Clearwater Health Services eventually signed a letter of intent to merge in September 2011.

The second reason, Hanson said, is because Sanford Health recognizes the employees of Clearwater Health Services are loyal to the community and the organization, which he said is essential.

Lastly, he added, Sanford Health is still protecting what he called "its market share" by not purchasing the buildings, which he said were aging and in need of some care.

Should Sanford decide to move its health services out of the buildings owned by the county, Johnson said, the agreement states Sanford Health would still pay Clearwater County for the lease on the buildings for three years.

"It doesn't mean we'd move out of the community," Hanson said. "It might mean we'd look for other areas in the community. Our business is to stay here in the community of Bagley, but not necessarily in those buildings."

In the coming months, the Clearwater Health Services Board of Directors will dissolve, Nelson said, and a new advisory board will form. According to Hanson, the board will consist of five to seven people, likely consisting of leaders from the business and education community, and will be in charge of making recommendations to Sanford Health.

Also, Hanson said, a "needs assessment" will be completed by Sanford Health personnel that will involve gaining input from community leaders on what medical services are needed or wanted in the Bagley and Clearbrook areas.

"That might mean we expand some services, but it's locally driven," he said.

Hanson added that the newly signed purchase agreement will not mean a reduction of staffing, but rather an increase in health care for patients.

Kirby Johnson, who in November 2011 was named administrator of Clearwater Health Services, will remain in place to oversee all operations of Sanford Bagley.

Nelson said he foresees better health care and more services being offered to residents of Clearwater County, without the added expense to the county and its taxpayers.

"It is important to have this health care because it makes the community and county more attractive for people to retire in, for people to move to or to have a business come to town," Nelson said. "With the hospital and clinic, it's more appealing."

At a signing celebration Tuesday afternoon at Memorial Hospital in Bagley, a Sanford Health spokesperson said Sanford Health would not disclose the purchase price tied into the agreement that was signed.

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