As M Health Fairview announced financial troubles and the closure of 22 clinics and pharmacies last week, Welia Health has proposed a move some believe will protect it from similar closures. 

Fairview, a non-profit health care system, reports that it lost $163 million in the first six months of this year. On Oct. 5, Fairview announced that it will close  its clinic in Pine City by Dec. 4. as part of cost-cutting measures, as well as 21 other clinics and pharmacies including in Rush City and Milaca. 

Welia has a hospital and clinic in Mora, as well as clinics in Pine City and Hinckley. In reaction to Fairview’s announcement, Welia CEO Randy Ulseth said, “(Welia) will do all we can to make sure the community of Pine City has all of the health care services they want and need.”

Ulseth reported Welia’s revenue has rebounded significantly, although not entirely, from initial decreases caused by the SARS-CoV-2 pandemic, the virus that leads to COVID-19.

In early April, Welia reported a decline of at least 50% in revenue after Governor Tim Walz issued an executive order temporarily discontinuing routine, non-emergent services, procedures and surgeries. Today, Ulseth reported revenue has returned to approximately 90% of Welia’s 2019 levels.

Non-profit privatization

The Welia Health Board of Directors has proposed becoming a private non-profit, charitable hospital. 

While Welia Health is currently owned by Kanabec County, the county commissioners have little to do with its operation. Welia Health is operated by a board of directors. Appointees to the board are approved by the county commissioners. Two seats on the nine-member board are reserved for current county commissioners. These current seat holders are commissioners Les Nielsen and Kathi Ellis

If Welia were to become a private non-profit, it would continue to be operated by this board of directors, the only difference is it would appoint its own members, instead of them being appointed by the county. 

None of Welia’s profits are transferred to the county; nor does any county taxpayer money go to fund Welia’s operations or buildings. Welia is self-sustaining. However, when Welia underwent its recently completed $52 million expansion, the county authorized the bonds for the project.

Ulseth said it is difficult for public hospitals like Welia to compete with private, nonprofit hospitals and health systems. Public hospitals are subject to state public purchasing laws, open meeting laws and data privacy laws; private hospitals are not. This makes it harder for public hospitals to react nimbly to changes in healthcare. 

Ulseth said this is one of the reasons it is more difficult for public hospitals to recruit and retain physicians and other health professionals. 

Welia’s providers are currently hired through an agreement with Allina Health. That agreement expires in August 2021. The expiration of that agreement is one of the motivators for Welia’s proposal to privatize at this time. 

Many hospitals were publicly owned 30 years ago because it was a way to bring health services to rural areas. The number of public hospitals in the United States is declining.  Less than 20% of hospitals in Minnesota are publicly owned; the only rural health system owned and wholly owned and operated by a county besides Welia is Alomere Health in Alexandria.

Ulseth said the last thing he would want is for Welia to be purchased by another healthcare system, potentially reducing services to the community. Ulseth believes privatizing as a non-profit will protect Welia from being purchased by another health system.

“When systems take ownership of rural hospitals, two things happen: One, they take jobs to the metro; Two, they take services to the metro,” he said. 

As a safeguard against that happening, Ulseth proposed including a right of first refusal as a stipulation of privatization. This means before Welia could be sold to another entity, it would first be offered to Kanabec County. 

Privatizing as a non-profit would not change the services Welia provides or the insurance accepted. The current care providers (doctors, nurses, etc.) would be the same.  The amount of property taxes paid by Welia would not be affected by privatization as a 501(c)3 non-profit. 

The decision

The decision of whether or not to privatize as a non-profit rests with the Kanabec County Board of Commissioners.

The commissioners recently took questions and comments from the public during a public hearing. The message to decision makers was clear: Keep Welia Health in the community. 

Welia’s Chief Medical Officer Brian Niskanen said his biggest fear would be for Welia to be purchased by an entity like Allina Health, Essentia or Fairview. He was in favor of Welia’s privatization. 

Others spoke with concerns about what  privatization could mean for community voice and public oversight of the hospital. 

Unionized nurses presented concerns about how the change would affect their retirement benefits. 

Commissioner Kathi Ellis, who is also on the Welia Health Board Of Directors, supported privatization as a way to keep the hospital in the community while separating it from potential political influences of county government. 

The board of commissioners continues to negotiate potential terms of privatization. No date has been set yet to vote on the issue.

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