Children’s Hospitals and Clinics, Inc.

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Childrens Hospitals and Clinics, Inc.

2525 Chicago Avenue South
Minneapolis, Minnesota 55404-4597
Telephone: (612) 813-6100
Toll Free: (888) 554-7887

Nonprofit Company
Employees: 3,400
Operating Revenues: $304.03 million (2002)
NAIC: 622110 Childrens Hospital General

Childrens Hospitals and Clinics, Inc. is the result of a merger of two formerly independent Twin Cities hospitals, St. Paul Childrens Hospital and the Minneapolis Childrens Medical Center. Childrens Hospitals and Clinics stands as the largest childrens healthcare system in the upper Midwest. Together the hospitals staff 268 dormitory units, in addition to providing care through five suburban clinics.

Devoted to Children: The Early Years of St. Paul Childrens Hospital

In the early part of the 20th century pediatric medicine became recognized as an important medical specialty. In the city of St. Paul, Minnesota, one of the pioneers in pediatrie medicine was Dr. Walter Reeve Ramsey. Ramseys influence in child-centered medicine in the region was legendary. He was one of only a few pediatricians in St. Paul in the early 1890s and taught pediatrics at the University of Minnesota Medical School in order to recruit and train more doctors to the profession.

Ramsey detailed his devotion to child patients in his history of Childrens Hospital: I was more and more conscious of the utter inadequacy in any of our hospitals, in giving sick children the care they needed and had a right to have. In addition, it was his belief that children were not miniature adults but belong in a realm of their own. The realm he envisioned was a childrens hospital committed to the care and treatment of children by professionals trained to work specifically with them.

Ramsey began to solicit the necessary funds to open the Twin Cities first childrens hospital in 1919. Within a few years he purchased five acres of land on Pleasant Avenue in St. Paula site for a future permanent hospitaland he established Childrens Hospital St. Paul in a modest ten-room house at the corner of Smith Avenue and Walnut Street. The house served as a temporary residence for four years until funds were raised to build on Pleasant Avenue. Although transitory, the house was equipped with 16 beds and a full medical staff.

In 1928 the facility on Pleasant Avenue was complete and more services were provided onsite. Ramsey, ever the educator, founded a school for nurses and established a medical student internship program during his early years as medical director.

The hospital faced its first real challenge during the Great Depression of the 1930s. Many patients families struggled to provide the most basic necessities for their children and were unable to pay even modest charges for healthcare. There was considerable concern that the hospital would be forced to close its doors. The hospital board made the decision to run a deficit for a few years and remain open. The board made significant sacrifices during the economic hard times, including critical cutbacks on services. Caregivers and staff took salary cuts in order to keep the institution afloat.

Challenged by the economy and its impact on the hospitals financial state, Ramsey looked for ways to make hospital stays affordable to those of limited means. He enlisted the prominent philanthropic powers of the St. Paul Junior League in 1933 and the Childrens Hospital Association (CHA) was formed. The CHAs mission was to promote the hospital and to help raise funds to assist patients and their families in paying bed fees and hospitalization costs. The CHA instituted charitable events of all sorts, including the Ice Follies, Tag Day, concerts, theater galas, and eventually the CHA ball. In all the organization raised millions of dollars over its six and one-half decades of service.

In postwar America medical advances were recorded at astounding rates and the Twin Cities healthcare market was under increasing pressure to adapt to higher standards and to expand and develop more technically advanced services. In keeping with these changes, Childrens Hospital modified itself in several key ways throughout the 1940s and 1950s. An operating room on site was added to the building in 1944. Other improvements included an extensive remodeling and renovation project with a capital campaign of $2.25 million in 1953, and its subsequent groundbreaking and building following in 1957 through 1958. The Lang wing was dedicated in 1959 and marked the hospitals opportunity to admit patients with communicable diseases. Other instrumental additions to service included an infants intensive care unit, the first of its kind in the upper Midwest.

Minneapolis Childrens Medical Center: Mid-20th Century Beginnings

Although the city of St. Paul had a thriving childrens hospital in the 1900s, in Minneapolis a small group of physicians and prominent citizens had remained locked in the discussion and planning stages for a childrens hospital of their own for many years. It was not until 1951, when pediatric practitioners in Minneapolis formed the Minneapolis Pediatric Society, that the possibility of a major capital campaign began to take shape. The society noted Ramseys success when he enlisted the help of the St. Paul Junior League and chose to follow suit. The societys members turned to its Junior League of Minneapolis women. The Childrens Hospital of Minneapolis, Inc. filed articles of incorporation in November 1953, but the reality of a fully functional medical facility was still years away.

