Working Session

MAYOR COUNCIL WORK SESSION
Wednesday, April 4, 2007 – 4:00 p.m.
Council Chambers

Members Present: Art Bakken, Bob Brooks, Doug Christensen, Hal Gershman, Eliot Glassheim (via phone), Mike McNamara (via phone), Mayor Brown (joined meeting in progress).

Members Absent: Mayor Brown.

Gershman called the meeting to order at 4:00 p.m.

1. Matter of Aurora Medical Center Property Tax Exemption

Dennis Reisnour, Altru Health System, gave a brief presentation addressing their opinion as to why the request from Aurora Medical Center should not be granted. Opinions expressed in the presentation were that Altru does not feel that the criteria for being a primary sector business have been met and that there would not be new jobs created, just a shifting of positions within the community. Reisnour continued that the other concern that Altru has is in regard to their sole community provider Medicare status that gives them $6.9 million in supplemental reimbursement each year. This designation could be lost if the Aurora Medical Center meets its target service levels and could result in Altru Health System having a net operating loss annually. Councilmembers requested that Altru provide full revenue and profit numbers from all sources, not just operations as had been discussed today.

Christensen commented that he does not understand why competition will put such a strain on Altru Health System. He inquired of Mel Carsen, City Assessor, whether the 50 mile delimiter is listed in City Code, as state code does not list any restrictions such as that. Carsen replied that there is no limit set in code. Glassheim commented that for the Growth Fund the 50 mile limit has been used to determine new wealth from redistributed wealth when considering projects.

Gershman cited a similar situation that often exists in airports when additional carriers come in and you actually see stimulation of the market and increased business overall. Reisnour stated that health care is different in that some studies have shown that private institutions have physicians that do more and often unnecessary tests that drive up the cost of health care, as they are paid based on revenue of the facility versus a community hospital which pays differently. McNamara commented that he would discount that as a physician takes an oath and would not buy into that all of them would disregard that oath and that in any industry you have a few that may abuse the system, but have found that is not always the case. He continued that he also does not believe that the actual effect of a loss of the Medicare sole provider status would be as great to the institution as has been portrayed. Glassheim commented that Altru does provide a large community benefit and does not want to pass something that would jeopardize their viability.

Brooks commented that he does understand that a nonprofit does need to stay within a certain range of profitability or they risk losing their nonprofit status, but would not see this to be a large issue in what we are talking about here and that communities do see it as critical that they retain their hospitals as evidenced by the struggles of smaller communities around us. He continued that he does believe this hospital is coming, regardless of whether the exemption is granted and that he does believe it will bring new jobs and increase the tax base which helps the community as a whole.

Pamela Russell, 4917 Chestnut Street, commented that she has been a nurse for over 30 years in the community and is supportive of the project as it gives members of the community a choice in their health care. She added that the proposal is for a 70 bed facility and it is not unforeseeable that there could be 35 of those occupied by people from outside the local area. She continued that all areas of Altru are not a nonprofit and that it is important for community members to have choices available when making their health care decisions and that competition may improve services for all health care options in the region.

Vernon Gornowicz, 1400 Kuster Court, stated that he supports City assistance for this project. He commented that often there are similar exemptions granted to bring in people from outside the City to start a business and that the people involved with this venture are local citizens and we should also show support for them and their desire to stay in town and work to make it a better community. He continued that in the past he has started two area businesses and each time received assistance from the City and they are still contributing to the community. Gornowicz stated that with the expansion of the City continuing to the south that it would be good for the community to also have medical facilities available on that end of town in case of emergencies.

Mary Lyn Berntson, 1516 Baron Boulevard, stated that she is co-owner of a private business in the health care field and that they have a policy of not turning away any clients and that they serve approximately the same level of charity patients that Altru has sited. She supported assistance for this project and noted that there are some service areas that Altru does not cover, alcohol and drug treatment, and that having a second facility in town would be a benefit to the community.

Rory Trottier, 5598 Pinehurst, encouraged the Council to look at the project on its own merits – as a new business that will bring jobs and opportunity to the community asking for assistance. He commented that being a private practice physician he takes exception to the comments made regarding unnecessary procedures and that he prides himself on the care he gives to his patients and like every other profession, you can have a few that maybe unethical, but can not generalize that all private facilities operate that way.

