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Hospital, JDA researching clinics’ purchase history

By Staff | Aug 15, 2020

Heart of America CEO Erik Christenson reached out to the Tribune Aug. 3 to clarify statements he made at the Good Samaritan Hospital Association’s regular July meeting.

The July 25 issue of the Tribune published an article about the meeting where Christenson discussed the HAMC’s Johnson Clinic purchase history, using what he said was incomplete information.

At the July board meeting, Christenson noted the clinic was “assessed for around $200,000. So, it was purchased for about three times the value of the property,” he said.

Christenson said he received more information from various sources after the July meeting. He said the purchase, estimated in July at $700,000, actually included three buildings.

“Here’s my understanding, here’s the clarification as I understand it now,” Christenson said. “The JDA purchased from the physicians the Johnson Clinic, Towner Clinic and Dunseith Clinic buildings and equipment in the clinics for $776,000. That’s everything.”

Christenson said he researched the purchase history further and learned the transaction included garages attached to the Johnson Clinic building.

Christenson added he later learned doctors working for the Johnson Clinic sold their practice to the hospital in a separate transaction, which amounted to approximately $300,000 more. The JDA did not purchase the practice.

“The only appraisal assessment I have is for an average of $370,000, and that’s just for the premises of the Johnson Clinic in Rugby. That appraisal does not include the Dunseith and Towner clinic buildings,” he added.

Christenson said the $200,000 assessment for the Johnson Clinic might have actually been the building’s assessed value for tax purposes.

“Some of it was people who were telling me things, and I just didn’t have all the information,” Christenson said of his sources pertaining to the purchase. “Some of it was notes that weren’t clear.”

Rugby Job Development Authority Executive Director Liz Heisey said she was also researching the purchase, poring through 10-year-old transaction records.

Heisey said she later found a document from an appraisal for the lenders valuing the Johnson Clinic at $650,000. She said the appraisal, dated Oct. 19, 2010, was prepared for Bremer Bank by Dakota Appraisal and Consulting of Bismarck.

Heisey said the $776,000, “was the negotiated price. They (the JDA) bought out the doctors. That was hospital’s negotiated price with the doctors. And we in turn leased it to them.”

“The JDA did not negotiate the price,” Heisey said, adding, “The hospital board did this after a year-long negotiation with the doctors.”

Heisey estimated the transaction was not closed until a year after that.

HAMC and the Johnson Clinic submitted a proposal for the HAMC and Johnson Clinic integration. It was a financial package presented to the JDA board requesting the JDA for a purchase and lease agreement for the Johnson Clinic building and the clinics in Dunseith and Towner.

“We did get grant funding and the JDA put in about $200,000 of their funding,” Heisey said.

“There was only around $569,000 that was financed and $100,000 was forgiven through the Governor’s fund,” she added.

“$150,000 was what Souris Basin loaned (the JDA for the purchase), and about $347,000 was financed through Bremer Bank. Bremer Bank is the lead bank. It’s actually Bremer, Merchants Bank, Ramsey and the Bank of North Dakota,” Heisey said. “It’s one loan and they share the risk. We paid off the Souris Basin loan last year. We paid $83,000. We paid it off early to save the interest.”

“It was to protect 371 jobs and to protect access to healthcare,” Heisey added.

After the purchase, the JDA leased the property back to the hospital, with the hospital responsible for its own maintenance, taxes and other expenses in an arrangement known as a triple net lease.

The hospital rents space in the Johnson Clinic building to Rugby Dental Clinic, Dakota Eye Institute and Heart of America Clinic Pharmacy, recouping the lease payments to the JDA.

Christenson indicated he had heard from community members that the clinic’s ownership would revert from the JDA back to Heart of America Medical Center, however, neither he nor Heisey could find information to support that contention.

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