Fairview To Merge With UCare

Proposed deal follows combining with PreferredOne.

Minneapolis-based Fairview Health Services has signed a letter of intent to merge with Minneapolis-based UCare, a nonprofit health plan. The proposed deal calls for UCare to become a wholly owned subsidiary of the Fairview health system. The two nonprofit organizations jointly announced the plan midday on Tuesday.
Jim Eppel will remain as president and CEO of UCare. Eppel replaced the retiring Nancy Feldman in June 2015.
The move extends Fairview’s expansion into the health plan business. In January, Fairview became the sole owner of the PreferredOne health plan. Prior to the deal, Fairview had a 50 percent stake in PreferredOne. The UCare and PreferredOne health plans, which had ranked as the fourth and fifth largest in Minnesota, will form Fairview’s health plan division.
Representatives of both Fairview and UCare rejected media requests to interview executives with either organization.
“This proposed combination mirrors a growing national trend of payer/provider partnerships and has the potential to transform how health care is delivered and financed in Minnesota,” David Murphy, Fairview’s interim CEO, said in a statement.
Murphy, the former CEO of the Red Wing Shoe Company and a 23-year veteran of General Mills, was tapped as Fairview’s interim CEO since March 2015. He also chairs Fairview’s board of directors.
“Fairview for a long time was a 50 percent owner of Preferred One, but they didn‘t talk very much about it. Now they seem to be embracing the dual role of being both the provider system and the health plan,” said Allan Baumgarten, an independent health care industry analyst and author of the annual Minnesota Health Market Review.
Baumgarten said other health plans may now start to view Fairview as a competitor: “There’s a potential there that there might be some kind of pushback from the health plan companies in the region.”
According to the joint statement from Fairview and UCare, “the two organizations aim to finalize details of the transaction and secure regulatory approvals by mid-summer 2016.” 
Last year UCare was stung when it lost out on state contracts for the Medical Assistance and MinnnesotaCare programs. In the wake of losing that business with the state, it announced 245 job cuts in October.
UCare currently has 583 employees and nearly 150,000 members in its health plans.
According to the joint statement on the newly proposed deal: “Overall workforce reductions are not anticipated as a result of the transaction.”
Fairview Health Services reported revenue of $3.36 billion for 2014, its most recent annual filing with the Minnesota Attorney General’s office. UCare reported revenue of $3.07 billion for 2014, but UCare drew about half of its revenue from the state contracts.
Fairview Health Services has more than 22,000 employees, including its University of Minnesota Health partnership.