Editor’s Note: This the second in a three-part series about CHI St. Joseph’s Hospital and Health Center, chronicling the hospital’s history and future as it transitions into its new facility next month. If you missed Friday’s story, visit www.thedickinsonpress.com.

The new CHI St. Joseph’s Health center almost didn’t happen.

Nearing the 100th anniversary of its arrival in Dickinson, the St. Joseph’s Hospital and Health Center was struggling to make a profit. Finances were plateauing. The organization was losing between 2 and 8 percent off of its bottom line every year in the early 2000s, said St. Joseph’s President Reed Reyman, who started in 2009. Medicare reimbursements were at just 55 to 60 percent, he said.

He summed up the problem: “We were trying to function within a payment structure that wouldn’t allow us to be successful.”

As health care centered more around outpatient procedures, the 40-room hospital, which was at the time licensed for 49 beds, wasn’t seeing a high enough volume of patients. Some days as few as 22 beds were occupied.

It was reminiscent of another trying period in the hospital’s history, when, in the late 1980s, the hospital had to cut employee pay after the second oil boom abruptly ended, said Dennis Zastoupil, an operations engineer who joined the staff in 1988.

“When I started ... there had just been a 5 percent cut in pay for all the employees because things got so slow all of a sudden. They made a sacrifice of taking pay cuts to adjust to the new economy,” he said.

In 2007, the struggling hospital underwent several high-profile closures, starting with its 7-year-old Oncology Center in June, and later its mental health inpatient services in August and mental health psychiatry services in September.

“Back then, we had several financial challenges relating to the hospital - an old, decaying facility,” said Michael Rowan, chief operating officer of Catholic Health Initiatives, which operates St. Joseph’s. “We had a number of departments which were either closed or not functioning well.”

Some of the issues had to do with staff, Rowan explained. Others were related to the challenge “one finds in rural areas” of trying to operate a hospital in a small community while providing services to a large geographic area.

CHI saw St. Joseph’s Hospital as a “vestige of a past era,” Rowan said, with “an excessive number of beds, an excessive amount of space.”

In his speech at the Nov. 6 blessing ceremony held for the new hospital on Fairway Street, Rowan said there were many skeptics who thought the future of St. Joseph’s was “very dim.” They questioned whether the Catholic health system could stay in Dickinson at all.

“It was a challenging time,” Rowan said.

By 2008, the hospital board, then under the presidency of recently elected state Rep. Mike Lefor, knew it had to determine a course forward if it was to keep CHI in the area.

“There was stress because, at the time, the hospital is losing money,” Lefor said. “Everyone wanted a solution to how we can make this thing all better. There was deep concern about the future. How do we fix this problem of losing money, as well as upgrade some of our aging facilities?”

A five-year revenue and expense projection from CHI’s then-CFO “showed that the course we were on was no longer sustainable,” Lefor said. “And so, at that time, one of the things I urged the board to do was to let whatever tensions there were in the past be in the past. Let’s move forward.”

The only solution

Hospital officials knew the solution was for St. Joseph’s to receive critical access designation.

The designation would lower the hospital’s licensed bed count to 25 and bring in as much as 101 percent of Medicare costs for certain procedures. The hospital would be paid for its costs, rather than receive a fee for services.

It was the “only way we could be successful,” Reyman said.

But a rather large obstacle stood in the way: Under federal law, no two critical access hospitals can be built within 35 miles of each other. Richardton Memorial Hospital, which then held the region’s only available critical access designation, was 23 miles away.

“The federal government had never allowed anyone to give up their access so that someone in the 35-mile range could take it,” Reyman said. Some local leaders estimated the hospital had a 5 percent chance of ever receiving the designation.

Hospital administrators, both locally and at CHI headquarters in Denver, formed an advocacy campaign to lobby a Congressional delegation made up of U.S. Sens. Kent Conrad and Byron Dorgan and Rep. Earl Pomeroy, and then-Gov. John Hoeven, for assistance in receiving the designation.

“We challenged them with an idea,” Rowan said. “What could they do to help?”

It took the collective efforts of CHI officials, Medicare representatives, the state health department, the Stark County Commission, Dickinson’s Mayor Dennis Johnson, Hoeven and the Congressional delegation working with administration at Richardton Memorial Hospital to transfer critical access status to St. Joseph’s.

