Potential Fairview merger raises concerns

The state attorney general is troubled partly by the possible impact on University hospitals.

Potential Fairview merger raises concerns

Marion Renault

Fairview Health Services, which controls the University of Minnesota Medical Center and clinics, could be acquired by Dakotas-based Sanford Health.

The possible merger hasn’t been formally announced, but according to a statement released by Fairview on Tuesday, the talks are in “very early stages” and would not move forward without the approval of the University.

Minnesota Attorney General Lori Swanson told the Star Tribune that the negotiations are more advanced and getting “pretty hot and heavy.”

Swanson said she will host several public hearings at the state Capitol starting April 7 concerning the proposed acquisition.

In a press release Tuesday, Swanson said she was “troubled” that discussions of “a matter of such sweeping consequences” have so far been private.

“There was over one year of public debate before Fairview … took control of the University of Minnesota Medical Center in 1997,” she said. “There should be robust public discussion and input now too.”

Swanson said she was concerned about the possibility of the University’s teaching and research hospital being put under the control of an out-of-state organization.

That’s an “unfortunate characterization,” Kelby Krabbenhoft, president and CEO of Sanford Health, said in a statement Tuesday since Sanford has more than 6,000 Minnesotan employees.

Krabbenhoft also said Fairview and Sanford are in the early stages of a merger not an acquisition. The timing of the discussion is “incredibly appropriate,” he said, considering Fairview’s search for a new CEO, which will be complete within a year.

The two organizations are also similarly sized, with approximately $3 billion in net revenues and 25,000 employees each, he said, making a merger fitting.

The University has been aware of “ongoing discussions” with Sanford because of its presence on the Fairview Board of Directors, University General Counsel Mark Rotenberg said in a conference call Tuesday.

“I don’t think that Fairview has been hiding the ball from the University here,” he said.

He said the University was not sure how its medical center — which educates 70 percent of the state’s physicians — would be affected by the merger but said it would be discussed.

Maintaining the standards and management structure of the University’s facilities is a major concern, Rotenberg said.

“We need to understand how … a new organization like that [would] support our clinical research,” he said.

The April hearings, he said, will help the University and Fairview understand the possible implications of the merger.

“Health care in Minnesota is a very competitive business,” he said. “The University has no intention of being left behind and disadvantaged in terms of its capacity to fulfill its public mission with Minnesotans.”

Fairview said in a press release Tuesday that the hospital isn’t alone in considering a merger in order to stay afloat in the health care market.

“Mergers and other types of partnerships between healthcare organizations are occurring at the local and national level,” it said. “Fairview’s Board of Directors is exploring whether [this] makes sense.”

Because the hospital has a state status as a charitable trust, it’s exempt from income, sales and property taxes, which means the hospital has an obligation to serve the state and people of Minnesota, Swanson said in a letter to Fairview Health Services.

“We’re a state constitutional corporation,” Rotenberg said, “and our single focus is the welfare of the University as a state of Minnesota institution.”