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Sanford, Fairview say U of Minnesota can repurchase flagship hospital, but U envisions 'reacquisition'

A merger between Sioux Falls, S.D.-based Sanford Health and Minneapolis-based Fairview Health System has been a subject of debate in the North Star State, with ownership of the University of Minnesota Medical Center proving particularly contentious. 

Fairview acquired the university's flagship hospital, also based in Minneapolis, in 1997. The entities' affiliation agreement stretches until 2026. But the university is concerned that Fairview's proposed merger with Sanford — which would create a 50-plus hospital system with 78,000 employees across the Dakotas and Minnesota — would interfere with its mission of providing academic healthcare in Minnesota. 

From Sanford and Fairview's perspective

Sanford CEO Bill Gassen and Fairview CEO James Hereford made remarks about the proposed joint system at a Jan. 10 attorney general listening session, where university representatives were also present. Fairview shared those remarks with Becker's

According to the documents Becker's received, Mr. Hereford said Fairview's hospitals and clinics would continue to operate with leadership based in the state of Minnesota — a nod to concerns that state taxpayers would fund out-of-state expansions for the newly merged systems. 

"I want to address those who have alluded to Sanford as an outsider — a foreign entity from the Dakotas unfit to participate in Minnesota's healthcare ecosystem," Mr. Hereford said. "The reality is that Sanford has provided high-quality care to Minnesotans for nearly two decades, with more than 7,000 dedicated employees in 20 hospitals and 70 clinics in communities including Bemidji, Thief River Falls, Worthington and Luverne." 

Additionally, Mr. Hereford defended the merger as a defense against industry pressures. 

The "status quo isn't sustainable," Mr. Hereford said. "The ongoing challenges and pressures on care delivery demand that we do things differently. We believe that, together, [Sanford and Fairview] can improve the experience for both patients and providers in a way that neither organization can do alone." 

When Mr. Gassen took the mic, he addressed the university. 

"I would be remiss if I didn't acknowledge the unique role the University of Minnesota plays in advancing medical research and training," Mr. Gassen said. "Since August of last year, we have engaged in productive dialogue with university leadership to explore a mutually beneficial partnership to advance our collective missions." 

"In the spirit of partnership, we have put all options on the table," Mr. Gassen continued. "This includes an option for the University of Minnesota to repurchase the academic medical center from the combined system." 

According to minutes from a University of Minnesota Board of Regents meeting on July 29, 1996, the board authorized the sale of the hospital and "subsequent academic affiliation with Fairview Hospital and Health Services" at a purchase price of approximately $87 million. 

From the University of Minnesota's perspective

At that Jan. 10 listening session, Jakub Tolar, MD, PhD, the dean of the University of Minnesota's medical school, said the university was not a party to the planning of the merger, and thus could not assure the public of its purpose.

Myron Frans, the university's senior vice president for finance and operations, affirmed Dr. Tolar's statement in a Jan. 13 interview with Becker's

Mr. Frans said Sanford and Fairview began their own discussions in May and came to the university with a letter of intent to merge in August. He specified that the university was not involved in the planning or design of the letter of intent. 

"The new combined system, as we understand it, would be governed by a single board that would be based in Sioux Falls, South Dakota," Mr. Frans said. "That is the current status of the LOI, is a single board." 

The university believes there must be local control of its flagship hospital to fulfill its mission of providing academic healthcare in Minnesota, according to Mr. Frans. 

"In order to support and maintain a strong academic health center with the University of Minnesota medical school and our UMP physicians, it is the university's position that the traditional flagship assets on our campus should return to university control, ownership and governance, and that then we should enter into strategic partnerships with other systems —  like Fairview or Sanford, depending on what happens —  to make sure that we can deliver the benefits of academic health and research and innovation to the rest of the people in Minnesota," Mr. Frans said. 

When Becker's asked Mr. Frans what roadblocks would be to buying back the hospital, he said that question assumes there was a purchase to begin with. He said that the university was losing money on the hospital when it transferred it to Fairview, but it was not "sold." 

"The transfer to Fairview had a lot of promises going both ways, and one of those conditions was that the assets would be used to help fulfill the university's mission to provide academic healthcare to the state of Minnesota," Mr. Frans said. 

"We're looking more at that transfer, and how do we transfer those assets back to the university," he continued. 

Mr. Frans said the university is meeting regularly with Sanford and Fairview, and discussions between the three entities are "ongoing." 

The U's next steps 

Reacquiring the University of Minnesota Medical Center from Fairview would kick-start the institution's "MPact Healthcare Innovation vision," which it announced in a Jan. 12 news release. 

The new strategic plan highlights plans to "own, govern and control" flagship facilities, and potentially build a new hospital near the existing medical center. 

"[The flagship hospital] would be a bridge to the new hospital," Mr. Frans told Becker's. "We envision reacquisition as phase 1. Phase 2 is the investment in those facilities to make sure they're at the right level of condition for the next number of years. And phase 3 would be the transfer to the new hospital that would be built in the medical district." 


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