Sanford, Fairview are reviving merger talk a decade after the last attempt failed

A massive merger of Sanford Health Systems and Fairview is back at the negotiating table in Minnesota, a decade after the state’s political concerns blighted a similar deal.

Leaders of Sioux Falls-based Sanford, Fairview-based and Minneapolis-based Sanford signed non-binding letters of intent to merge and publicly acknowledged the negotiations Tuesday, asserting that the deal would inspire innovation, improve patient care and protect them from mounting economic challenges.

If the combined system is successful, it will be based in Sioux Falls and will be one of the largest healthcare providers in the upper Midwest, with 78,000 employees and more than 50 hospitals – including the University of Minnesota Medical Center.

Sanford and Fairview have yet to convince state regulators and lawmakers of the merits of the deal while negotiating details with the U to avoid controversies like the one that doomed the merger 10 years ago.

“I would just say that 2013, whereas it was only a decade ago, is forever. Different circumstances. Different people. Different organizations. Different relationships,” said James Hereford, CEO of Fairview. “I think all of these differences dictate a very different outcome.”

Sanford operates 47 medical centers in Dakota and rural western Minnesota while Fairview’s 10 inpatient hospitals are largely concentrated around the Twin Cities.

Sanford CEO Bill Gassin said Sanford Health will get top billing as the parent company, but maintains a “very physical institutional presence” in the Twin Cities.

Hospitals nationwide have been hit by the pandemic, resulting in shortages of financial resources and staff. Jasin said integration is about more than just survival. It would combine the strengths of two healthcare systems with “similar missions” in ways that would expand equitable access to in-person and virtual care.

“Doing it just for the sake of scaling is not going to work, simply put,” Jacin said.

Both houses have approved the negotiations. Pending regulatory reviews, both sides seek to close the deal in 2023.

Several issues remain to be resolved, including whether to retain the M Health Fairview brand for several Fairview operations and how to marry employee models into the two systems. Fairview leases some of its own staff, but also employs union nurses at hospitals and relies on U.S. faculty physicians with their own independent group practices.

The Minnesota Nurses Association issued a statement Tuesday asking for a “seat at the table” to ensure that negotiations consider the needs of nurses and patients.

The U sold its teaching hospital to Fairview in the 1990s, a landmark deal that closely links the health system to the university’s health care mission.

The former Minnesota attorney general and other opponents in 2013 dismissed the idea of ​​an out-of-state organization running U Hospital, the taxpayer-subsidized training site for most of the state’s doctors. State legislators introduced legislation to block the move at the time, and others suggested that the university acquire Fairview instead.

Minnesota spokesperson Keith Ellison said Minnesota Attorney General Keith Ellison is aware of the latest negotiations and plans to conduct an investigation to ensure the merger is in compliance with laws governing charities and nonprofits. “We are also assessing any potential impacts on competition along with state and federal partners.”

Myron France, the university’s senior vice president for finance and operations, said the university was informed of the new merger talks in August and was involved in the “early stages of discussion.”

U receives millions of dollars in subsidies each year from Fairview for teaching, research and health care, France said, and needs to see how the merger will affect this deal along with Fairview’s bottom line.

“What are Fairview and Sanford’s plans to rectify Fairview’s financial challenges?” He said.

Neither Jason nor Hereford were in charge at the time of the 2013 merger talks. They revived the idea over dinner during a healthcare conference at the end of May.

Founded in 1906, Fairview operates more than 80 clinics and 36 notable suburban pharmacies and hospitals in Burnsville, Edina, Maplewood and Woodbury. The Fairview Ambulance Department responds to more than 40,000 emergency calls annually, and the Ebenezer unit operates four long-term care and transitional care facilities.

Fairview was the fourth largest nonprofit group in Minnesota in 2021, according to a Star Tribune analysis, with about $6.43 billion in revenue and 31,000 employees. Of the state’s 12 largest nonprofits last year, only Fairview was losing money in operations — a trend that has continued this year. Some competing health systems, such as Allina and North Memorial, have seen their finances deteriorate in the first half of this year as well.

Sanford’s merger was not motivated by the relatively poor financial performance of Fairview, Hereford said, which in recent years has closed St. Joseph’s Hospital and its old 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, complementary core competencies to do that.”

Sanford Health has its origins in the opening of a hospital in Sioux Falls in 1894. It was later named for businessman and philanthropist T. Denny Sanford after a charitable gift of $400 million in 2007.

With approximately 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 for the Minnesota Health System, operating 19 hospitals, 70 clinics and employing more than 7,000 employees.

Sanford Health made a profit from operations last year while reporting slightly more revenue ($7.14 billion) than Fairview. It operates a health insurance plan as well as a network of elderly care facilities.

Sanford recently failed to complete its proposed mergers with Utah-based Intermountain Healthcare and Iowa-based UnityPoint Health.

Sanford walked away from the Intermountain merger, Jasin said, after he became CEO and decided with his board that it wouldn’t lead to meaningful improvements in healthcare. He added that Fairview offers more opportunities, including collaboration on Sanford’s initiative to promote virtual care in rural areas.

A new virtual care center is announced in 2021 as part of a $350 million charitable gift from T. Denny Sanford. His total donation to the healthcare system over the years comes to nearly $1.5 billion.

“Probably no one has lost sight of the challenges healthcare has faced over the past few years, everything from the pandemic to some of the economic challenges we face today,” Jasin said. “The opportunity to bring together two organizations with very similar missions…an amazing opportunity we don’t want to miss.”

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