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Introduction



The Fargo, North Dakota healthcare market is served by many different physicians and hospitals. This area includes an eastern North Dakota and a portion of western Minnesota. St. Luke’s Hospital and the Fargo Clinic are both major players in this region. St. Luke’s was a community not-for-profit hospital, and the Fargo Clinic was two separate for-profit corporations.

Until recently, they have been operating as separate entities. In 1986, they formed a partnership and proceeded to operate separately but under the trade name of MeritCare. This was done to position both of the companies for future growth, merger, or expansion. As of January 1, 1993, the restructured nonprofit organization had been functioning as one. The official merger date was set for July 1, 1993. It is felt that the merger will allow both organizations to cut costs and increase stability by eliminating duplication of facilities and services, increasing overall efficiency, and providing better economies of scale. The ultimate goal of the merger will be to provide an integrated, cost-effective system of care that will be appealing to the market they operate within.



Background



The Fargo-Moorhead Metro Area that these facilities serve had a 1990 population of over 150,000. The total market area includes another 215,000 persons. Medicare, Blue Cross/Blue Shield along with other traditional forms of health insurance, dominates the payor market. HMO’s and PPO’s make up less than five percent of the market. The total market area has 14.6% of the population over 65, which is higher than the national average. This number should help explain the importance of the Medicare market.

The Fargo Clinic, in 1993, had 250 physicians in 30 locations. Five of these are larger clinics, with the rest being smaller community-based facilities. They had over a million...