Pastor's legacy of giving remains
By Jonathan Knutson
The Forum - 09/04/1999

The Rev. August Hoeger was a man who hated suffering. And a man determined to do his utmost

to alleviate it.

His work, which began with the establishment of a nursing home in Arthur, N.D., in 1923, has grown into Banner Health System, one of the nation's largest nonprofit health care organizations.

The organization, which has no religious affiliation, operates 32 hospitals, 32 nursing homes and offers various other health care services in 14 states. It has revenue of $1.6 billion, assets of $1.9 billion and 22,500 employees.

Banner was created earlier this week by the merger of Fargo-based Lutheran Health Systems and Phoenix-based Samaritan Health System.

"This merger wasn't about getting bigger simply for the getting bigger, or to cut costs. It was done because the two organizations can accomplish more together than they could alone," said Steven Orr, chairman and chief executive officer of Banner. He held the same positions at Lutheran Health Systems.

Lutheran Health Systems served primarily rural areas, while Samaritan Health System served primarily the Phoenix area.

Banner will maintain corporate offices in Fargo and Phoenix. Corporate meeting space will be established in Denver, where a few senior executives will have offices.

The Fargo office has 250 employees. No layoffs are planned due to the merger.

The 15-member Banner board of directors will consist of seven directors each from Lutheran Health Systems and Samaritan, and one new director selected by Lutheran Health Systems.

Banner, for all its modern-day size and sophistication, is in no small part the legacy of August Hoeger's compassion.

Concerned about living conditions for people with disabilities, Hoeger determined to do something about it.

So he and a group of other area pastors established the Evangelical Lutheran Good Samaritan Society in 1922. The next year, the society opened the six-room Good Samaritan Home in Arthur.

The 12 initial residents included two teen-aged brothers with Muscular Dystrophy, two epileptic men and three developmentally disabled children.

Over the next 14 years, the society grew rapidly, adding a number of hospitals and nursing homes in the Upper Midwest.

Much of the growth was due to Fred Knautz, who joined the society in 1928.

"Under the leadership of Fred Knautz, centralized management techniques were put in place so facilities could operate economically and efficiently to provide high-quality health care services," according to Banner informational material.

By all accounts, Knautz was a remarkable man. A strong-willed and deeply religious ex-Marine, he had planned on a career in the Salvation Army.

But he and his wife, Margaret, an Arthur native, visited Arthur and were moved by Hoeger's appeal for missionary workers in New Guinea. So the Knautzes spent the next seven years there. Fred worked as a business manager; Margaret as practical nurse and teacher.

Returning to America, Fred Knautz became business manager of the society.

Though the Evangelical Lutheran Good Samaritan Society continued to grow through the 1930s, the organization struggled with heavy debt. Donations plummeted because of the Great Depression, and the society was in almost constant financial peril. At one point, Knautz even lent money to the society so that it could meet its obligations.

In 1937 society officials decided to reorganize. The newly created Lutheran Hospitals and Homes Society of America reduced the organization's liabilities and increased the possibility of salvaging some facilities if financial profits continued.

The organization had a landmark year in 1940. One highlight was creating a badly needed central office in Fargo. The office operated at several locations in Fargo before moving to its current home at 4310 17th Ave. S.W. in 1994.

Another highlight of 1940: The Crippled Children's School of Fargo became part of the society and moved to Jamestown, N.D. Apparently some Fargo residents resented the school's presence here and society officials decided it should be relocated.

A 23-year-old woman - Anne Carlsen, who was born with incomplete arms and legs - joined the school in 1940. She served the school for 40 years as teacher and administrator and helped bring it worldwide acclaim.

In 1958 she received the presidential trophy as Handicapped American of the Year. In 1980 the school was renamed the Anne Carlsen School for Children to honor her.

Lutheran Hospital and Homes Society of America continued to grow through the 1940s and 1950s. By 1947 it had 24 institutions, by 1958 it had 60.

In the mid 1940s, Knautz was called to Washington, D.C., to serve as an adviser to the U.S. Surgeon General. He helped to formulate national health policies that promote small, rural hospitals.

The 1960s brought more growth for the society. One milestone: Los Alamos, N.M., Medical Center joined the organization in 1964. The original facility had thick concrete walls to protect it from a potential nuclear accident or attack at the atomic research laboratory in Los Alamos. A new hospital was built later.

Knautz retired in 1968 and was succeeded as head of the organization by Harry Malm, who served for 11 years.

Knautz died in 1971. By then, the society he helped to found had grown to 87 facilities in 14 states.

The society struggled in the early 1970s. The Occupational Safety and Health Administration, commonly known as OSHA, required more record keeping and forced costly modifications at some of the society's facilities.

In 1972, 62 of the society's 92 facilities operated at a loss.

Even so, the organization continued to grow. In 1976 it's described in a book on hospital management systems as the "largest non-governmental, not-for-profit, multiple hospital system in the United States."

The 1980s brought new challenges. Changes in government reimbursement policies and a declining rural population hurt many of the society's small, rural facilities.

In 1987 the society had to reduce its corporate office expenses by 40 percent; about 30 percent of its work force was cut.

But the drastic measures paid off. The society did well financially in 1988 and the upswing continued for several years, in part because some long-term debt was refinanced at considerable savings.

The 1980s brought new opportunities, too. In 1984 the organization was renamed Lutheran Health Systems to give more flexibility to its operations. The new charter read that the organization was to "engage in and conduct charitable hospital, educational, scientific and religious activities and to further such activities as may be deemed advisable for advancement of health care."

The new charter was put to use in 1985, when a for-profit subsidiary of Lutheran Health Systems branched out into the sale of durable hospital equipment and management consulting, among other things.

The organization took another giant step toward its future in 1988, when Orr was named its president and chief executive officer.

Orr, now 52, had an extensive background in health care and is considered an innovator.

For instance, in 1991 - years earlier than most other organizations - Lutheran Health Systems began linking personal computers at all of its facilities via an electronic network. The organization also introduced electronic-mail to reduce the dreaded "telephone tag" and an electronic publication, Health-E-Mail, that's transmitted weekly from the corporate office to its facilities systemwide.

Orr, for his part, prizes flexibility and openness, and gives employees unusually wide latitude in making decisions.

One example: Any employee is free to schedule a meeting with any other employee.

Literally.

"Any one of our people can go to another employee's calendar and (in writing) request a meeting. A janitor could come and schedule a meeting with me," Orr said.

The next few years don't figure to be easy for Banner. Integrating Lutheran Health Systems and Samaritan Health System will be a challenge, and most of the rural areas served by Banner are struggling.

But Orr is confident the organization will come through it in good shape.

He's also confident that the organization's core philosophy will stay the same, despite technological and demographic change.

As Knautz once told his board of directors, "We wholeheartedly believe in scientific medicine and we strive faithfully to keep pace with it in our hospitals. But human personality, human values, human courage in suffering, the human spirit refusing to be beaten, human compassion - all of these are so infinitely grander and more important than the profoundest medical discovery. They constitute the meaning and value of life."