Sanford, U of M End Pursuit of Fairview Takeover
Discussions regarding a takeover of Fairview Health Services, either by Sanford Health or the University of Minnesota, came to an abrupt end on Wednesday—a development that comes after a whirlwind week in which various roadblocks and many questions about the possible partnerships had arisen.
In a Wednesday statement, Kelby K. Krabbenhoft, the CEO of Sioux Falls, South Dakota-based Sanford Health, announced that Sanford would withdraw from talks about a possible merger or acquisition—and Minneapolis-based Fairview announced that similar discussions with the U of M have also ended.
“Sanford Health has a philosophical policy of ‘only going where we are invited,’ and it seems as though the incredibly positive beginnings to discussions of the merger of Fairview Health and Sanford Health has turned into a situation that finds us being unwelcome by some interested parties and key stakeholders of our proposed merger partner,” Krabbenhoft said. “It is inconceivable and unacceptable to me that we would ever propose a merger without the affirmation of these parties.”
In response, Fairview issued its own statement in which Chairman and Interim CEO Chuck Mooty said: “We understand why they would choose to step back at this time, but the news comes as a disappointment.”
Mooty said that the possibility of a U of M takeover is no longer on the table either. However, Fairview and the U will instead work to strengthen their existing partnership.
“Clearly, we need to ensure strategic alignment between us before we can advance new ideas for the future,” Mooty said in a statement. “However, we feel it is not the time to discuss any proposal that involves the university acquiring Fairview.”
Fairview owns seven hospitals and operates more than 40 primary care clinics. It has controlled the University of Minnesota Medical Center, a research and teaching hospital that trains about 70 percent of Minnesota doctors, since 1997.
The recent developments force Fairview to go back to the drawing board as far as a merger or acquisition is concerned. The organization’s exploration comes at a time when the health care industry is undergoing major changes and some consolidation. Two weeks ago, when Fairview confirmed that it had been in discussions with Sanford, it said that its board had “a responsibility to ensure the organization’s long-term sustainability,” adding: “Given the rapid pace of change in our current health care market, it is prudent for our board to be having these kinds of discussions.”
Meanwhile, Fairview said Wednesday that it will move forward in finding a new CEO. Mooty has served as interim CEO since August, when former CEO Mark Eustis left after Fairview’s board voted not to renew his contract. His retirement came in the wake of a controversy involving Chicago-based Accretive Health, LLC, which has been accused of using overly aggressive and sometimes illegal methods of collecting funds from Fairview patients.
Discussions between Fairview and Sanford came to light in late March when Attorney General Lori Swanson said that her office had learned about “very serious discussions” taking place between Fairview and Sanford and outlined a number of concerns. Then about a week ago, news surfaced that the U of M in late January had proposed its own takeover of Fairview.
Swanson pressed for information Sunday at a hearing at the state Capitol—which provided the first opportunity for public input on the possible merger.
Among other things, she questioned whether discussions surrounding a merger had been inappropriately intertwined with conversations about U of M efforts to raise money for its athletics department. (In response, the U’s general counsel, reportedly said Sunday that the U of M had suspended discussions with donors linked to the potential Fairview-Sanford merger until the future of the University of Minnesota Medical Center was decided.)
Swanson also voiced concerns about Fairview—a Minnesota charitable trust that has received public and private gifts over the years and is exempt from various taxes—being taken over by an out-of-state company. Additionally, she questioned the ties that a Sanford-controlled Fairview would have to the business interests of retired banker T. Denny Sanford, a wealthy U of M alumnus who is now a major donor to the Golden Gopher Athletic Fund. Sanford Health was created in 2007 thanks to a $400 million gift from him.
Some state lawmakers appeared to share Swanson’s concerns: According to a Star Tribune report, several legislators on Monday sponsored bills that they claimed would put a moratorium on the sale of U of M hospitals to any out-of-state company—a move that would have halted a Sanford takeover. Additionally, the chair of the House Commerce Committee called on Fairview executives to appear before a legislative hearing next week to discuss their plans.