Tom Peterson, on behalf of Aurora Medical Park stated that he wanted to provide some information as follow-up to some of the questions that were posed at the Council Meeting on Monday. He stated that research supports that a community of our size can support two hospitals and cited examples of other communities where two hospitals have been sustainable, including most larger cities in North Dakota. He cited increased benefits in the area of emergency response, particularly in the south end of the community as well as having a second option during emergency situations that might make reaching the other side of town difficult or impossible, such as natural disasters, chemical spills, etc. Peterson provided statistical information on indigent care services provided now at the Stadter Center and the Center for Psychiatric Health and pointed out that the first statement in their action plan is that “No one will be denied care.” He continued that they have had an independently done feasibility study which provides results that show two facilities are sustainable within the community and that with the targets they are working towards they will be less than 10% of the volume that Altru achieves. In responding to the concerns of the sole community provider for Medicare, Peterson noted that there are very uncommon nationwide due to the need for more healthcare options in community.
Peterson provided additional statistical information related to the impact that the opening of the Stadter Center had on Altru patient services and pointed out that there was not a negative impact, but rather Altru levels remained somewhat constant, but the community received the additional revenue from the increased patients that have been seen at the Stadter Center.

Paul Bothun, 1771 Lydia Circle, commented on his experience in opening a sleep lab in Grand Forks and that its effect has not been to draw business away from Altru, but that it has actually increased the level of service at Altru, besides providing the service at his facility, of which many patients come from outside the community.

Bakken commented that America has been built on competition and that he feels an alternative for the community is a benefit. He added that even if this project were not to be done, someone is going to bring in another hospital whether in Grand Forks or East Grand Forks and this exemption will not stop competition from coming.

Glassheim commented that in the pro-forma statements it lists a loss the first year, breakeven the second year, and slight profit starting in the third year and that if that is correct he would maybe suggest perhaps only offering assistance until there are profits. Peterson replied that the pro-forma projections are based on obtaining the exemption and if that were not granted would change all the numbers reported and there would be substantial differences in the profit projections for the first five years.

Kreun requested that Peterson provide hard copy of the statistical numbers for the Stadter Center and Center for Psychiatric Care that were cited relating to patients from outside the area. He also asked that Carsen give the typical criteria that are used in evaluating these requests. Carsen explained that the 50 mile radius is one factor, if it is a manufacturing business, and then referred to other guidelines listed in State Code, and further that these have typically not been done for retail businesses, office space, and where the new business would be direct competition to another taxpaying business. Kreun noted that then by that definition this is not direct competition, as Altru is a nonprofit and therefore does not pay taxes and there would be no competitive disadvantage granted by approving this exemption. Carsen stated that yes based on that definition there is no competitive disadvantage by granting this exemption and also noted that any application for exemption is considered on its own and can be granted or not at the discretion of the Council and has no affect on even an identical proposal that may come to the group in the future.

Kreun stated that since there will be some Council Members unavailable on April 16, he would suggest holding a special Council meeting on Monday, April 9 so that this item could be decided with all members in attendance.

Christensen agreed and formally called for a Special Council meeting for Monday, April 9 at 7:00 p.m. in City Council Chambers to act on this item.

Kreun commented that this request will be looked at as a business decision and whether it is a benefit to the community and should not be viewed as a vote for or against Altru, but rather how it affects all members of the community. Christensen added that some could also relate the Canad situation, which is competition to other hotels in town, but is believed to be a benefit to the community as a whole. He continued that he has received feedback from a number of citizens and the overwhelming feel is support for having a choice in healthcare in this community and the Council will take all factors into consideration when making their decision.

Gershman commented that he was also thinking of the competitive advantage issue, but Carsen has clarified that. He added that we did support Canad with the principal that it will stimulate the market and community and thereby help existing businesses and sees this having a similar effect. Gershman added that we are a growing community and that is a good thing and will result in the need for more facilities.

McNamara commented that he has received numerous e-mails and calls from people in support of a choice, that this project will have a long term benefit to the tax roles of the City and will be a benefit to the community.

Glassheim stated that he is still not sure whether or not trying to compare the two are like matching apples and oranges and that he feels that a nonprofit can do things for the community that a for profit facility does not. He also stated he has a caution that sometimes competition in health care can drive up some costs as each facility strives to get newer and better equipment to stay ahead.

Trottier responded that he has seen numerous studies that show that increase in health care costs is not related to competition. He added that some concerns were implied that a private facility will only recommend treatments and treat patients that are profitable, but that having been an Altru doctor in the past, he can speak to the fact that they also look at the bottom line just go about it in a different manner and that as physicians they have a responsibility to the patient and not always financial driven.

Gerhsman thanked all for attending and sharing their comments tonight and reaffirmed that this matter will be heard for action at a special City Council Meeting on Monday, April 9.

Meeting adjourned.


Respectfully submitted,
Sherie Lundmark
Admin Spec Sr