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JOHN BUNN: The Minnesota Medical Association predicts that a dozen or more towns will lose their hospitals in the next three years. In towns where the population may already be slipping, the business district failing, and the schools struggling for survival, it's not surprising that the loss of local health care feels to rural people like one more sign that their communities are dying.

Merle Oswald is Mayor of Lakefield, a town of 1,800 near the Iowa border in southwestern Minnesota.

MERLE OSWALD: If you don't have a doctor, those people have got to go to Jackson Spirit Lake Worthington, wherever. And those people are going to do some business in those towns, too. And no matter what it is, their people are going to buy groceries, maybe they're going to go buy clothing, maybe they're going to have to fill their car with gas.

Drugstore, where we got a doctor here, those people can do that business here. And I think it's a great asset to the whole community, not only just the hospital alone.

JOHN BUNN: The small municipal hospital in Lakefield was near financial ruin a few years ago after the town lost its only doctor and, with him, a lot of its customers. The hospital and nursing home are together the largest employer in Lakefield, providing about 100 jobs. And all those jobs were threatened because one man, the doctor, had left. The hospital's administrator is Jerry Burmeister.

JERRY BURMEISTER: So it just reinforced what I'd been saying all along that the doctor is the one that makes your hospital. You can do all you want to save costs. But if you don't have the patience to support it, it's nothing but a cost center to the city.

JOHN BUNN: In its desperation, the city of Lakefield guaranteed a first year salary of $120,000 to any family doctor who would move to town. That's twice what a lot of big city doctors make. But even with that enticement, says Mayor Oswald, it took almost a year to find a taker.

MERLE OSWALD: We had two different doctors that were interested in coming. But their wives had come, and they just didn't care for a town of this size. So the wife ruled [? nurse ?] at that time.

JOHN BUNN: The town finally recruited a doctor from Canada, who now says he's here to stay. And the community's hospital has been restored to financial health. In having landed a doctor, Lakefield is among the lucky few in rural Minnesota.

Right now, there are an estimated 200 openings for family physicians in small Minnesota towns. And that number is growing. But very few of the abundant doctors in larger cities want to move to the country. That makes someone like Randy Rice a prized commodity.

RANDY RICE: OK, I want you to take some deep breaths. Go like this. OK.

JOHN BUNN: Rice, a University of Minnesota Medical student, is midway through an afternoon of appointments at the Ely Clinic in Northeastern Minnesota. Rice has spent nine months as an intern in Ely through a program designed to steer medical students into rural practice.

RANDY RICE: I will be done with medical school this next June. And then I will have three years of family practice, residency after that. I think rural family physicians are going into a rural family practice is a pretty open field right now. I don't see any problems finding a job.

JOHN BUNN: In fact, rice should have his pick of rural doctoring jobs. The question is once he's found one, how long will he stay with it? Dr. Bruce Homa now works at a medium-sized clinic in Hutchinson, an hour West of the Twin Cities. He came to Hutchinson after leaving a rural practice in Perham, where he had worked for four years. Homa says he had wanted to work in a small town.

BRUCE HOMA: And I like the rural lifestyle. It's a little easier going and quieter. The problem in Perham was it just didn't have any time to enjoy that.

JOHN BUNN: Homa says in Perham, he worked long hours and had to be on call every fifth night. In Hutchinson, there's more time to spend with his family. And he says he enjoys working on a larger staff with more colleagues to consult with.

BRUCE HOMA: You need an unusual person, in my perspective, to go out into the small areas and struggle with the problems that you have there when you could choose not to.

JOHN BUNN: Another of the problems for rural doctors is the Medicare reimbursement system, which pays doctors in the Twin Cities and Rochester substantially more for treating elderly patients than those in the rest of the state. Rural doctors, whose patients are disproportionately old, say they often can't cover their costs with what Medicare pays them.

They often pass the extra charge on to their patients. But say they themselves also make a financial sacrifice. Congress is considering ways to correct the disparity in Medicare reimbursement.

Meanwhile, small town hospitals scramble for patients and for the few doctors coming into rural areas. Terry Hill is executive director of the Northern Lakes Consortium, a group of Northern Minnesota hospitals, doctors, and nursing homes.

TERRY HILL: I think that's basically what we're talking about here is survival. It's not only survival of the rural health care system. I have real concerns about survival of the rural communities, in general.

And one of the cornerstones of every rural community in Minnesota is the health care system. And it's very directly and very intricately related to the other sectors out there, as well.

JOHN BUNN: Hill adds that the forces working against rural hospitals and doctors have more serious implications in isolated parts of Northern Minnesota. They're not only the economic health of communities is threatened. But if a couple more hospitals were to close, Minnesotans living in those towns could find themselves hours from the nearest doctor. With Leif Enger and Rachel Reeby, this is John Bunn reporting.