‘Now is the time to act’: Minnesota system votes to convert to nonprofit

Alexandria, Minn.-based Alomere Health will move forward with plans to convert from a county-owned hospital to a nonprofit after its board of directors voted unanimously to recommend the change.

The recommendation now goes to the Douglas County Board of Commissioners, which will review a proposed lease agreement and governance structure at its Sept. 2 meeting. A public hearing is scheduled for Sept. 26, after which the commissioners will vote on whether to approve the conversion. 

If approved, Alomere Health would transition to nonprofit status on Jan. 1, 2026.

The move follows a similar move by Fort Myers, Fla.-based Lee Health last year. As a private nonprofit, the health system said it will expand outside Lee County and projects to realize an additional $1 billion in net patient revenue over the next 10 years. 

Under Alomere Health’s plan, Douglas County would continue to own the system’s land and buildings, which would be leased to the nonprofit. The county would appoint two members to the nonprofit board, initially filled by current commissioners. The county would also retain authority over any potential sale, merger or transaction that gives up control of Alomere Health.

“The health system board has studied this question for almost a decade, and now is the time to act,” Board Chair Shari Laven said in an Aug. 25 news release shared with Becker’s. “To best serve patients across west-central Minnesota, Alomere Health needs to be able to bring services closer to where patients are across the region, and that means new alliances and investments outside of Douglas County.”

Douglas County Hospital, a 127-bed facility renamed Alomere Health in 2018, has not funded operations with a tax levy, though the county remains its financial guarantor. 

“By converting to a nonprofit organization, Alomere Health removes this financial risk from Douglas County taxpayers. That is important as Alomere Health continues to grow as a regional destination and invests more outside the county to better serve patients across the region,” Jerry Rapp, chair of the Douglas County Board of Commissioners, said. “With Douglas County retaining ownership of the land and buildings, and county commissioners appointing two members to the board, the county will continue to have meaningful input into the future of Alomere Health.”

Carl Vaagenes, CEO of Alomere Health, said the change will allow the system to pursue partnerships more easily. 

As a government-owned health system, “we have had strategic conversations with other independent community hospitals in the region, but our county ownership has proven a stumbling block for those potential partners,” Mr. Vaagenes said. “This change represents an important strategic evolution for Alomere Health that will allow us to build on what we do best — delivering high-quality care with a local touch — and sustain it for the long term.”

Board leaders also cited a new state law, the Omnibus Pension Act, which would make exiting the Minnesota Public Employees Retirement Association pension system costlier if the system waits until after July 1, 2027, to convert.

If approved, Alomere Health would join the more than 100 private nonprofit hospitals in Minnesota. Many of those nonprofit hospitals were founded as city or county hospitals or hospital taxing districts but have since converted to nonprofit status, according to the health system. Fewer than 10 remain county-owned.

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