Court orders Essentia Health, city of Fosston to return to arbitration

FOSSTON — The city of Fosston and Essentia Health must resume talks in their yearslong dispute over the health care provider’s operation of the local hospital.

In an order filed Saturday, June 20, a Polk County District judge required the parties to take part in arbitration over whether the city has the right to end Essentia’s involvement.

Judge Jeffrey Remick wrote the court is required to order arbitration based on state law and a clear and unambiguous agreement between the entities.

“The parties’ agreement to arbitrate here is broad, and it applies to any dispute related to the terms of the 2009 Affiliation Agreement. Specifically, the arbitration provision clearly states that ‘any Dispute which is not resolved by mediation ... shall be submitted to binding arbitration,” Remick wrote.

Fosston city leaders have maintained that services at Essentia Health 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 claimed in its arbitration demand that Essentia Health 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 Fosston City Council agreed to remove Essentia as the operator of the critical access hospital as of the beginning of this year.

Essentia Health has accused city leaders of misrepresenting basic facts of the agreement and misleading the people of Fosston.

The provider has also argued another round of arbitration was not necessary. In its court responses, it states the city was refusing to accept a previous ruling.

“The City’s motion to compel arbitration should be denied because the alleged disputes were resolved — or could have been resolved — in the prior arbitration,” it wrote in a Jan. 22 memo.

Fosston has maintained that providing labor and delivery was an essential part of the agreement.

Arbitrators ruled in a split decision in 2024 that Essentia did not breach its contract.

The city of Fosston has had a vested interest in the local hospital for generations: it established the Fosston Hospital Association in 1947, which later became First Care Medical Services. On behalf of First Care, Fosston entered into the affiliation agreement with Essentia Health in 2009.

The provider broke ground on a $12 million emergency room expansion in April.