The Fairview-Sanford Merger Revisited
Sanford operates a hospital in Bemidji and a number of clinics in western Minnesota Sanford Health

The Fairview-Sanford Merger Revisited

Fairview's merger with Sanford is every Minnesotan's business.

The Twin Cities are the 15th-largest metro region in the country, yet we boast the world-class medical facilities of a top 10 or top five region—notably the University of Minnesota hospitals, Mayo, and Allina’s Abbott Northwestern Hospital. This wealth of resources is both a benefit and a curse in parsing the potential merger of Fairview, which owns the U’s hospitals, with Sanford Health of South Dakota, because it’s easy to take our many advantages for granted.

People are understandably asking how much money and effort taxpayers need to exert to protect the U from Sanford when there’s so much redundancy in quality available to consumers. The answer: probably a lot. For those of us who rarely interact with the U’s hospitals, the value they present to the state is perhaps not well understood. For the treatment of many illnesses and diseases, they are the only game in town. (Remember, Mayo has to accept you as a patient, and even if they do, many people’s insurance doesn’t cover treatment at Mayo.) And the university medical centers are good at what they do. I speak from experience within my own family.

At its core, Fairview is looking for a merger partner for the simple reason that it can’t stop losing money. Why that is, is beyond my pay grade, though Allina and HealthPartners have historically generated operating income for providing similar types of care. (Fairview would contend it’s the nature of the U’s operations that keep it in red ink.) Fairview’s suitor, Sanford, is great at generating operating income and believes it can gain the stature and heft it covets while rightsizing Fairview in a way that stops the bleeding.

Sanford has no track record running a system of teaching hospitals at a land grant university. The U’s hospitals would be a feather in Sanford’s cap, but Sanford will still have Fairview’s network of clinics and other hospitals (Southdale, Ridges, etc.) to provide scale if the U goes its own way.

The merger offers little apparent benefit to the U; it is a state asset, not a corporate player. It trains the majority of our doctors, dentists, and veterinarians. It is responsible, directly or indirectly, for much of our med-tech and medical innovation. It’s simply not worth the risk of putting these assets under an out-of-state entity.

Figuring out what the U’s care system looks like as an independent, how it generates revenue, what its capital needs are, is a massive undertaking, and the Fairview/Sanford merger is playing out on a timeline incompatible with such consideration. The Legislature, Fairview, and the U are being asked to structure a merger/severance without adequate due diligence and planning.

“The merger offers little apparent benefit to the U….[which] trains the majority of our doctors, dentists, and veterinarians. It is responsible, directly or indirectly, for much of our med-tech and medical innovation.”

Spinning off the U’s hospitals presents certain urgent questions, even if we decide that
$1 billion in taxpayer money is a fair price to pay to extricate the U from Fairview/Sanford. How does the U as a medical provider make it? Most of the profit in health care is in bread-and-butter medicine—screening tests, routine care, sports medicine. That care generates margins that subsidize specialized care, complex surgeries, and management of rare disease processes. Many think the U will need to remain networked with Fairview, even if it’s a shotgun marriage.

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A couple generations ago, Mayo was a one-off entity like the U. The two are hardly analogous, but both were known for hospital care of complex and rare illnesses. Over time, Mayo has expanded. Its care network now covers 44 communities in Minnesota and Wisconsin, operating local hospitals and providing bread-and-butter services. It created care systems in Jacksonville, Florida, and Scottsdale, Arizona, to take advantage of growth opportunities in rapidly growing regions that were not known for world-class medical care.

If taxpayers buy the U’s medical facilities back from Fairview (some are modern, like Masonic Children’s Hospital and the new Surgery Center), what does that do to the long-anticipated effort to replace the U’s primary hospital, which is aging and lacks modern patient amenities? The U has an amazing medical fundraising machine, but it’s an important question.

I’m not normally a huge Minnesota parochialist, trumpeting the idea that we do everything better here. But it is neither overstatement nor parochialism to suggest that destabilizing the U to benefit Fairview presents an unacceptable trade-off to a sector that drives the state’s larger economy and quality of life.

If you’re not currently engaged on this complex controversy, I’d urge you to pay attention.