The State of Healthcare: Poised for Change

Though these are tumultuous times for the healthcare industry nationally, North Dakota finds itself, as in other sectors, uniquely positioned to weather — and even grow through — the challenges at hand.

“In general, the state of healthcare in North Dakota is very good,” declares Paul von Ebers, the President and Chief Executive Officer of BlueCross BlueShield of North Dakota (BCBSND), the state’s largest healthcare insurer. “By national measurements we have a high quality of care in the state, and the cost of healthcare, while it’s a concern to everybody, is somewhat lower than national averages.”

The why behind the robust state of the state’s healthcare industry is two-fold, in von Evers’ opinion. One is the more or less conservative nature of the state. “People don’t seek care quickly; they tend to wait and see if things will resolve on their own.”

The second factor, he believes, is the large integrated groups of physicians in business across the state. “In other words, various types of physicians’ specialties who are working together. That’s been shown nationally to produce a relatively high-quality and low-cost form of care.”

Sanford Health is an example of that integration. With the recent acquisition of Medcenter One in Bismarck, the organization now stretches across the state and into surrounding states, such as Minnesota and South Dakota. The organization is known as the largest rural, not-for-profit healthcare system in the nation with locations in 126 communities in seven states.

“It was a real easy relationship to start to talk about bigger things,” said Kelby Krabbenhoft, president and CEO of Sanford Health System of the merger. He added that the integration of healthcare in the state will be a large part of how the state moves forward.

“North Dakota is emerging from a long history of austerity, in terms of how the healthcare industry was paid, how it was able to develop services,” said Krabbenhoft. “It is experiencing the consolidation of healthcare, that’s a very natural thing that is happening in the industry.”

He added that, “North Dakota is going through a real period of change. I’m seeing us discussing new services, expanding facilities and growth in terms of talent we can recruit to our organization. Those are the things we’re really focused and challenged by right now. It’s a good problem to have. I’d rather have that than be shrinking and declining.”

Well Cared For

“While the state of healthcare in North Dakota is not all that it could be, it is generally superior to most other states,” suggests Jeffrey Hinson, Regional Administrator, Denver, Centers for Medicare & Medicaid Services (CMS).

Uninsured people in the state under age 64 comprise 12 percent of the population — 74,100 residents — compared to the national average of 16 percent, Hinson points out. By most objective standards, he argues, North Dakota is better cared for than the U.S. as a whole. Citing Kaiser Family Foundation figures, he notes that infant mortality and low birth weight are both below the national average, for instance, and child obesity is significantly below the national average. The death rate per 100,000 people is also below the U.S. average, as is the heart disease death rate. In addition, life expectancy is higher than the national average.

With regard to health insurance in North Dakota, Hinson points out, premiums are lower than most others pay for employer-based group policies, the largest source of coverage in the state. For a single person, it is about 2 percent lower than the national average, but for an individual plus one other person, it is 6 percent lower. For a family policy, the premiums average more than 10 percent lower.

“Group and individual insurance policies tend to have a better record of spending premium dollars on direct provision of healthcare and quality improvement,” he notes. “This year, for the first time, insurance companies are required to spend a minimum of 80 percent of premiums on these things, rather than overhead, profit, and other non-health related expenses.” For large group policies, the figure is 85 percent. Yet, in North Dakota, there were almost no cases of insurers not meeting this minimum standard, unlike other states, where spending below the minimum had to be rebated to policyholders.


“We are in a state of transition for a couple of different reasons,” said Gary Miller, President and CEO of St. Alexius Medical Center in Bismarck. “I think the Accountable Care Act, or as everyone refers to it, ObamaCare, is moving us further into the realm of paying for quality and outcomes versus paying for volume. I always refer to it as a fee-for-service, although we are still primarily in that type of an arena in North Dakota.”

Miller says he sees the state moving further in that direction, “and the government promoting that. I see Blue Cross/Blue Shield promoting it. We get paid more for producing outcomes versus just producing levels of care. Right now we’re on a Medicare basis, where 70 percent of our payment is determined by quality indicators and benchmarks, and the other 30 percent by patient satisfaction scores. So it’s just the very beginning, but I think we are in a transition for that particular purpose.”

The rest of the country is following the same trend, Miller points out. “I think we are going to continue to go down that path so that just because you order a test and get paid for a test doesn’t necessarily make it part of what should be included in your care continuum. We are moving into a transitional period, from being paid for volumes to being paid for outcomes.”

Miller also sees North Dakota in a state of transition in terms of the overall landscape of the providers across the state. “The Sanford (Health System) signs went up across the street this week, so obviously the Sanford system is growing in North Dakota.”

