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Willmar council unanimously OKs Rice Hospital lease to newly formed Carris Health

WILLMAR — Rice Memorial Hospital will officially be part of Carris Health, a subsidiary of CentraCare Health, as the Willmar City Council unanimously approved the lease and affiliation agreement with the nonprofit healthcare provider.

Rice, along with Willmar Medical Services and Affiliated Community Medical Centers, will form Carris Health through the affiliation agreement.

The vote Monday to approve the lease and affiliation was 7-0. Counselor Rick Fagerlie was absent. A vote to convert the hospital bonds to qualified 501(c)3 bonds also passed unanimously.

The Rice Hospital Board recommended the approval of the affiliation at its special meeting Oct. 30 and moved it to the City Council table, who had final say. The ACMC Health board of directors and its 89 physician shareholders have also approved the agreement.

The stated goals of the affiliation agreement in the approved resolution are to provide more integrated and effective care to the region; recruit and retain physicians and other healthcare providers; keep the Rice facilities competitive in the healthcare arena; strengthen Rice's position as an independent provider of healthcare in the region; and provide a source of payment for the city's bond obligations for the Rice facilities that are not tied to the facilities' operations.

"We are pleased to report that we have a transaction with terms that is very favorable to the local community and the long-term commitments of CentraCare and this new entity to continue to maintain the highest level of service to Willmar," said Tim Keane of Kutak Rock, special legal counsel for the city, hired to help during the lease and affiliation agreement negotiations.

As part of the approved agreement, Carris Health will lease Rice Memorial Hospital for a total of 60 years. The city will continue to retain ownership of the hospital, but Carris Health will pay the city rent for the hospital, which will then be used for the bond payments. Carris will also pay the city $300,000 a year in an intergovernmental transfer.

Carris Health, in addition to guaranteeing bond payments, will also need to invest at least $32 million into Rice Hospital during the first 10 years of the lease.

An option for Carris Health to purchase Rice Hospital after 10 years is in the agreement. However, Carris will need to have paid off the city's bonds and satisfy additional lease and city charter requirements, including a referendum of voters.

The city, through the Rice Hospital Board, will continue to have oversight authority regarding the operation and management of the hospital and enforce the terms of the lease. A Carris Health board will be formed of representatives from Rice and ACMC.

There will also be two local appointees to the CentraCare Board, an opportunity that has not been given to other hospitals and clinics which have partnered with CentraCare, said Jill Radloff, Rice Hospital legal counsel.

"We took care throughout the negotiation process to make sure that the city continues to have oversight of the facility and continues to have control," Radloff said.

All Rice employees will be offered jobs with Carris Health and union contracts will be honored. Core services will continue to be provided at Rice Hospital including inpatient beds, emergency room, surgery, therapy services, ambulance service and obstetrics.

"There are commitments that certain services will continue to stay in the city of Willmar during the term, and there will be opportunities to recruit additional specialists during the term," said Radloff.

Prior to the council vote, a public hearing was conducted to give interested community members and hospital staff one last chance to comment on the agreement. The nurses had a large contingent at the meeting and a few commented that the nurses support the affiliation but still feel there was lack of employee engagement in the process.

"It is really disappointing, that is what we asked for all along," Rice nurse Johanna Reller said. "It speaks to me how the administration feels about all our input."

The nurses called for a transition oversight committee, to make sure Carris Health was keeping up its end of the bargain regarding patient services and employee benefits and jobs.

"We believe there should be assurances Carris Health won't start picking away at us after this agreement goes into effect," Reller said. "To make sure the new corporation keeps its promises and doesn't make unilateral decisions that can harm the quality of care our patients receive or undermine staff."

Carnie Allex, pharmacy director at Rice, spoke in favor of the agreement, saying it is necessary to make sure Rice continues to provide high quality care and remain financially viable.

"To ensure Rice can fulfill its mission, we have to be willing to make decisions now that will allow that mission to be fulfilled for many years to come," Allex said.