Mayo Clinic, rural patients spar over consolidation of services at Albert Lea hospital

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The ongoing dispute highlights a notable concern in U.S. healthcare policy, observers say.

Editor's note: This story has been updated to include a response from Mayo Clinic.

Residents of Albert Lea, Minnesota, are fighting for the Mayo Clinic-operated hospital in their small town, and the ongoing dispute highlights one of the major issues in U.S. healthcare policy, observers say. 

Mayo Clinic announced in the summer that it would transfer inpatient services at its Albert Lea hospital to its Austin, Minnesota, campus, and it pulled ICU care in October. Mayo Clinic also plans to end surgical care at Albert Lea in January and obstetrics by 2020. 

The world-renowned institution says that the move will stabilize the rural, 129-bed hospital and that the system will still provide community care. But critics in the town say it hurts current residents and could deter more people from moving to the area, according to an article from Politico. 

RELATED: World-class Cleveland Clinic at odds with its poor, unhealthy neighbors 

And healthcare industry observers say that the spat between one of the nation's most famous health systems and the small Minnesota towns showcases a notable flaw in healthcare policy: Nonprofit hospitals are tax exempt with the caveat that they spend on charity care, but the Internal Revenue Service does not limit annual profits or set requirements on how much hospitals must spend charitably to retain that status, according to the article. 

"It's struck me that they're behaving in a corporate kind of way that seemed inconsistent with their history," Paul Levy, the former CEO of Beth Israel Deaconess Medical Center, told the publication. Without regulatory intervention this "status quo" for large nonprofit systems will likely continue, he said.

Mayo Clinic said in an email to FierceHealthcare that though the healthcare industry has evolved, the system remains committed to its core mission. The system will "rise to meet" new challenges while still "providing the best care to every patient through integrated clinical practice, education, and research," it said.

"We are proud to serve all of our communities and will continue to offer the highest quality of care that our patients have come to expect and rely on," the system said in the statement. "As a mission-driven, not-for-profit organization, we provide care for everyone in need, as well as charity care contributions to the communities we serve."

RELATED: Special Report—8 ways to fix the Affordable Care Act 

An investigation published by Politico earlier this year found that though hospital profits have skyrocketed under the Affordable Care Act, hospitals were spending less on charity care. As these hospitals grow in wealth, the communities they serve suffer from poor health; the report offered Johns Hopkins as an example, and Cleveland Clinic has faced similar criticism. 

“Tax-exempt hospitals could absolutely be doing more, given what they’re saving,” Lauren Taylor, a doctoral student in health policy at Harvard and co-author of the 2013 book “The American Health Care Paradox,” told the publication in July. 

What exactly defines charity care is unclear, too. In addition to free screenings, some hospitals claim Medicare and Medicaid underpayments or staff training as charity care. 

New charity care reporting requirements went into effect late last year, and the IRS revoked tax-exempt status from a hospital for the first time earlier this year under the new measures. The IRS reviews hospitals every three years. 

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