Not only will that momentum continue, Miller predicts, but should serve as what he calls “a new element that has entered our equation. [Sanford] moved from their base in Sioux Falls into the Fargo area, into the Minnesota area and now into Western North Dakota. I assume they plan to continue that expansion. So there’s transition again, this time in terms of the provider involvement.”

Who Needs Care?

Patient demographics have, indeed, changed in North Dakota in the last few years, von Ebers confirms. “Prior to the oil boom we were getting gradually older. Now with the oil boom we are having younger workers come into the state, and that is beginning to influence the average age.”

“The vast majority and the fundamental view of demographics in North Dakota have stayed the same,” Krabbenhoff added. “It’s very much culturally how it always has been, but it’s aging. That, of course, has implications on healthcare. The emerging demographic is a lot of young men that then transition into young families who are immigrating into North Dakota because of the oil and related businesses that stretch from east to west, north to south in North Dakota. It’s not just in the oil fields.” The influx has specific implications for the healthcare industry which is trying to keep up with a quickly changing world.

Von Ebers adds that there are other demographic factors at work besides gender that will help frame the healthcare debate in the years ahead – “and they are not very positive.”

The first is that residents across the state are growing more and more overweight. von Ebers cites research showing that 72 percent of the people in North Dakota are overweight. “I don’t have precise numbers, but a significant number are actually obese or morbidly obese. Only about half of us get the kind of exercise we really need to get on a typical day.” The inevitable result isn’t hard to guess. “We are seeing an increase in chronic disease — like diabetes which is related to obesity, and cardiovascular disease, which is also related to obesity.”

Figures like these, von Ebers adds, “are part of the reason why healthcare costs have gotten much more expensive over the last few years.”

BCBSND is coping with expansion in a couple of ways, according to von Ebers. The first is by changing the way it pays doctors in hospitals to reward efficiency and high quality. In the past, he recounts, “we basically paid piecework, if you will: the more you do the more you get. We’re changing that to reward doctors’ making sure that patients get the right care at the right time, with the result that people stay healthier and have to have the more expensive things done less often. And so we believe we can save money that way and still get people the care that they need.”

One program that BCBSND is doing that von Ebers thinks is important for state residents to know about is called MediQ Home, which “connects patients with personal doctors, and then provides both information to the doctors on the care needed for those individual patients and information on how other doctors are managing similar patients.” That way, he continues, the doctor can see whether he’s getting all the care that is needed for those individual patients. “They can also see if they are being more or less successful as other doctors doing the same thing. This program is really improving the quality of care for people with chronic disease.”

The Challenge of Growth

Growth is, of course, a major trend in the state of the state’s healthcare, in Miller’s opinion. “We see our volumes going up. We see western North Dakota growing in terms of population because of oil and gas and wind, and along with that more people are having increased healthcare needs.”

Clearly, growth brings with it a host of challenges. Because of it, Miller explains, healthcare companies across North Dakota are experiencing difficulties procuring staffing in several areas, perhaps most notably nursing. “But also the entry-level positions,” he is quick to add. “I would cite food and nutrition, environmental services, housekeeping — all critical to our ability to provide a quality care setting. Those are becoming more and more challenging for us in terms of just finding more staff.”

The reasons aren’t hard to figure: an increase in competition and greater job availability “not just in oil and gas but in almost all of the sectors,” he says. “Look at hotels; look at any of the other businesses. They’re all growing, which is good. And of course it also presents challenges.”

“It’s a challenge to have staff to accommodate our growth,” added Dennis Millirons, president of Sanford’s Fargo Medical Center. “We have a very low unemployment rate. It has been a challenge to keep up with in terms of the employment necessary in certain areas for us to begin to accommodate our growth.”

To help solve the problem, Sanford has partnered with several colleges in the state to offer residency programs for both nurses and doctors with the intention of luring students into the healthcare field. Additionally, the company has a “grow your own” policy that awards scholarships to students from families that already work for the organization.

“We think the best and brightest are going to come from our own people,” said Krabbenhoff. “It’s a way for us to invest generationally into our staff.”

Along with that growth comes, as night follows day, the need for capital. Miller says that he and his colleagues are having discussions about the need for additional facilities. “We’re on divert at certain times because all of our beds are in use. I believe Sanford has had a similar situation, so we’re looking at the question, ‘What does that mean to us?’”

Expansion, easy enough to say, comes with a steep price tag. For instance: another bed tower means another $120 million. Access to capital, to put it mildly, “is a challenge,” Miller concedes. “If all the indicators are that this growth is going to be sustained and going to continue, we are going to have to address the facility needs. So that’s a challenge for us.”

“We’ve outgrown our facilities,” adds Millirons. “We have older facilities in the downtown [Fargo] campus that just don’t meet our needs anymore. We’re well into planning a new campus in the western part of Fargo.”

