Sanford Health shouldn't own Minnesota's teaching hospital, say two former governors
Ex-Govs. Mark Dayton and Tim Pawlenty told a senate committee on Tuesday the state should retain the University of Minnesota assets should Sanford acquire Fairview Health Services.
ST. PAUL — Two former governors of Minnesota said Tuesday that the state's teaching hospital should not be owned by Sanford Health, based in Sioux Falls.
Govs. Mark Dayton and Tim Pawlenty testified before a state legislative committee about Sanford's planned merger with Twin Cities-based Fairview Health Services. The two governors said the state should do everything it can to hold on to the University of Minnesota’s academic health assets in the merger, including the school’s teaching hospital. Fairview currently controls university hospitals, where the vast majority of the state’s doctors receive their training.
The proposed merger has been the subject of hot debate in the Minnesota Legislature.
One of the biggest sticking points of the debate is what to do with the University of Minnesota Medical Center in Minneapolis and other facilities tied to the medical school, assets of a public university that have been tied to Fairview since 1997.
Dayton, in his remarks to the Senate Health and Human Services Committee Tuesday night, said called the prospect of the university’s academic health center being under the ownership of a South Dakota-based enterprise “alarming,” and said he hoped Sanford CEO Bill Gassen and Fairview CEO James Hereford would make good on their pledge to help the university get its assets back.
“If not, a proposed merger between Fairview and Sanford should be prohibited,” said Dayton, who served from 2011 to 2019. “As a land-grant institution, the University of Minnesota and all of its assets are obligated, both legally and morally, to be used for the benefit of our state and our citizens.”
Last month, Sanford CEO Bill Gassen suggested the university could repurchase the center and other facilities from the health system. Right now, the university is seeking about $1 billion from the Legislature to do so, though it does not want to treat the transfer as a "commercial purchase-and-sale transaction." Rather, it views the facilities as "nonprofit charitable assets" tied to the school's mission as a state university.
Hereford said Fairview has put about a billion dollars into the teaching hospital since it first acquired it over 20 years ago, and it's "imperative" negotiations begin on a price for the university assets, as the university wants to operate the hospital by March 2024.
The leadership of both health organizations, which announced their intent to merge in late 2022, say their combined operating revenue would be around $13 billion each year. They argue Fairview, which like many health systems has struggled financially in recent years, would be in a better position to serve patients if it merged with Sanford.
Gassen told the committee Tuesday that Sanford, which would absorb Fairview in the merger and take over management, would honor the ongoing agreement with the university and the academic health center would be under the control of a Minnesota-based board until the state buys it back.
Pawlenty, governor of Minnesota from 2003 to 2011, said a health care merger is not a topic typically at the top of the mind of voters, but pointed to Minnesota’s status as a national and worldwide center for health care as one reason for the state to approach the merger carefully. M Health Fairview, which incorporates the Maroon “M” for the University of Minnesota in its logo, is a valuable brand for the state, the ex-governor said.
“People know and respect and understand and appreciate what's underneath that in terms of the history, contributions, and what that reflects for the state of Minnesota,” Pawlenty said. “It says M Health. It doesn't say … out of state health. It says Minnesota.”
The systems aim to merge by May 31, though the office of Attorney General Keith Ellison is still investigating the merger to determine if it complies with antitrust and charity laws. The Federal Trade Commission could also get involved in the process, and Ellison said his office would work closely with federal officials if that happened.
At Tuesday’s hearing, Ellison gave senators an update on his investigation, which he said is still in progress and does not have a set timeline for completion.
“Our office may find no violations of law,” he said. “But still, we could come to the conclusion that the merger is not in the best interest of the public.”
If that turns out to be the case, Ellison said the Legislature could consider bills that would give his office tools “related to our ability to investigate large healthcare transactions and consolidations, including consideration of whether a given transaction serves the public interest.”
Opponents of the merger, including the Minnesota Nursing Association, argue consolidation of health care systems ultimately leads to higher costs and reduced services. A recent study released by the group said “cross-market” mergers could result in 7% to 15% price increases, and pointed to cuts made at HealthEast after Fairview acquired the company.
Labor groups also worry whether their collective bargaining agreements will carry over from Minnesota-based Fairview when Sanford takes over management. Gassen told senators Sanford would honor existing labor arrangements.
Regarding concerns about hits to rural health care, Sanford leadership has pointed to more than a billion dollars it invested in northwestern Minnesota health care, including a new high-level trauma center in Fargo and a hospital in Thief River Falls. Fairview and Sanford say part of the merger will include a $500 million investment in areas currently served by Fairview.
Sen. Rob Kupec, DFL-Moorhead, said Fargo has become a medical destination since Sanford acquired MeritCare and invested in the area, though he acknowledged that the Fargo-Moorhead area and rural healthcare represent very different markets from that of the Twin Cities.
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