The Junior League of Minneapolis successfully raised $21,000 in 1954, but the nonprofit was still searching for a home in the early 1960s. The hospital board had surveyed many sites and was close to selecting one when in 1966 Abbott Northwestern invited Childrens Hospital to join its newly formed consortium, and offered the hospital a home. Dr. Arnold Anderson, a local pediatrician and member of the Minneapolis Pediatric Society, had proved instrumental in securing a facility for the hospital and was named its new medical director and chief executive officer.

By December 1969 the Minneapolis Childrens Hospital had raised approximately 40 percent of the needed funds for its $6 million building project and proceeded to break ground for its new building. Like its cumbersome organizational beginnings, the building process did not go easily. Construction had to be halted for well over a year at one point while the necessary funds were raised. In February 1971 the board eventually turned to selling $4.5 million in bonds to complete the project.

In 1979 St. Paul Childrens Hospital relocated to Chicago Avenue in St. Paul, making it part of a healthcare campus with United Hospital. The hospital board successfully raised $14 million, surpassing its campaign goal of $6 million. With a new facility completed, the hospital began to work on its infrastructure and services throughout the next decade.

The 1980s were a time of rapid expansion for both childrens hospitals. Minneapolis, though slower to get established, grew rapidly during this time. In 1983 it took on a new name and became Minneapolis Childrens Medical Center (MCMC). The following year it opened a pediatric unit at Fairview Ridges Hospital, creating a partnership with another medical center that was unique at the time. MCMC was ready for a major addition by 1985 and completed a $14 million expansion. The addition brought many new services onsite for the hospital, including an emergency room, surgical center, x-ray units, and laboratories.

At the same time, grants and in-house fundraising efforts allowed for important changes to occur in St. Paul. Research programs in immunology and neonatology were underway in the capital city and in 1984 the St. Paul Childrens Hospital opened a pediatric intensive care unit. Another grant in 1986 allowed the hospital to open the Midwest Childrens Resource Center to serve the region in both diagnosing and treating child abuse and neglect.

In 1992 MCMC expanded its facility once again. Its $33 million state-of-the-art addition included an infant care center and a renovated pediatric intensive care unit.

The 1990s: Statewide Consolidation of the Healthcare Industry

In the 1990s healthcare in the state of Minnesota and in many other regions around the United States transformed itself through industrywide mergers and consolidations. In 1992, despite notable earnings for each, Childrens Hospital St. Paul and Minneapolis Childrens Medical Center began to study the possibility of becoming one corporate structure. According to an August 8, 1994 article in Modern Healthcare magazine, there was significant concern in the Minnesota Attorney Generals office about the proposed merger. Merging both childrens medical centers meant that the new company would control close to 88 percent of the inpatient pediatric care Twin Cities market. It was clear that both hospitals earnings were strong. Modern Heathcare revealed that in 1992 MCMC listed profits of $1.3 million on revenues of $124.6 million and Childrens Hospital of St. Paul listed profits of $3.3 million on revenues of $54.6 million.

Company Perspectives:

Childrens Hospitals and Clinics is the largest childrens health care organization in the upper Midwest, with 268 staffed beds at its two hospitals in St. Paul and Minneapolis. A full range of pediatric specialty services, critical care, and clinics serve premature infants through older teens. While we serve thousands of our regions sick children each year, we also strive to keep children well and to prevent illness and injury. Childrens also includes Childrens West, a pediatric outpatient clinic in Minnetonka; Childrens Roseville, a pediatric outpatient rehabilitation clinic in Roseville; Childrens St. Francis, an 8-bed pediatrics unit at St. Francis Regional Medical Center in Shakopee; and Childrens Clinics Woodwinds Health Campus in Woodbury.

The Minnesota Attorney Generals office allowed the merger to proceed but announced restrictions under which the newly merged hospitals would have to comply. The hospitals signed an agreement intended to prevent future antitrust litigation. The terms included a restriction on acquiring or merging with another hospital and limitations on managing pediatric facilities of other hospitals.

The completed merger created a 254-bed health care network with $190 million in assets and annual gross patient revenues of $229 million, according to an August 8, 1994 article in Modern Healthcare Magazine. Brock Nelson was named CEO of the new organization.

In June 1995 the hospitals foundations, which had previously remained separate, were merged. The new entity was named Childrens Health Care Foundation. Nancy Haskin, the former head of the foundation at Minneapolis Childrens Medical Center, was named head of the newly unified foundation. The merger caused some concern over which hospital and city would benefit most from the merger. The rivalry between Minneapolis and St. Paul, with their different styles and climates, carried over to philanthropy as well, and certain donors found it more difficult to give to a foundation that was not tied to the hospital in their specific city.

