As Sanford, Fairview look to push merger forward, questions about UMN’s role remain

U of M hospital
The University of Minnesota wants its role in a new merger between Sanford and Fairview clarified before the deal is finalized.
Mark Zdechlik | MPR News 2015

Updated: 1:50 p.m.

As Sanford Health and Fairview Health Services executives make their case in public meetings explaining why the combination of the two health care companies would be good for Minnesota patients and communities, it’s still not clear how a Minnesota institution will fit in.

Since the proposed merger was announced, the question of what will happen with the University of Minnesota has been at the center. The two health care companies have set a planned deadline of March 31 to complete the merger. What’s still unclear, however, is what role the U will have in the combined company.

Meanwhile, the university recently announced its own plans to grow, which officials say were pushed up by the merger proposal.

“The announcement by our clinical partners at Fairview of their planned merger with Sanford certainly sped our announcement of the need for the focused academic medical center for the future on the campus,” said Dr. Jakub Tolar, dean of UMN medical school. “[The proposed merger] actually has made it obvious that we need to answer this question no matter what in the next couple of years. So now is as good a time as ever.”

UMN officials announced at a Jan. 12 press conference that they plan to reacquire several on-campus facilities: The U of M Medical Centers on the east and west banks, the M Health Fairview Clinics and Surgery Center, and the Masonic Children’s Hospital.

The U will seek financial support from elected officials to help them achieve this goal, along with “upgrading the facilities, and joining in the planning for a new, world-class medical center on the east bank of the Twin Cities campus.”

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At a recent public comment meeting in Bemidji, Sanford Health CEO Bill Gassen said their approach has been to keep all options on the table, including for the university to repurchase its teaching hospital from the combined system.

“We're committed to honoring the existing agreements with the university while we work together on the terms of a repurchase [and] what a future partnership could look like,” Gassen said. “Time is of the essence, however, to complete our merger with Fairview. Every day we wait is a missed opportunity to realize the benefits for our patients, for our people, and for the communities we have the privilege of serving.”

The university’s faculty-physicians train more than 70 percent of the state’s doctors, according to the U.

Tolar said they don’t necessarily want the U out of the deal.

“I want the university to be a part of the deal because the university is the center of gravity of the deal, the reason why, you know, the enormous amount of revenue that comes to value comes from the hands of my clinicians,” Tolar said.

What the university wants, it seems, are assurances. The dean said the best case scenario is an upgrade of what they have now, “into the even better position when we can live out to the fullness of the potential that this practice, and this medical school, and this university — with its health science schools — presents to the state rather than be restricted to an exclusive business relationship with a single health care system.”

Fairview officials said requiring UMN physicians to have an exclusive relationship with the combined system is not being proposed. The U’s partnership with Fairview runs through 2026, something Tolar said they plan to honor.

But, as the dean indicates, they need time to sort out concerns like these, making the March 31 date too short, he said.

“The timeline is somewhat artificial — it's a self-imposed timeline. There's no reason to do this right now,” Tolar said. “This is an action that our children and grandchildren will live with. So putting more focused management and thought into ‘how is this going to work for them,’ I think is going to be incredibly important.”

The CEOs of Fairview and Sanford told MPR News that anything’s possible, but they’re not actively contemplating slowing down the merger timeline.

“We believe very strongly in the virtues of bringing the organizations together,” Gassen said. “It's a lawful transaction. It's a transaction that has, at its core, improving the lives of the patients we serve and the communities that we have the privilege of living in and serving. And so our intention is to move forward with that as soon as we can.”

In an interview on the MPR News program “Minnesota Now,” Attorney General Keith Ellison said the deadline for the deal is “too quick,” and that he has asked the parties for more time.

“This is moving along at a pace that, I think, is not giving my office the time it needs to review how this is going to affect healthcare in our state, workers who work for the system, patients, cost, consolidation,” he said. “There's still a lot of things on the table, including the University [of Minnesota] hospital, which has a research academic teaching mission, which is really important to Minnesotans. I think I'd rather know what's going to happen with that before a merger goes through than after.”

Ellison said his office expects to complete its review around the end of the month.

Recently, the agency Moody’s Investor Service downgraded Fairview’s credit rating due to the company’s financials. In a statement, Fairview said the report reflects the urgency of the situation, saying that the two organizations can “strengthen our financial footing and improve the experience for both patients and providers in a way that neither Fairview nor Sanford can do alone.”

Ellison hosts the next public comment session Wednesday at 6 p.m. at the Worthington High School cafeteria. The final meeting is Jan. 31 at the Ives Studio at the Reif Performing Arts Center in Grand Rapids at 6 p.m.