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Hospital Vote in Magic Valley
Idaho Statesman 5/20/2006

St. Luke's Regional Medical Center wants to create the first hospital system based in Idaho.

The Boise-based nonprofit hospital will get its wish if Twin Falls County voters on Tuesday approve a proposed takeover by St. Luke's of the Magic Valley Regional Medical Center, a county-owned hospital in Twin Falls.

The merger would create the St. Luke's Health System — a four-hospital system. The 369-bed Boise-based hospital already operates a 104-bed hospital in Meridian and a 25-bed hospital in Ketchum.

An 11-member board would oversee the system with members from each region. Three local boards would operate under the system board — one for Boise and Meridian, a second for Ketchum and a third for Twin Falls.

When Magic Valley invited St. Luke's to propose a merger, St. Luke's saw the perfect opportunity to build a system, said Ed Dahlberg, St. Luke's president and chief executive officer.

For their part, Twin Falls County officials saw an opportunity to replace their aging hospital with a 21st-century, 172-bed building at no taxpayer expense. St. Luke's has agreed to build a new $120 million hospital.

"We get a new hospital. I think it's a win-win all the way around," said Gary Grindstaff, a county commissioner.

Benefits of Consolidation

The proposed St. Luke's Magic Valley Regional Medical Center reflects consolidations in the hospital industry, especially among county-owned facilities that usually vie for funding with other county agencies, according to industry analysts.

"That's been going on for 10 years," said Bill Cleverley, a hospital consultant in Ohio who has consulted for St. Luke's.

Several hospitals in Idaho already are parts of nationwide hospital systems.

Saint Alphonsus Regional Medical Center is part of Trinity Health, a Catholic health-care organization based in Michigan. West Valley Regional Medical Center in Caldwell and Eastern Idaho Regional Medical Center in Idaho Falls are part of Hospital Corporation of America, a for-profit hospital chain based in Nashville, Tenn. (St. Luke's, founded in 1902 by an Episcopal bishop, is a nonprofit governed by a volunteer board.)

Idaho is slightly behind the times because it doesn't have an Idaho-based hospital system yet, said Rick Wade, senior vice president for the American Hospital Association. Many other states have at least one in-state system.

Counties leave the business

Counties throughout the United States have been trying to get out of the hospital business because of cuts in Medicare and Medicaid reimbursements, Wade said. Hospitals can be drains on county budgets, he said.

Magic Valley is in good financial shape right now, said John Kee, the hospital's chief executive officer, but the hospital knew it would need a new building in the next few years. The board and managers analyzed several options, including new construction or merging with another hospital. They decided on the merger.

"Magic Valley on its own is not in a position to take the degree of risk necessary into this project," Kee said.

But Twin Falls County residents consider the hospital a community institution. Under St. Luke's, the ultimate authority over the hospital would reside in Boise, not Twin Falls. Still, proponents of the merger say that's better than leaving their destiny to an organization based outside Idaho. Twin Falls County would have four members on a 20-member St. Luke's board.

Magic Valley hospital officials invited St. Luke's after polling local doctors and staff about who they preferred as a partner. "St. Luke's more or less rose to the top because it is really the only purely Idaho-based hospital that is not influenced by an out-of-state interest," Kee said.

Other plans rejected

Several hospitals and hospital systems wanted to make proposals to take over the Magic Valley hospital, including St. Alphonsus, but Magic Valley officials chose St. Luke's without asking for other proposals.

Another hospital might have offered more money for Magic Valley Regional Medical Center or provided more services, said Janelle Reilly, chief operating officer at Saint Al's, which asked the commissioners to open a bidding process.

But the Twin Falls County commissioners and officials at Magic Valley and St. Luke's hospitals said they believe the community is getting a good deal.

Besides a new hospital, Grindstaff said the deal includes:

• A $15 million charitable trust fund.

• $3 million to renovate a medical clinic and convert it to county offices.

• $2 million a year for St. Luke's to lease the current hospital until the new hospital is built.

Services will improve after the merger, and no major staff changes are planned at either hospital, Dahlberg and Kee said.

If the health system is created, Dahlberg said St. Luke's has no immediate plans to expand the system by acquiring other hospitals.

"We can't go into someplace and say we're going to take you over," Dahlberg said. "It's got to be a win-win situation for everybody."