While health care debates rage on in Washington D.C., the trend of health care industry mergers continues unabated. On Wednesday morning, Minneapolis-based Fairview Health Services and St. Paul-based HealthEast Care System announced plans to merge the two health care nonprofits. The combination of the two providers will now become the largest in the Twin Cities.
 
Fairview president and CEO James Hereford will lead the combined organization. The existing Fairview board of directors, with the addition of three HealthEast board members, will govern the new entity. HealthEast primarily has a presence in the east metro with facilities such as St. John’s Hospital in downtown St. Paul and the Woodwinds Health Campus in Woodbury; that’s a corner of the market that Fairview currently doesn’t serve.
 
Cindy Fruitrail, a spokeswoman for Fairview, said that the two systems complement each other well because their hospitals and clinics don’t overlap in any service areas. Fruitrail said that no decisions have been made about the name of the combined organization. She said that the two groups had discussed a potential merger for years prior to Wednesday’s announcement.
 
“It’s been a conversation for many years between the organizations...it just makes a lot of sense,” said Fruitrail.
 
Merger discussions predate the arrival of Hereford, who took the helm as Fairview CEO in December, said Fruitrail.
 
Fairview is a much larger operation with a total of 24,874 employees, compared to 7,267 employees at HealthEast. Fairview has 42 primary care clinics; HealthEast has 14 clinics. It is not clear if any jobs would be cut as a result of the merger.
 
“We’re certainly not at the point of talking about anything like that,” said Fruitrail. “We have a lot of work to do in the coming months.”
 
State filings show that for 2015, Fairview had total revenue of $3.75 billion. Five different HealthEast nonprofits had $1.16 billion in revenue.
 
Since one nonprofit can’t literally “buy” another nonprofit, no money changes hands in such a merger. Many health care mergers are driven by the current push to reduce the overall cost of health care; health care execs think that combined systems can operate more efficiently.
 
Previously, Bloomington-based HealthPartners merged with St. Louis Park-based Park Nicollet Health Services in 2013. While the combined organization uses the HealthPartners name, Park Nicollet facilities still use the Park Nicollet name.
 
Ultimately the deal requires federal approval to move forward. On Tuesday, two Chicago hospital systems announce scrapping plans to merge after a court fight against the Federal Trade Commission failed.
 
“I think for Fairview it’s a way of expanding their geographic reach,” said Allan Baumgarten, an independent health care industry analyst and author of the annual Minnesota Health Market Review.
 
In his analysis of patient revenue statistics, a combined Fairview/Health East would now have 30 percent of the market in the Twin Cities. Allina is second with 26 percent; HealthPartners is third at 14.5 percent.
 
Given the lack of geographic overlap between the two networks, Baumgarten doesn’t foresee any trouble with the feds for Fairview and HealthEast.
 
“This merger is not going to get opposed by the Federal Trade Commission,” said Baumgarten.
 
Just last week, TCB reported that Fairview and the UCare health plan had ended discussions over a possible merger, first announced in April 2016. Fruitrail said those discussions were unrelated to the announced HealthEast merger.

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