Minnesota lawmakers are considering options for additional review of the Fairview-Sanford merger

State lawmakers are considering options to slow or block the proposed merger between Fairview and Sanford, which would create one of the largest healthcare systems in the Midwest and transfer control of the University of Minnesota Medical Center to an NGO.

Several lawmakers at the joint session of the House of Representatives’ Commerce and Health Committees on Monday expressed concern that the merger would reduce choice and competition in rural Minnesota and put the state’s primary teaching hospital under the control of Sioux Falls-based Sanford.

Rep. Robert Bierman, DFL-Apple Valley, urged quick action on his bill, which would require approval from the state health commissioner before such a merger could take place. The state needs new tools to assess how such deals might affect health care costs and access for Minnesotans, he said.

“This merger of two of the The largest healthcare organizations will impact the entire national healthcare system,” he said.

While a review by Minnesota Attorney General Keith Ellison is ongoing, it is limited to violations of charity or antitrust laws as a result of the merger. Antitrust violations could be difficult to prove given that Fairview’s hospitals and clinics are concentrated in the Twin Cities and Sanford has become the dominant medical provider in western Minnesota.

Fairview and Sanford chief executives testified at the hearing about the benefits of completing a merger this year — creating a unified system of more than 50 hospitals that could survive and even expand in an increasingly challenging healthcare market. Fairview has suffered financial losses in recent years, leading to a recent downgrade in its credit rating, and CEO James Hereford said it needs to adjust.

Pharmaceutical companies and healthcare plans have prospered during the pandemic, but hospitals have faced financial challenges and staffing shortages that have overwhelmed their capacities, Hereford said.

“We can’t fool ourselves into believing that the status quo will be maintained,” he said. “We are not going back to pre-COVID conditions. Health care has changed fundamentally.”

A similar merger attempt between Fairview and Sanford fell through a decade ago, largely over political concerns about the fate of U Hospital. At Monday’s hearing, Dr. Jakob Tolar, dean of U Medical School, said he opposed the latest attempt because its impact on the university had not been fully assessed.

Other bills proposed at that session would ban any transfer of a U-Hospital to an out-of-state entity or require Fairview to return assets it received as part of its 1997 financial bailout of U-Hospital.

Fairview and the U are working under an agreement through 2026 that will direct millions of dollars in clinical revenue to the university for research and academic support. Sanford CEO Bill Gassen said the merger would not disrupt this agreement and the merged organization will work with the university on its next chapter.

“We’re willing to work with the University of Minnesota on what that vision looks like,” he said.

U leaders offered an alternative earlier this month: Minnesota would regain control of its medical campus and eventually build a new billion-dollar hospital.

“This is a landmark opportunity to chart the future of healthcare and medicine in the state of Minnesota,” Tolar said.

Critics of the proposed merger included US University sophomore Allison Leopold, who testified that the U ranks best for primary care education, while Sanford medical school doesn’t even show up in rankings.

“This merger would impact the educational attainment of our school,” she said, noting that it could impact recruitment at a facility that serves more than 70% of Minnesota’s primary care physicians.

However, Leopold also had concerns about the U plan, calling a billion-dollar hospital wasteful.

Hereford said Sanford was portrayed as something of a foreign bogeyman when its investments in rural hospitals likely saved them and improved local-level access to specialties like cancer care in rural Minnesota.

Fairview has invested in clinical access for low-income and uninsured patients; Many of its financial woes deepened in 2017 with its acquisition of the loss-making HealthEast system on the East Metro.

Fairview has a $62 million plan to replace the current Bethesda Hospital in St. Paul with a new psychiatric hospital it would operate with Tennessee-based Acadia Healthcare. Legislators required a health commissioner review before this project could proceed, a possible precursor to a merger review.

Fairview and Sanford had aimed to complete the merger by the end of March, but several lawmakers said they felt rushed.

MP Liz Reyer, DFL-Eagan, asked for assurances from Fairview and Sanford that they would not close hospitals as history suggests mergers lead to such closures and higher costs.

“They may not have any plans, but I saw it,” she said. “I saw it in Minnesota. I’ve seen it in other states.”

Rep. Tim O’Driscoll, R-Sartell, warned that Minnesota could stand in the way of a merger that could preserve health care.

“What happens when Fairview closes its doors?” he asked. “How does that help when there’s no other merger partner to step forward?”


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