Healthcare Systems

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Healthcare Systems

Introduction

The Fargo, North Dakota healthcare market is served by many different physicians and hospitals. This area includes an eastern North Dakota and a portion of western Minnesota. St. Luke's Hospital and the Fargo Clinic are both major players in this region. St. Luke's was a community not-for-profit hospital, and the Fargo Clinic was two separate for-profit corporations.
Until recently, they have been operating as separate entities. In 1986, they formed a partnership and proceeded to operate separately but under the trade name of MeritCare. This was done to position both of the companies for future growth, merger, or expansion. As of January 1, 1993, the restructured nonprofit organization had been functioning as one. The official merger date was set for July 1, 1993. It is felt that the merger will allow both organizations to cut costs and increase stability by eliminating duplication of facilities and services, increasing overall efficiency, and providing better economies of scale. The ultimate goal of the merger will be to provide an integrated, cost-effective system of care that will be appealing to the market they operate within.

Background

The Fargo-Moorhead Metro Area that these facilities serve had a 1990 population of over 150,000. The total market area includes another 215,000 persons. Medicare, Blue Cross/Blue Shield along with other traditional forms of health insurance, dominates the payor market. HMO's and PPO's make up less than five percent of the market. The total market area has 14.6% of the population over 65, which is higher than the national average. This number should help explain the importance of the Medicare market.
The Fargo Clinic, in 1993, had 250 physicians in 30 locations. Five of these are larger clinics, with the rest being smaller community-based facilities. They had over a million patient visits in 1992, with over half coming from Minnesota. Revenues were $150 million, which represented over a 50% growth in the last five years. The Fargo Clinic's physicians represented 70% of the total in the market. In the mid-1980's, they embarked on a rapid expansion by purchasing many area primary care centers. This has provided them with a solid base of much needed primary care capacity from which to grow on.
St. Luke's Hospital is equipped with 357 staffed beds and 40 nursery bassinets. They are a tertiary care facility and the largest hospital in North Dakota. Over 99% of the admissions, which are served by their 2,400 employees, already come from physicians of the Fargo Clinic. In 1992, they had over 100,000 days of inpatient care. The birthing facility delivered more that 1,500 babies in 1993. Market share has steadily increased to 60% of inpatient visits in their service area, with 60% of them coming from Minnesota. St. Luke's also operates the Roger Maris Cancer Center, which provides care to a larger region than the acute care hospital. Total revenues have increased over 60% in the last years, and they have a fund balance of over $69 million.

Strengths
In 1986, Fargo Clinic and St. Luke's Hospital merged to create their biggest strength ' an integration of facilities and services (MeritCare). This eliminated duplication, which allowed them to focus on other health care strategies as well as cut costs. Radiology, Information systems, Plant operations, Human resources, Planning and marketing, Housekeeping, Utility management, Maintenance of equipment, and telecommunications are several areas in which MeritCare can consolidate and cut costs.
St. Luke's strengths also include that they are the largest hospital and private employer in North Dakota. As of 1993, outreach activities at St. Luke's Hospital were established. These networks included such things as oncology (20 locations), emergency heart services (30 locations) and maternal child care (18 locations). These outreach activities will help them to grow and strengthen their market position.
The Roger Maris Cancer Center is a strength of MeritCare. It provides cancer treatment to people in three states, pulling patients from eastern North Dakota, northern South Dakota and western Minnesota. This has been a very successful venture increasing patient visits per month by 100.
The strengths of the Fargo Clinic add significant strength to the MeritCare merger. One of the main strengths of the clinic is that it is one of the largest multispecialty clinics in the country with 30 locations throughout North Dakota and Minnesota. It also presents an integrated, cost-effective system of care that should be integral in obtaining profitable managed care contracts. By having the hospital and clinic operating as one entity, the quality of care should improve with a slower rise in costs. This increase in quality of care will improve community health care and increase their patient load.

Weaknesses
A weakness of MeritCare is shown through the non-integration of information systems. This task has not been ...

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