Fosston asks court to force Essentia Health into talks over hospital agreement

FOSSTON — The city of Fosston is asking the court to step in to force Essentia Health into talks over whether the city has the right to end the health care provider’s operation of the local hospital.

Fosston city leaders maintain that services at Essentia Health have declined in the last several years, notably with the end of labor and delivery services at the hospital in 2022. Those services are now diverted to Essentia Health-St. Mary’s in Detroit Lakes, about 60 miles away.

Fosston claims in its new arbitration demand that Essentia Health has also restricted the number of ambulances available to serve the community, removed a longstanding board member and understaffed facilities. The city says it has been unable to resolve this disagreement in informal talks.

The city and health care provider have been sparring privately, publicly and in official mediation sessions as Fosston leaders vie for more local control of the hospital. But Essentia Health says the city is refusing to accept last year’s arbitration ruling that determined the provider did not breach its contract.

“By continuing to drag out this disagreement, city leaders are misrepresenting basic facts of the agreement and misleading the people of Fosston,” according to an emailed statement from an Essentia Health spokesperson. “At Essentia, we remain focused on strengthening local health care, supporting our staff and delivering exceptional care for the patients we’re honored to serve.”

In legal documents filed Nov. 17 in Polk County District Court, the city claims Essentia Health is treating the 18-year cooperative agreement as if the provider took ownership of First Care Medical Services, the nonprofit that owns the hospital.

“There is no dispute that the Agreement did not sell First Care [or any of its assets] to Essentia," the city’s demand for arbitration claimed. "Essentia has treated First Care as an asset it owns — just one of many outposts in its multi-state healthcare empire.”

In the Nov. 24 statement to KAXE, Essentia Health officials disagreed.

“Since 2009, Essentia has been the sole owner of First Care Medical Services [FCMS], which includes the hospital and clinic in Fosston, as well as clinics in Oklee and Bagley,” the spokesperson wrote. “The city of Fosston’s role in the affiliation agreement is to appoint one member to the FCMS board of directors and to ensure that certain services are provided.”

The city of Fosston has had a vested interest in its hospital for generations and established the Fosston Hospital Association — now the nonprofit known as First Care Medical Services — as owner of the hospital in 1947. The city approached Essentia Health in 2007 for the present agreement, which was finalized two years later.

"The parties bargained for a relationship in which Essentia would manage the day-to-day operations of First Care and provide healthcare services in exchange for a corporate support fee, while the city would maintain an interest in ensuring that First Care continued to serve the healthcare needs of the community," stated Fosston's demand.

The last round of arbitration with Essentia Health in 2024 hinged on a breach of contract dispute. The city of Fosston maintained that providing labor and delivery services was an essential part of the agreement. Arbitrators ruled in a split decision that there was no breach of contract.

“Even though the majority sided with Essentia, it clarified in its order that its decision ‘should not be construed as granting Essentia unrestricted freedom to alter core services without consequence in the future,’” the new arbitration demand stated.

Fosston maintains that this new demand is separate from last year’s issue of a breach of contract, but Essentia Health leaders say they see it differently.

“A neutral arbitration panel sided with Essentia Health, finding that Essentia is meeting the terms of its affiliation agreement with the city of Fosston. We believe that the latest claims from the city are inappropriate and irrelevant to the arbitration process,” Essentia stated.

The Fosston City Council voted Nov. 26, 2024, to terminate its affiliation agreement with Essentia Health, and provided notice of intent to do so effective Jan. 1, 2026.

"Essentia [Health] entered into an agreement based on promises — promises the city believes have since been broken," a news release stated. "The community has been clear and consistent: they no longer wish to have Essentia in charge of their healthcare."

Essentia announced earlier this year that it plans to invest $12 million in renovating Fosston’s emergency department and recently signed a 10-year sports medicine agreement with Fosston Public Schools.

“As an integrated non-profit health system, our team offers seamless access to over 20 specialty services here in Fosston, alongside a full network of specialty providers, hospitals and advanced technology," Essentia Health wrote in a statement. “We’re committed to ensuring that this high-quality, integrated care remains available in the Fosston community.”

Essentia Health has not yet submitted a response to Fosston’s demand for arbitration through the court. No court date for this case was available as of Dec. 3.