North Country Health Services and Sanford Health announced in November that they planned to explore a merger.
That merger now becomes effective Tuesday.
The merger will result in the creation of Sanford Bemidji, which, legally, will be known as Sanford Health of Northern Minnesota, based in Bemidji.
Sanford Bemidji will consist of Sanford Bemidji Medical Center and Sanford Bemidji Clinic.
"It's a wonderful opportunity for the community and for us as a health care organization," said Paul Hanson, president/CEO of NCHS. "We have such huge expectations of ourselves right now. I believe the resources provided can only help us grow and improve our quality."
The two heath care organizations announced Friday the final approval and contract-signing. The contract becomes effective Tuesday, March 1.
"A yearlong evaluation process revealed many ways for us to better serve the region together as an integrated provider," said Kelby Krabbenhoft, CEO of Sanford Health in a news release. "We will combine the resources of a strong regional health care institution and a multi-specialty physician clinic, together with the Sanford Health System, to offer more primary and specialty care services and new programs in research and education."
Sanford is not buying NCHS, but, rather, the two entities are merging. As part of the affiliation, Sanford Health will invest $70 million in the community throughout the next 10 years in terms of facilities, recruitment and technology. Also, Sanford immediately will make a $5 million gift to the NCHS Foundation, which will remain an independent nonprofit governed by a board separate from Sanford Bemidji Board of Directors.
The merger is the first step in the integration of the two health care organizations in Bemidji. Plans are underway to expand the areas of heart, cancer, orthopedics and sports medicine, and women's health, as well as research and education.
"Our goals were the same - to make Bemidji a regional referral center in northern Minnesota and this merger will enable us to do so," Krabbenhoft said in the release.
NCHS and Sanford Health in November signed letters of intent of begin to begin the merger process. It was expected to take three to five months.
Hanson said the due diligence process went well.
Patients will probably not notice a lot of changes, other than those affecting the name of the hospital and health care system.
"For employees, especially, we will be looking at making some gradual changes over the next few months, such as name badges, sign changes," Hanson said. "We are going to be very deliberate in keeping communication lines open so there is not something happening the next day without notice."
Less visible changes will involve bringing the hospital and clinic under the Sanford Bemidji umbrella together, especially in terms of sharing information and resources.
"We have bigger initiatives out there in terms of integrating the information systems into one," he said.
NCHS has more than 900 employees with 25,000 emergency visits, 5,500 acute admissions and 1,000 births a year. It opened in 1898.
Sanford Health is headquartered in Fargo, N.D., and Sioux Falls, S.D., and has 31 hospitals, 111 clinic locations and more than 800 physicians in 70 specialties of medicine.
NCHS employees will not have to reapply for their jobs, and all will be retain their employment statuses, wages and benefits.
"One of the proposed benefits of a combined organization is growth, not just in size, but in jobs," Sanford Health stated in a handout. "As an outcome, there will be gained synergies and efficiencies, but we expect that new jobs and opportunities will outnumber any jobs that might be duplicative."
The reason for the merger is that the two entities believe that the hospital and clinic now will be in a stronger position to grow the health care system in the area and meet the needs of the community in the future.
Health care reform does factor into the decision to merge, according to the organizations, because the national emphasis on reform calls for collaboration between health care entities.
"Integrated systems are the preferred model for reform because they provide high quality at a lower cost," Sanford Health stated in handout materials.
Under new reform models, health systems must be a significant size to succeed, according to Sanford Health.
"Size is needed to bear financial risk, have access to capital, actively manage the delivery of care, invest in IT and other high-impact technologies as well as increase participation in research and development," according to Sanford Health.