A mega-merger of the Sanford and Fairview health systems is back on the table in Minnesota, a decade after state political concerns derailed a similar deal.
Leaders of Sioux Falls-based Sanford and Minneapolis-based Fairview signed nonbinding letters of intent to merge and publicly acknowledged the negotiations on Tuesday, saying the deal would inspire innovation, improve care to patients and protect them from growing economic challenges.
If successful, the combined system would be based in Sioux Falls and would be one of the largest health care providers in the Upper Midwest, comprised of 78,000 employees and more than 50 hospitals, including the State Medical Center. University of Minnesota.
Sanford and Fairview have yet to convince regulators and state lawmakers of the merits of the deal while negotiating details with the U to avoid controversies like those that doomed the merger 10 years ago.
“I would just say that 2013, when it was only a decade ago, is an eternity. Different conditions. Different people. Different organizations. Different relationships,” said James Hereford, Fairview’s chief executive. “And I think all of those differences dictate a very different outcome.”
Sanford operates 47 medical centers in the Dakotas and rural western Minnesota, while Fairview’s 10 inpatient hospitals are largely concentrated around the Twin Cities.
Sanford Health would get the top spot as the parent company, but would retain “a very significant corporate presence” in the Twin Cities, said Sanford chief executive Bill Gassen.
Hospitals nationwide have been impacted by the pandemic, resulting in financial and staffing resource shortages. Gassen said the merger is more than a matter of survival; it would combine the strengths of two health care systems with “similar missions” in ways that expand equitable access to in-person and virtual care.
“Doing it just to get bigger just won’t work,” Gassen said.
Both boards have approved the negotiations. Pending regulatory reviews, both parties seek to close the deal in 2023.
Many issues still need to be resolved, including whether to retain the M Health Fairview brand for many Fairview operations and how to marry employee models from the two systems. Fairview hires some of its own staff, but also employs unionized hospital nurses and relies on U faculty physicians with their own independent group practice.
The Nurses Association of Minnesota released a statement on Tuesday asking for “a seat at the table” to ensure negotiations take into account the needs of nurses and patients.
The U sold its teaching hospital to Fairview in the 1990s, a landmark deal that tied the health care system tightly to the university’s health care mission.
The former Minnesota attorney general and other opponents balked in 2013 at the idea of an out-of-state organization running Hospital U, the taxpayer-funded training ground for most doctors in the state. ‘State. State lawmakers introduced legislation to block the move at the time, and others proposed that the university take over Fairview instead.
Minnesota Attorney General Keith Ellison is aware of the latest negotiations and plans an investigation to ensure the merger complies with laws governing charities and nonprofits, spokesman John Stiles said. “We are also evaluating possible effects on competition with state and federal partners.”
Myron Frans, the U’s senior vice president of finance and operations, said the university was made aware of the new merger talks in August and was involved in “the very early stages of the discussion”.
The U receives millions of dollars in teaching, research and health care support from Fairview each year, and needs to know how the merger would affect that deal and Fairview’s bottom line, Frans said.
“What are Fairview’s and Sanford’s plans to fix Fairview’s financial problems?” ” he said.
Neither Gassen nor Hereford were in charge at the time of the 2013 merger talks. They rekindled the idea over dinner at a healthcare convention in late May.
Founded in 1906, Fairview operates more than 80 clinics, 36 pharmacies and prominent suburban hospitals in Burnsville, Edina, Maplewood and Woodbury. Fairview’s Ambulance Division responds to more than 40,000 emergency calls annually and its Ebenezer Unit operates four long-term care facilities and two transitional care facilities.
Fairview was Minnesota’s fourth-largest nonprofit in 2021, according to a Star Tribune analysis, with revenue of about $6.43 billion and 31,000 employees. Of the 12 largest nonprofits in the state last year, only Fairview was losing money on its operations — a trend that has continued this year. Some competing health systems, such as Allina and North Memorial, also saw their financial conditions deteriorate in the first half of this year.
Hereford said the Sanford merger was not driven by the relatively weak financial performance of Fairview, which in recent years closed St. Joseph’s Hospital and the Bethesda Hospital campus, both in St. Paul.
“We need to be able to drive innovation and drive new approaches,” Hereford said. “And I think what’s really different at this point is that the combination of the two organizations brings such important and complementary core competencies to do just that.”
The origin of Sanford Health dates back to the opening of a hospital in Sioux Falls in 1894. It was later named for businessman and philanthropist T. Denny Sanford after a $400 million donation dollars in 2007.
With nearly 45,000 employees, Sanford’s largest hospitals are in Sioux Falls as well as Fargo and Bismarck, ND Sanford Bemidji Medical Center is the largest hospital in the Minnesota Health System, where it operates 19 hospitals, 70 clinics and has more than 7,000 employees.
Sanford Health made money from its operations last year while posting slightly higher revenue ($7.14 billion) than Fairview. It operates a health insurance scheme as well as a network of care facilities for the elderly.
Sanford recently failed to complete proposed mergers with Utah-based Intermountain Healthcare and Iowa-based UnityPoint Health.
Sanford walked away from the Intermountain merger, Gassen said, after becoming CEO and determining with its board that it would not result in meaningful health care improvements. Fairview presents more opportunities, he added, including collaborating on a Sanford initiative to boost virtual care in rural areas.
A new virtual care center was announced in 2021 as part of a $350 million philanthropic gift from T. Denny Sanford. His total donations to the health care system over the years amount to nearly $1.5 billion.
“It’s probably not lost on anyone the challenges that health care has faced over the past few years, ranging from a pandemic to some of the economic challenges we face today,” Gassen said. “The opportunity to bring together two organizations that have extremely similar missions…is an incredible opportunity that we just don’t want to miss.”