Higher Standards: 2000 and Beyond

A July 2000 U.S. News & World Report article named Childrens Hospitals of Minneapolis and St. Paul among the best hospitals in the nation. The July 17 edition primarily examined Childrens patient safety plan and focused on the plans development and implementation. Chief Operating Officer Julie Morath conceived of the plan to do away with common hospital errors. Reporting and communication between hospital staff and the administrative teams were key to the hospitals success.

In July 2002 the American Hospital Association announced Childrens Hospital and Clinics Minneapolis/St. Paul as a finalist for its Quest for Quality prize. The prize of $12,500 recognized the hospitals for their leadership in creating a culture of safety. The prize further acknowledged that there existed a model of collaboration between the various teams at the hospital and that communication was exemplary from administrators, to staff, to patients and their families.

Childrens Health Care Incorporated, and its hospitals and clinics, were situated strongly in the Twin Cities healthcare market, controlling significantly more than two-thirds of the pediatric healthcare services in the region. The company appeared to be well adapted to the health needs of children in the Midwest, and leading the way in the industry in its commitment to improving safety at its facilities.

Principal Divisions

Childrens Hospital St. Paul; Minneapolis Childrens Medical Center; Childrens Ridges; Childrens Roseville; Childrens St. Francis; Childrens Clinic Woodwinds; Childrens West.

Principal Competitors

Gillette Childrens Hospital; Fairview Ridges Hospital; Abbott Northwestern.

Key Dates:

Walter Reeve Ramsey, M.D., begins raising money for a hospital devoted to pediatric care.
Ramsey buys five acres on Pleasant Avenue in St. Paul.
Ramsey incorporates Childrens Hospital St. Paul.
The hospital opens at the corner of Smith Avenue and Walnut Street.
A new facility opens on Pleasant Avenue, in St. Paul.
The St. Paul Junior League women form the Childrens Hospital Association.
An operating room is opened at Childrens St. Paul.
The Lang wing is dedicated in St. Paul; $885,000 is raised for Childrens Hospital in Minneapolis.
Minneapolis begins a building campaign and succeeds in raising $1.8 million.
Childrens Hospital St. Paul opens its first outpatient department.
Childrens St. Paul becomes a teaching hospital for the University of Minnesota.
Minneapolis Childrens Hospital opens on January 31.
Childrens Hospital St. Paul relocates to Chicago Avenue South.
1983 :
Minneapolis Childrens Hospital is renamed Minneapolis Childrens Medical Center.
Minneapolis Childrens Medical Center completes a $1.4 million renovation.
Minneapolis Childrens Medical Center completes a $33 million expansion; Minneapolis and St. Paul Childrens hospitals begin merger talks.
Childrens Health Care is formed; Childrens West in Minnetonka opens.
Childrens Foundation is created when the St. Paul and Minneapolis hospital foundations merge.
Childrens Roseville opens.
Childrens Clinic Woodwinds opens in Woodbury, Minnesota.
Childrens Clinics St. Francis opens.

Further Reading

Burda, David, Hospitals Make Antitrust Pact, Modern Healthcare, August 8, 1994, p. 34.

Burr, Barry B., Derivatives Lift Stock Exposure, Pensions & Investments, September 2, 1996, p. 2.

Duchshere, Kevin, Hospitals CEO Brock Nelson Says Hell Resign, Star Tribune, June 19, 2002, p. 3D.

Greene, Jay, Merger Permutations Muddle the Picture in Minnesota, Modern Healthcare, January 6, 1992, p. 64.

Kim, Howard, Hospitals Stretch to Meet Needs of Young and Old, Modern Healthcare, September 3, 1990, p. 22.

Marcotty, Josephine, Employer Group Rates Area Medical Centers, Star Tribune, January 17, 2002, p. 1B.

New People at Systems, Modern Heathcare, August 20, 1990, p. 80.

Nissen, Todd, Area Childrens Hospitals Are Pursuing Merger Pact, Minneapolis-St. Paul City Business, January 27, 1992, p. 1.

Pallarito, Karen, Merger Mania Among Hospitals, Health Systems Can Be Troubling, Costly for Charitable Foundations, Modern Healthcare, October, 2, 1995, p. 76.

, S & P, Moodys Announce Credit-Rating Updates, Modern Healthcare, September 11, 1995, p. 24.

Ramsey, Walter Reeve, The Childrens Hospital of St. Paul, MN: A Factual History from the Time of Its Inception in 1923 to the Present Time, St. Paul: n.p., 1954.

Regional News Digest Midwest, Modern Healthcare, August 8, 1994, p. 100.

Rosenthal, Robert, M.D., The Story of the Childrens Hospital, Minnesota Medicine, February 1972.

Susan B. Culligan

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Children’s Hospitals and Clinics, Inc.

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