Sanford in Talks to Take Over Fairview Health Services

Fairview Health Services is in discussions about being taken over by South Dakota-based Sanford Health; Attorney General Lori Swanson has concerns and is holding public hearings on the issue.

Fairview Health Services is in discussions about the possibility of being taken over by Sioux Falls, South Dakota-based Sanford Health, and Attorney General Lori Swanson’s office is investigating the possible merger.
 
In a letter to Chuck Mooty, Fairview’s chairman and acting CEO, Swanson said that her office has learned about “very serious discussions” taking place between Minneapolis-based Fairview about a transaction through which Sanford would control the local health care system. (Separately, she told the Star Tribune that Fairview’s board of directors is scheduled to hold a retreat on April 8, presumably to consider a takeover.)
 
Meanwhile, Swanson plans to hold public hearings on the issue at the State Capitol starting April 7.
 
Fairview, which owns seven hospitals and operates more than 40 primary care clinics, issued a statement mid-Tuesday afternoon, saying: “Fairview’s board of directors is exploring whether a merger or other type of partnership makes sense.” It added: “Our talks with Sanford Health are in the very early stages, which is why there has not been broad public discussion. Fairview also said that “no agreements or formal commitments have been made.”
 
Swanson told Mooty in her letter that she has concerns about a merger, partly because it could put the Fairview-controlled University of Minnesota Medical Center, a research and teaching hospital that trains about 70 percent of Minnesota doctors, under the control of an out-of-state company.
 
Swanson told the Star Tribune that U of M hospital officials are concerned about being owned by Sanford, which has become a regional health care network based on hundreds of millions of dollars given by South Dakota banker Denny Sanford.
 
By contrast, Fairview, formed more than a century ago as a Minnesota charitable trust, is exempt from property, income, and sales taxes and has received public and private gifts of land and money over the years. In a press release, Swanson said that Fairview “exists because of 100 years of goodwill, generosity, and financial support of the people of Minnesota.”

Fairview said in its statement that “nothing will move forward unless we and our parters at the University of Minnesota believe there is merit to a merger”—and the organization said its board is gathering input from many sources, including internal and external experts, and that it has engaged University of Minnesota leaders in the conversation.
 
When Fairview acquired the University Medical Center in 1997, it agreed to maintain the facility as a “flagship, world-class institution and to provide resources to support world-class education and research” there, Swanson told Mooty in her letter. More recently, Fairview promised to work with the University of Minnesota to establish a $182 million state-of-the-art ambulatory care medical facility to be used by university doctors and students.
 
“Given Fairview’s charitable ties and obligations to the people of Minnesota and the State of Minnesota, I am troubled by the notion that a small group of people—apparently composed of a portion of the Fairview board of directors and representatives from an out-of-state entity—would conduct private discussions without the benefit of the public’s input regarding a matter of such sweeping consequences as it relates to the control of the university health system, the quality of health care for Minnesota patients, and our state’s economy and international prestige,” Swanson said in her letter to Mooty.
 
Fairview now generates more than $2 billion in annual revenue, has a net worth of about $1.2 billion, and employs roughly 22,000 Minnesotans. The organization said that “given the rapid pace of change in our current health care market, it is prudent” for its board to be having discussions about mergers and other types of partnerships.
 
In other health care news, the Mayo Clinic said Tuesday that two of its hospitals—Saint Marys Hospital and Rochester Methodist Hospital—will transition to a single licensed hospital as of January 1, 2014. The combined hospital will operate under the name Mayo Clinic Hospital—Rochester.
 
Saint Marys and Rochester Methodist are both among Minnesota’s 10 largest hospitals based on operating revenue. The Mayo Clinic said that changes in the health care regulatory environment and changing consumer expectations prompted the combination.
 
Separate financial and operating data must be submitted for each hospital in reports to organizations such as the Centers for Medicare & Medicaid Services and The Joint Commission. The Mayo Clinic said the separate reports have resulted in “an incomplete and incorrect picture” of its care.
 
“We know patients seek information from government and nongovernment entities to obtain important quality and financial data,” Mayo Clinic President and CEO John Noseworthy said in a statement. “By continuing the integration we began in 1986, patients can have a more complete, accurate picture of the care we provide at Mayo Clinic.”