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Busy week included first round of construction bids

A whirlwind of activity in local and upper Midwest health care culminated Monday, with the merger of two health care systems and the groundbreaking for the new Perham Memorial Hospital.

The first of numerous bids were awarded Oct. 28 by the Perham Memorial Hospital District Board.

More than 72 bid packages were received for the estimated $35 million project.

Meanwhile, the merger of Sanford Health and MeritCare in the midst of Perham's hospital planning added financial muscle to the Perham project-but at the same time, added complexity to an already complex financing package.

The new Sanford-MeritCare conglomorate will become a major lease-holder at the new Perham facility, as operator of the clinic. In addition, the merged health care system is playing a role in the financing package for PMHH, and is helping secure the loans in a time of tight credit.

"We've had an agreement and a great working relationship with Perham Memorial for 24 years, and we're in the process of re-negotiating," said Doug Vang, president of MeritCare Health Network. "We're very near concluding (a new lease with PMHH) and we have agreed in principal."

"It will be 90 days before we have all the legal documents in place," said PMHH administrator Chuck Hofius. "But the financing is not a matter of if-but when."

Bremer is expected to be the lead bank in the financing, with the U.S. Department of Agriculture likely guaranteeing the loan up to 90 percent, said Hofius.

Sanford-MeritCare will not be providing direct credit to the PMHH building project, said Vang. "Credit enhancement" is how he described the relationship.

The involvement of Sanford-MeritCare will be more "integrated" with PMHH in financing and operations than prior to the "credit crisis," said Vang.

"(Sanford-MeritCare)Will be more involved in management than in the past," acknowledged Hofius.

"Merger of equals" is the way Vang views the joining of MeritCare and Sanford. The merged health care network will honor any existing agreements with other communities and clinics, such as PMHH, added Vang.

The merger results in a nonprofit health network with a service territory of 130,000 square miles, and 17,000 employees-including more than 800 physicians. The doctors in Perham will be Sanford-MeritCare employees, who work in East Otter Tail County under a lease arrangement between PMHH and Sanford-MeritCare.

More than 72 bid packets were received by the hospital board. With the building industry in a general slump, the bids were highly competitive.

Brainerd-based Norson Construction is the project manager, which advises the hospital board through the course of the construction. Three contracts were awarded last week, for earthwork, concrete and foundation reinforcing work. These are the first phases in the construction, and represent about $1.6 million of the project cost. The electrical contract, which is projected at about $2.7 million, is on hold pending further legal and hospital board review. Tight bidding came down to Perham-based J.C. Electric and a Willmar-based commercial electrical contractor-which in dollar terms, was the low bidder.

As a governmental body with taxing authority, the Perham hospital district board must comply with more strict state bidding laws. Remaining bids are exptected to be awarded over the next 90 days.

BHH Partners, and local representative Tony Stoll, is the project architect. BHH, along with specialized design consultants, has handled all the drawings and renderings; and also the structural, civil, mechanical and electrical engineer design work.

"We're excited to see all this get started. It has been a process involving many consultants and staff," said Stoll. "There has been a lot of thought from programming meetings and community information-gathering sessions...We're very anxious to participate in a project that will serve our area for many years to come."

Construction is expected to span 22 months, with opening of the facility in summer or fall of 2011.