GRANITE FALLS — Granite Falls Health will be a wholly owned subsidiary of Avera Health in the coming year.

That’s the goal of a non-binding agreement approved by the two organizations this month.

Tom Kooiman, chief executive officer for Granite Falls Health, said the two organizations are on track to have a final agreement in place by the start of the new year. Granite Falls Health and Avera already have a working relationship, he said. Granite Falls Health medical staff members are employees of Avera Health.

Granite Falls Health is currently owned by the city of Granite Falls. It operates a 25-bed, critical-care hospital; a medical clinic that was previously owned by ACMC Health of Willmar; and a 48-bed skilled nursing home.

Granite Falls Health and Avera Health intend to form a separate, nonprofit entity to be known as Avera Granite Falls. It would be part of Avera Marshall.

The city of Granite Falls would continue to own the medical facilities and real estate, and lease them to Avera Granite Falls for a term of 40 years. As part of the agreement, Avera would guarantee the debt obligation for the skilled nursing home through the lease payments. The nursing home was opened in 2015.

Granite Falls Health, Swift County Benson Health Services, and the RC Hospital and Clinics in Renville County are among the area’s remaining independent health systems which are now seeking to affiliate with larger systems.

Granite Falls Health received inquiries from four prospective partners. A community task force and the health system’s board of directors selected Avera as a possible partner.

Kooiman said the main goal is to preserve health care services in the community along with as many health care jobs as possible. He said the system’s board of directors believes a relationship with a larger system offers more long-term financial stability than remaining independent. Larger systems are better able to recruit providers, and have more leverage in negotiating reimbursement rates from insurance providers and costs from suppliers.

Granite Falls Health is also hoping the agreement will help it address a need for improved facilities. The agreement will include language in which Avera pledges to give “strong consideration” to developing a new facility in five to seven years.

Granite Falls Health is looking at replacing its hospital by developing a new facility on property adjacent to the nursing home. Kooiman said the new facility would likely be more akin to a super-clinic or micro-hospital rather than the current critical-care hospital.

Granite Falls Health is also aiming to retain a role in the governance of the proposed Avera Granite Falls entity.

Under the current proposal, it will be governed by a seven-member board. Three of the board members will be from the Granite Falls area, with one of those members appointed by the Granite Falls City Council. Three members will be from Avera Marshall and the seventh member will be the CEO.

Two of the Avera Granite Falls Health board members will also serve on the Avera Marshall board of directors.