Duluth, Minn.-based Essentia Health told city of Fosston, Minn., leaders that the city does not have the authority to unilaterally terminate an agreement allowing the health system to control Fosston Hospital.
Essentia's Dec. 18 letter comes after Fosston's city council unanimously voted in November to terminate the 2009 agreement between First Care Medical Services — a city-owned 501(c)(3) organization that operated the Fosston hospital — and Essentia Health that allowed the system to control the hospital with First Care Medical Services retaining ownership of the property and holding the hospital's license.
"The only thing the city can do is terminate its own involvement in the affiliation agreement," Essentia said in a Dec. 18 news release. "In light of the city's refusal to work with Essentia and its desire to withdraw from the agreement, Essentia will accept the city’s withdrawal."
Fosston officials said in a Nov. 26 news release that the city council's vote "reflects the city's commitment to addressing concerns over the current state of healthcare services in Fosston."
"Under the terms of the 2009 agreement, the city and its legal counsel believe that termination is a logical and valid legal action at this time," the release said. "After a 15-year relationship, and given the continued decline in local healthcare services, Fosston’s city council has determined that the time to terminate this agreement has arrived."
City council's vote came after an arbitration panel ruled in Essentia's favor in September in a dispute with the city. The city sought to terminate the agreement and regain control of the hospital after Essentia Health-Fosston paused labor and delivery services in June 2022. Fosston Mayor Jim Offerdahl told Becker's in January that the city had reason to believe that it was never a pause: "It really was a shutdown, but they called it that and led everyone to believe it was that for nearly a year."
Essentia said in its Dec. 18 news release that the arbitration panel "specifically found that Essentia is continuing to provide comprehensive care and services to area residents as required by the affiliation agreement."
"The city of Fosston has made its decision, and we look forward to engaging with the community to ensure we maintain high-quality health care in Fosston well into the future," Essentia said in the release. "The arbitration ruling in September, as well as legal precedent, permit us to continue to follow our mission in serving our patients, colleagues and the community."
Fosston city officials said in a Dec. 19 news release that Essentia's suggestion that the city decided to remove itself from the affiliation agreement is misleading.
"Nothing could be further from the truth," the city's news release said. "As the city council made clear in its resolution, its ultimate goal is to restore local healthcare decision-making to the community, preserving uninterrupted healthcare access and quality for decades to come. To that end, the city has the legal right to terminate the affiliation agreement—and, in doing so, return governance of First Care to the community where it belongs."
Fosston officials said in the release that they still hope to collaborate with Essentia to "ensure a smooth transition back to local control."
"If Essentia persists on its current path, however, the city is prepared to exercise all of its legal rights to resolve these issues in the appropriate forum," the release said.