Key state lawmakers joined Minnesota Attorney General Keith Ellison in encouraging leaders of Fairview Health Services and Sanford Health to ditch a scheduled March 31 merger date for the two nonprofit health entities, which operate more than 58 hospitals and medical centers between them, to allow more time for legislative review.

“This is one of the most significant transactions related to medical care in Minnesota in many, many years,” said Rep. Zack Stephenson, DFL-Coon Rapids, addressing the chief executive officers of both medical networks. “We have to ensure that Minnesotans’ access to medical care is not restricted, and costs are not driven up. Looking at comparable transactions around the country, that’s not at all a given.”

Added state Rep. Tina Liebling, DFL-Rochester, “What’s the rush?”

Stephenson, chair of the House Commerce Finance and Policy Committee, and Liebling, chair of the Health Policy and Finance Committee, hosted a joint legislative hearing Monday on the proposed merger of Sioux Falls-based Sanford and Minneapolis-based Fairview, a proposal that has drawn growing opposition from organized labor and leaders of the University of Minnesota and its medical school.

‘Hospitals continue to close’

Seeking to allay lawmaker concerns that mergers can raise costs and insurance premiums by reducing competition, Bill Gassen, CEO of Sanford Health, noted that Sanford and Fairview currently do not operate hospitals within 75 miles of each other.

“Hospitals continue to close. They are not sustainable on their own,” Gassen said. “Being part of a system, they have more of a chance.”

Monday’s wide-ranging hearing marked the first time state lawmakers have begun to weigh in publicly on the merger, which could have deep impacts on the U of M’s on-campus teaching hospitals. In advance of the merger, university officials have called for major state financial assistance to help them buy back the medical center, which educates some 70% of the doctors and nurses in Minnesota and was sold to Fairview in 1997.

“Academic medicine takes more time and a different approach,” said Myron Frans, the U’s chief operations officer, addressing lawmakers Monday. “The university, not a healthcare facility, we believe, must be in charge of those facilities.”

Also Monday, Rep. Robert Bierman, DFL-Apple Valley, introduced a bill aimed at creating a formal legislative hearing and review process for the proposed merger. That proposed legislation will be taken up by the House commerce committee on Wednesday afternoon.

Rep. Duane Quam, R-Byron, said he wanted to hear more about the underlying factors impacting Fairview’s uncertain financial footing, especially in light of the fact that Sanford and Fairview attempted a thwarted merger a decade ago.

“I keep hearing about symptoms,” said Quam, blaming excessive government regulation for mergers in the farm and agricultural sector. “It would be nice to understand the drivers. Ten years ago you were looking to do the same thing.”

Moody’s Fairview downgrade

The CEOs of the two medical networks emphasized that a combined entity would leverage resources, allowing new investments in tele-health, artificial intelligence and precision medical care with costs shared across the two systems. It could also stabilize Fairview’s shaky financial status, they said.

On Jan. 18, Moody’s Investors Service, a key credit rating agency, announced it had downgraded Fairview’s bond rating to “Baa1” in response to “weak operating performance, which began prior to the pandemic but worsened in 2022 … (and) will be difficult to reverse” in light of labor costs and “soft inpatient volume trends.”

The credit agency also pointed to concerns around inflation and annual payments to the University of Minnesota.

Launched in 2019, the “M Health Fairview” academic health system partnership between the U, the University of Minnesota Physicians and Fairview Health Services is under contract to run through Dec. 31, 2026.

The two CEOs emphasized that despite critics’ fears to the contrary, existing abortion services and gender-affirming care for trans and non-binary patients at Fairview facilities would continue uninterrupted.

“We heard concerns about access to gender affirming and comprehensive reproductive healthcare,” Hereford said. “Both Fairview and Sanford are committed to ensuring the independence of our medical staff.”

Ongoing review

Renewing his recent call for a delay to the scheduled March 31 merger date, Ellison said he has dedicated 12 staff members to an ongoing review of charity regulations, anti-trust rules and other potential public impacts related to the transaction.

His office is scheduled to host the last of four public input sessions from 6 to 8 p.m. Tuesday at the Reif Performing Arts Center in Grand Rapids.

Others who testified Monday included Jakub Tolar, dean of the U of M Medical School, and multiple nurses, representatives of organized labor and a medical student.

Related Articles

• Health | Dusk-to-dawn arts festival Northern Spark has ended after 15 years

• Health | Photos: Winners of the snow and ice sculpting contest for the 2023 St. Paul Winter Carnival

• Health | More than 100 brave frigid weather at the governor’s mansion in St. Paul to protest Tyre Nichols death

• Health | Letters: Overreacting to sensitive issues on campus is nothing new

• Health | St. Paul Mayor Carter, city council poised to approve $2.6M home-buying ‘Inheritance Fund’