A judge has issued an early ruling in favor of the University of Minnesota in its bid to retain majority control over UCare, the Minneapolis-based health plan the U created in the 1980s.

The U’s Board of Regents sued UCare on Nov. 1 after learning of a plan to expand the number of members on the UCare board of directors so that members appointed by the U no longer make up the majority.

Losing the majority “could result in UCare altering its charter mission to the detriment of Minnesotans it is charged to serve, minimizing or even ending the University’s historical governance role, and jeopardizing the University’s right … to receive UCare’s net assets in the event of dissolution of UCare,” Medical School Dean Jakob Tolar wrote in an affidavit.

UCare has said it wants to add more members in order to “enhance the diversity and professional expertise of its board.” And any harm the U might suffer from that move would be “pure speculation and conjecture,” it said.

Hennepin County District Judge Laurie J. Miller, however, granted the U’s request for a temporary injunction Wednesday, writing that it merely preserves “the decades-long status quo” while the case is litigated, and that the U has a reasonable chance of winning the lawsuit.

“The Court finds that UCare’s goal of eliminating the University’s majority on UCare’s board, following decades in which the University has always maintained such a majority, poses a risk of irreparable harm to the University,” Miller wrote.

A spokesman for the U called Miller’s ruling a “significant early decision” in the case.

UCare said it’s still “confident of prevailing” in the lawsuit.

“UCare is evaluating this preliminary ruling with the determination that our organizational independence will be upheld in ensuing rulings to ensure we can best serve our members without outside interference. UCare disputes the University’s positions. A full review of the facts, which will occur in the next phases of litigation, will support UCare’s position,” a spokeswoman said.

Memorandum of understanding

According to the U’s complaint, its Department of Family Medicine created UCare in 1984 as a demonstration project for local Medicaid recipients, in part so that low-income patients could continue seeing their U-affiliated doctors. A nonprofit health maintenance organization (HMO) since 1987, it has over $1.2 billion in assets and $4.4 billion in yearly revenue, doing much of its business through state Medicaid contracts.

UCare reimburses the U through University of Minnesota Physicians for health care services provided to 640,000 UCare members in Minnesota and Wisconsin. UCare also makes charitable contributions to the U.

In 1997, before a medical school restructuring, UCare and the U entered a memorandum of understanding intended to memorialize their relationship. The U says that contract gave them the right to appoint a majority of seats on the UCare board of directors. It also said that if UCare dissolves, its assets will go to the U’s family medicine department.

The U says UCare recognized the need for the U’s approval as recently as 2017, when the U stopped an attempted merger. (The details are redacted in the court record, but UCare at the time was discussing a merger with Fairview Health Services.)

In recent years, however, UCare has pursued actions – again, the details are redacted in the court record – that the U said “appear directed at divorcing its reserves from its charter mission of serving Minnesota residents and the U.”

Separately, UCare noted to the court that it is proceeding with an expansion into Iowa over the U’s objections.

UCare has taken the position that the 1997 memorandum of agreement is unenforceable and did not guarantee the U majority control on the board indefinitely. In making that argument, UCare noted it no longer does things the contract calls for, such as provide the U quarterly financial statements or seek the U’s approval over UCare’s donations.

The judge was not persuaded.

“Instead of proving that the MOU is not a binding agreement as UCare contends, the Court finds that this statement is equally if not more likely to be viewed as evidence that UCare has not been complying with its obligations under the MOU,” Miller wrote.

Board members ‘threatened’

In order to reach the two-thirds threshold to expand the 15-person board, UCare would need the support of at least three directors appointed by the U.

Tolar has accused UCare of misleading board members about their obligations in hopes of winning enough votes to expand the board. The parties’ agreement says there is no conflict of interest between the U and UCare, but UCare allegedly has told its board members otherwise.

“UCare has gone so far as to threaten (U-appointed) members with criminal and civil penalties if they take into account the interests of the University in exercising their duties as Board members,” the U said in its complaint.

UCare said there’s no evidence anyone was threatened.

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