Minnesota bill targets hospital mergers; Sanford Health, Fairview Health remain committed to deal

Sanford Health President and CEO BIll Gassen, left, and Fairview Health Services President and CEO James Hereford, announced plans to merge the two systems last fall. (Image credit: Sanford Health)

Minnesota lawmakers have approved a bill that could pose new difficulties for hospital mergers.

The measure could potentially affect the planned merger between Sanford Health and Fairview Health Services, which operates the University of Minnesota Medical Center. Both Sanford and Fairview say they are committed to moving forward with the deal, which would create a new organization with more than 50 hospitals and a combined $14 billion in revenue.

Lawmakers have sent a bill to Minnesota Gov. Tim Walz that would give the state’s attorney general’s office more authority in reviewing hospital consolidations. Walz is expected to sign the bill, The Minnesota Reformer reported, citing a spokesperson for the governor.

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The legislation includes a provision related to the proposed merger of Fairview and Sanford, which is based in South Dakota. Under the legislation, Minnesota Attorney General Keith Ellison would have the authority to approve or reject an out-of-state organization’s bid to run the University of Minnesota Medical Center.

The bill would also require an out-of-state organization taking over a nonprofit Minnesota health system to reimburse “an amount equal to the value of any charitable assets the health system received from the state,” according to a release from Minnesota Rep. Robert Bierman, a sponsor of the legislation.

Bierman and lawmakers backing the bill say it’s designed to protect the interest of patients amidst hospital mergers and consolidations.

“This legislation is about putting patients ahead of profits, ensuring we’re centering their care in how we move forward with health care system mergers,” Bierman said in a statement earlier this month.

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Sticking together

Both Sanford and Fairview have said the consolidation would expand healthcare options for patients in Minnesota and other states. If approved, the deal would create a system with 56 hospitals and 600 sites of care.

Sanford Health says it is still moving forward and remains confident in the benefits of its planned merger with Fairivew.

”Together with Fairview, we will make historic investments to strengthen high-quality care delivery in Minnesota, address critical workforce challenges and expand access to care for the underserved in both rural and urban areas,” Sanford said in a statement.

“We have worked closely with the Office of the Attorney General on their review since last fall and will continue to do so in order to comply with the new requirements should this legislation be signed into law," Sanford said.

Fairview has said it would sell the University of Minnesota Medical Center back to the university to move forward with the merger.

Fairview also remains undeterred in its plans to join Sanford.

“This new law does not change our desire to combine with Sanford Health, and while it creates new regulatory processes, we strongly believe that the merger is in the public interest and that we can comply with the new requirements,” Fairview said in a statement.

“As a combined organization, Fairview and Sanford can deliver our primary, specialty and sub-specialty care to a broader and more diverse population across Minnesota and throughout the Midwest,” Fairview said. “Together, we can continue to invest in our operations across Minnesota, and enable greater innovation.”

Fairview and Sanford said in April they would agree to provide 90 days notice before closing the deal, at the request of the state attorney general, The Star-Tribune reported.

While Fairview is willing to sell the medical center to the University of Minnesota, the system said its preference is to continue a partnership with the university. The system said it would give the University of Minnesota Medical School greater options for medical research and education and access to a wider variety of patients. But Fairview said, “The university must decide its own future.”

In a news conference this week, Walz said the Minnesota legislature may have to meet over the summer to discuss long-term plans regarding the University of Minnesota Medical School.

Concerns of scope

The Minnesota Hospital Association has raised concerns about the scope of the legislation. The association cites the expanded authority of the attorney general’s office, including the omission of a timeline on the office’s ability to “unwind a completed transaction.”

“The scope of the authority is so broad it could potentially inundate the Minnesota Department of Health (MDH) and the AG’s office with frequent organizational changes that would now need to have a lengthy process to be approved,” the association says. “This provision will limit the ability of our state’s hospitals and health systems to make the timely and nimble organizational adjustments needed to stay viable to serve patients and communities.”

Sanford Health President and CEO BIll Gassen and Fairview Health Services President and CEO James Hereford initially announced their plans to merge in November 2022, and they initially hoped to conclude the deal by March 31, 2023. The systems postponed the completion of the deal earlier this year.