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Published June 05, 2013, 11:30 PM

Sanford to trim $10 million in top jobs; more systemwide posts to come to Fargo

FARGO - Sanford Health is buying out a dozen of the 50 administrators offered early retirements or reassignments under a restructuring plan estimated to save $10 million a year.

By: Patrick Springer, INFORUM

FARGO - Sanford Health is buying out a dozen of the 50 administrators offered early retirements or reassignments under a restructuring plan estimated to save $10 million a year.

At the same time, Sanford is planning to centralize management of system-wide functions, an initiative that will mean a new office building here next to the $500 million medical center under construction.

All but 12 of the managers or executives affected by the restructuring opted for early retirement or accepted a new position in the restructuring, Kelby Krabbenhoft, Sanford’s chief executive officer, told The Forum on Wednesday.

The new office building will house managers and staff involving operations such as pharmacy and laboratory services as well as home health care and its network of rural hospitals, Krabbenhoft said.

“We’re moving all of that to Fargo,” Krabbenhoft said. “We’re really pumped about that.”

The expanding health system has a service area of 220,000 square miles and counts 1,365 managers among its 26,000 employees.

According to the Greater Fargo Moorhead Economic Development Corp., the more than 6,700 full-time Fargo jobs at Sanford made it the metro area’s largest employer by far, as of last summer. The next closest is the 2,400 full-time jobs at North Dakota State University.

The centralization effort will begin with renting a second floor of offices in the downtown Radisson Hotel. The new office building next to the medical center under construction near Veterans Boulevard and Interstate 94 is expected to be ready for occupancy within three or four years, Krabbenhoft said. Its size and price tag have not yet been determined.

“It just makes a lot of sense,” he said, noting that top corporate offices will remain in Sioux Falls, S.D. “It’s a good balance.”

Sanford is also adding 80 positions to handle a new Medicare billing system that will be based in Fargo but will serve Sanford’s entire network.

Not all of those positions have been filled, Krabbenhoft said, but training will begin in July.

The decision to streamline management comes five years after philanthropist T. Denny Sanford made an initial, transformative donation of $400 million.

Since then, Sanford has expanded significantly with a series of mergers, starting with the former MeritCare, based in Fargo, and later including health systems in Bismarck and Bemidji, Minn.

“I decided that it was time to ask the company to look at itself,” Krabbenhoft said, including a management structure inherited from the series of mergers.

“It just seems the responsible thing to do,” he said. “I’ve been very patient.”

He added, “It’s not been provoked by any budget crisis,” but was made with an eye toward expected reimbursement reductions as a result of cost-containment moves by public and private insurers.

“That’s the way I avoid layoffs,” Krabbenhoft said, “by staying on top of it.”

Those taking early retirement include Becky Nelson, senior vice president and chief operating officer, based in Sioux Falls, who will retire July 1 instead of Jan. 1, and Dr. Bruce Pitts, chief medical officer, based in Fargo.

Another Fargo executive who is leaving is Dr. Rhonda Ketterling, chief medical officer of Sanford Clinic.

Although Sanford has grown through mergers, it also has grown by adding new services and through increased patient volumes.

A Sanford analysis indicates that more than 3,000 new positions have been added through new programs and increased volumes since the 2009 Sanford-MeritCare merger, Krabbenhoft said.

Adding new physicians, for instance, results in a hiring multiplier effect.

This year, Sanford is adding 80 physicians. Last year, it added 94. Two years ago, 140 doctors were added. Each new physician results in another seven employees, Krabbenhoft said.

“We continue to grow,” he added. “I hope we’re sending the message now that we’re growing very cautiously and very carefully.”

With an annual employee turnover rate of about 15 percent, Sanford must hire about 3,900 employees a year to fill vacancies created by departures. As of Wednesday, Sanford was advertising 206 openings on its website.

With a work force so large, a 1 percent pay raise increases Sanford’s payroll by $15 million, Krabbenhoft said.

Sanford is committed to medical research based in Fargo, Krabbenhoft said, and continues to identify research opportunities that would tap the expertise from local colleges and universities.

“Research is alive and well in Fargo relative to Sanford,” he said.

On other topics, Krabbenhoft said Sanford’s decision earlier this year to withdraw from possible merger talks with Fairview Health in the Twin Cities, following political opposition in St. Paul, was a disappointment, Krabbenhoft said.

As Sanford plans for future expansion opportunities, it looks to “more so going west,” including western North Dakota and South Dakota as well as other states.

Sanford is evaluating possible mergers, but Krabbenhoft said he could not divulge details. It recently declined an offer from a Twin Cities hospital, he said.

Health reform and other factors will continue to drive consolidation, mergers and acquisitions in health care, Krabbenhoft said. That means more organizations likely will knock at Sanford’s door with offers to combine operations.

“We don’t have to be out provoking it,” Krabbenhoft said.


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Readers can reach Forum reporter Patrick Springer at (701) 241-5522

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