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Merit Care, Sanford Health talk possible merger

FARGO - MeritCare, which marked a century in business last year and operates as the largest private employer in North Dakota, is exploring combining operations with Sanford Health in Sioux Falls, S.D.

A merger could join two dominant health systems with neighboring service areas stretching across five states.

The two health systems issued a joint statement Wednesday to acknowledge the talks.

Few details were released about ongoing discussions, which the two health organizations expect will continue this summer.

The statement, issued jointly by Kelby Krabbenhoft, CEO of Sanford Health, and Roger Gilbertson, president and CEO of Fargo-based MeritCare, in its entirety:

"MeritCare and Sanford Health have commenced discussions at the executive and board level to evaluate the potential of a combined organization for the purpose of furthering their similar missions of improving patient care in the communities we serve. Both systems expect that these discussions will be comprehensive. At this time, these conversations are exploratory. An update is expected by the end of the summer."

If reached, a combined organization would create a network of hospitals and clinics covering parts of five states: North Dakota, South Dakota, Minnesota, Iowa and Nebraska. Sanford and MeritCare have complementary service areas that do not overlap.

"This is not a buyout situation on either side," MeritCare spokesman Darren Huber said. "We are evaluating the possibility of a combined organization."

Huber declined to say which party initiated the talks or when discussions began. "It's premature to talk about any specifics."

Similarly, Sanford declined further comment through a spokeswoman. No reaction to Wednesday's announcement was immediately available from Innovis Health, MeritCare's chief rival in the Fargo-Moorhead area.

MeritCare, with 7,131 employees, operates health care facilities from Jamestown, N.D., to Cass Lake, Minn.

It operates a hospital with two campuses in Fargo with combined beds of 583 and a regional hospital in Thief River Falls, Minn., as well as 20 locations in Fargo-Moorhead, eight clinics in North Dakota and 19 in Minnesota.

In late June 2008, MeritCare announced it would save $9.2 million by cutting 210 positions, including 120 vacant posts, and reducing hours for another 90 employees. It also closed a satellite clinic in LaMoure, N.D., as revenues failed to meet expenses, in part due to lagging Medicare reimbursements.

By September, MeritCare administrators said efficiency steps staunched financial hemorrhaging and the medical system would end its fiscal year in healthy condition.

Sanford Health has a hand in nearly every aspect of medical care. In addition to 23 hospitals and 128 clinics in four states, Sanford runs nursing homes, assisted living facilities, hospices, pharmacies, a research center, medical equipment providers, wellness centers, home-health services and an insurance plan.

Sanford touts itself as the biggest employer in the region, with more than 9,200 employees, and as the largest health-care system between Denver and the Mayo Clinic in Rochester, Minn.

And Sanford seems intent on getting bigger. It plans to build a hospital in Aberdeen, S.D., which would be the second hospital in the city of about 25,000. Later this year, it expects to open a clinic in Duncan, Okla., and break ground on a new Sioux Falls cardiac center.

The expansion follows a donation in 2007 of $400 million from T. Denny Sanford, a banking entrepreneur-turned-benefactor.

The wide-ranging health-care provider was known as Sioux Valley Hospital and Health System before the donation from Sanford, a Sioux Falls banker and philanthropist who's said he hopes to die broke. The nonprofit's namesake was estimated by Forbes in 2008 to be worth $2.8 billion, a fortune that made him the 412th richest person in the world by Forbes' rankings.

As directed by the terms of Sanford's gift, the nonprofit has launched a project focusing on curing one disease, juvenile diabetes. Gift guidelines also dictate a focus on research, hospital campus design and children's health.

As part of the latter goal, Sanford Health opened a new $60 million children's hospital in Sioux Falls in March, a building designed to look like a castle, and announced plans earlier this month to build a series of international pediatric clinics starting in Belize. Sanford himself signed off on the selection of Belize as the site of the first international clinic, according to a June 7 report in the Sioux Falls Argus Leader.