According to Millirons the new campus is expected to open in mid-2016, will be approximately 1.3 million square feet with 460 private rooms. The budget for the new facility is around $541 million.

Another ongoing challenge is quality of care, according to Miller. The good news, as he puts it, is that “through all of these things – through this current transition, through growth, through some of the other challenges – we’ve been able to maintain our quality. We’re very proud of that fact in North Dakota.” In fact, the state ranks “very high” in terms of the ability to evidence quality benchmarks. “We’re also very cost-effective. In fact, we had the 48th-lowest cost in terms of the Medicare definition of cost. We’re very proud of that fact.”

The year to come shapes us as one filled with challenges “just because we continue to see our patient levels being quite high,” Miller points out, “putting pressure on our facilities, putting pressure on our staff. In that respect we’re okay with the fact that people are coming to us seeking healing in their lives, but obviously we have to be prepared to deal with that kind of volume increase.”

John Kutch, the President and CEO of Trinity Health in Minot, says that “the demands of a growing local and regional economy accentuate the challenges that already existed before the recent oil boom in our area.” Trinity, the region’s largest employer with more than 2,700 employees across the care system, has outreach clinics in 12 communities.

Among Trinity’s major challenges, Kutch says, are improving its infrastructure and facilities as it leverages new technologies and recruitment and retention of medical staff, “particularly primary care providers. While we’ve added more than 85 in the past two years and now have nearly 200 on staff, we are actively recruiting more.” Other challenges include the recruitment and retention of professional staff, offering competitive wages – “We compete nationally for talent, while reimbursements in North Dakota lag behind the nation” – and the demands of a growing elderly patient population who need access to affordable care.


The Patient Protection and Affordable Care Act was signed into law by President Barack Obama on March 23, 2010. Together with the Health Care and Education Reconciliation Act, it represents what some have called the most significant regulatory overhaul of the U.S. healthcare system since the passage of Medicare and Medicaid in 1965.

Under ObamaCare, “there are many new rules and procedures that all health insurance companies have to follow,” von Ebers points out. “We have implemented those that are due so far, and we are preparing to implement the rest.” That said, what will certainly prove to be the biggest thing about the Affordable Care Act is that “it is going to give financial assistance to many people to afford healthcare, — but it is not going to reduce the cost of healthcare. As a matter of fact it may increase the cost of healthcare.”

With that in mind, he and his colleagues at BCBSND are working with hospitals and doctors around the state to bring new programs online to reduce the cost of healthcare. “We are concerned that healthcare costs are bankrupting individuals, businesses, state governments and the federal government.”

Von Ebers and company are also working with their members to help them stay healthy by managing their exercise and eating habits, and learn to access the healthcare system in the most efficient way possible.

“Are we concerned about the Act, per se?” Miller asks rhetorically. “I think you have to be concerned about the Act because it brings changes with it. But part of my situation is that I’ve been in healthcare in North Dakota for almost 35 years, so I’ve had the benefit of going through a few changes already. Does it concern me? Yes, only because it brings new things to the table and we must adjust and deal with them. But I’m not necessarily of the opinion that it’s all totally bad.”

“There’s a period of uncertainty because of the political activity involved in it,” added Krabbenhoff. “That always creates a choice. Do we go into a period of paralysis, waiting for someone else to decide when the uncertainty is over? Or, can we go forward with what we believe is a core game plan fundamental to providing healthcare in any scenario? We’ve chosen the latter.”

“Changes in Washington will have relatively little impact, if any on Trinity Health,” says Kutch. “They will not distract our care system from responding to the needs and expectations of the communities and region we serve.”

New this year under the Affordable Care Act, hospitals with high re-admission rates for Medicare beneficiaries will be penalized with lower reimbursement rates, starting October 1, 2012, Hinson points out. This is because excessive readmissions within 30 days indicates inadequate care and/or follow-up treatment of the underlying problem, and greatly increases Medicare spending unnecessarily. “We are proud to say that major medical centers in Fargo, Bismarck, Minot, and Grand Forks are all but untouched by this policy because they provide high quality of care to North Dakotans with Medicare,” he said.

Beyond that, the Affordable Care Act requires that most health insurance policies provide preventive services with no out-of-pocket costs to the policyholder. This includes everything from a flu shot to a mammogram to a colonoscopy.

“We do not have figures for the population at large,” Hinson says, “but among Medicare beneficiaries in North Dakota, the number taking advantage of this benefit in the first seven months of 2012 (73,961) is a jump of 55% from the similar time period in 2011 (47,716).” He calls this “a promising development for the future, since we know preventive services can detect illness or disease at an early stage where it can be successfully treated, or even prevented, at much lower cost.”

Taken together, Hinson concludes, “these data show us that the state of healthcare in North Dakota is exceptionally good, and getting better.”

That’s an assessment many North Dakotans would get behind.

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