“Up until about 2006 or so, I didn’t really understand what the designation of critical access meant,” Johnson said. “It’s only until you’re concerned with the future of the hospital did we really dig in and get ourselves educated.”

The committee met seven or eight times to hammer out details, Lefor said.

“There were a lot of players involved, working hard together,” he said.

St. Joseph’s Hospital and Health Center received its critical access designation on July 1, 2009, after a year of lobbying and negotiations. Richardton, aided by $500,000 as part of the transfer agreement, and a $940,000 grant from the U.S. Department of Health and Human Services, relinquished its designation and began its transition to a skilled nursing facility. St. Joseph’s downsized to a 25-bed facility, and almost immediately its financial situation turned.

If the hospital hadn’t changed its payer system, its revenue stream would never have stabilized enough to survive long-term, Reyman said.

“We went right away from losing between 2 and 8 percent every year to making between 2 and 8 percent,” he said. “Just the opposite. We did a 180 on our finances and a lot of issues.”

Deciding to build

The new hospital “didn’t happen that fast,” Lefor said.

One wasn’t even in the plans when the hospital pursued its critical access designation. It wasn’t until a year later, when the community began to experience an influx of people as the oil boom took off, that “it became more and more obvious that we were going to have to do some different things with the facility,” Reyman said.

The process started when Stark County approached St. Joseph’s in 2010 with a proposition: Buy the land west of the new West River Community Center. CHI offered to purchase 40 acres of land, then owned by Dickinson Parks and Recreation, for “if and when you are ever going to build a hospital,” Reyman said. “In 2010, we had no intention of building.”

But as the projected costs of keeping the aging St. Joseph’s Hospital and Health Center up-to-date continued to climb, the board realized a bigger need had arisen.

“You can put Band-Aids on it, but at the end of the day, where that led us, we want to talk about a new facility,” Lefor said. “As long as costs are getting this high, we might as well build a new facility.”

Local leaders again came together in 2010 to encourage CHI to invest in the new, $100 million state-of-the-art hospital. CHI agreed to front St. Joseph’s $100 million, as long as the local community could raise $15 million to put toward costs - it’s common for CHI to ask the local community to share in the costs, Rowan said.

Of the $15 million needed for the total $100 million capital campaign, roughly $12 million has been raised.

Johnson, who as mayor helped encourage CHI to consider helping build the new hospital, said CHI’s decision to invest - even knowing the risks involved - showed its commitment to the area.

“Not much more than seven, eight, nine years ago, the hospital was really struggling,” he said. “To go from a struggling organization to one that would be taking on a nearly $100 million commitment is a pretty big jump.”

Members of the advocacy campaign had celebrated the victory of St Joseph’s being one of - if not the - only institution to successfully receive critical access designation from another facility, but not everyone understood at first what the designation meant for the hospital or the community.

Many thought Dickinson “didn’t have a real hospital anymore,” Reyman said.

But the transition was a primary reason why the new CHI St. Joseph’s Health facility could become a reality at all. The financial turnaround helped St. Joseph’s prove to CHI that the organization could “commit to a business plan,” Rowan said.

“CHI put $85 million into this facility,” he said. “You’ve got to have something sustainable before you’re breaking ground.”

Fundamental for the community

Ground did break, on Oct. 5, 2012. In December, a new hospital will open featuring 25 private patient rooms, four delivery suites, a dedicated outpatient surgery center and an enclosed ambulance garage, among other modern amenities the old facility lacks.

Rowan said St. Joseph’s receiving critical access designation “was the only option.” CHI leaving Dickinson - one of the organization’s 11 facilities in North Dakota - would have hurt the entire community.

“One of the challenges is people leave the community for their health care,” he said. “You need new programs and services to keeping people in the community, instead of running all the way to Bismarck. It’s fundamental.”

It took “a lot of community involvement” to not only acquire designation, but to bring the new facility to Dickinson, Lefor said.

Community members “recognize the importance of health care in the community,” Lefor said.

“We all banded together to make a financial situation much better than it is, and improve the ability to recruit and retain staff,” he said, calling the new St. Joseph’s “the best critical access facility in the country.”

“It’s just a wonderful tribute to the community and the people in it.”

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Faulx is a reporter with The Press. Contact her at 701-456-1207.