Sanford, Fairview, has revived the merger debate a decade after the last attempt failed

A mega-merger of Sanford and Fairview health systems is back on the table in Minnesota a decade after state political concerns derailed a similar deal.

Leaders of Sioux Falls-based Sanford and Minneapolis-based Fairview signed nonbinding letters of intent to merge and publicly acknowledged the talks Tuesday, arguing the deal will inspire innovation, improve patient care and protect them from growing economic challenges.

If successful, the combined system would be based in Sioux Falls and would be one of the largest health care providers in the Upper Midwest, with 78,000 employees and more than 50 hospitals, including the Minnesota Medical Center.

Sanford and Fairview still need to convince regulators and state lawmakers of the merits of the deal, while negotiating details with the U.S. to avoid disputes like those that doomed the merger 10 years ago.

“I would just say that 2013, while it was only ten years ago, is forever. Different conditions. Different people. Different organizations. Different relationships,” said James Hereford, chief executive of Fairview. “And I think all those differences dictate a very different outcome.”

Sanford operates 47 medical centers in the Dakotas and western Minnesota, while Fairview’s 10 inpatient hospitals are centered around the Twin Cities.

Sanford Health will receive the top fee as the parent company, but will retain “a very substantial corporate presence” in the Twin Cities, Sanford CEO Bill Gassen said.

Hospitals across the country have suffered from the pandemic, which has led to a lack of funding and staff. Gassen said the merger was about more than survival; it will combine the strengths of the two health systems with “similar missions,” expanding equal access to in-person and virtual care.

“Doing it just to grow it just won’t work,” Gassen said.

Both boards approved the negotiations. Pending regulatory reviews, the two sides aim to close the deal in 2023.

Many issues remain unresolved, including whether to keep the M Health Fairview brand for many of Fairview’s operations and how to marry the two systems’ operating models. Fairview employs some of its own staff, but also employs affiliated hospital nurses and relies on U faculty physicians with its own independent group practices.

The Minnesota Nurses Association released a statement Tuesday, calling for a “seat at the table” to ensure negotiations take into account the needs of nurses and patients.

The U sold its teaching hospital to Fairview in the 1990s, a landmark deal that tied the health system closely to the university’s health mission.

Minnesota’s former attorney general and other opponents in 2013 rejected the idea of ​​an out-of-state organization running the U hospital, the taxpayer-supported training site for most of the state’s doctors. State lawmakers introduced legislation at the time to block the move, and others suggested the university take over Fairview instead.

Minnesota Attorney General Keith Ellison is aware of the recent negotiations and plans to investigate the merger to make sure it complies with laws governing charities and nonprofits, spokesman John Stiles said. “We are also evaluating potential impacts on competition with our state and federal partners.”

Myron France, US’s senior vice president for finance and operations, said the university was informed of the new merger talks in August and was involved in the “very early stages of the discussion.”

The U receives multimillion-dollar support from Fairview each year for teaching, research and health care, and needs to know how the merger will affect that deal along with Fairview’s bottom line, Franz said.

“What are Fairview and Sanford’s plans to fix Fairview’s financial problems?” he said.

Neither Gassen nor Hereford were in charge during the 2013 merger talks. They rekindled the idea over lunch at a health convention in late May.

Founded in 1906, Fairview operates more than 80 clinics, 36 pharmacies and popular suburban hospitals in Burnsville, Edina, Maplewood and Woodbury. Fairview’s emergency department responds to more than 40,000 emergency calls a year, and its Ebenezer unit operates four long-term care and two transitional care facilities.

Fairview was Minnesota’s fourth-largest nonprofit group in 2021, with about $6.43 billion in revenue and 31,000 employees, according to a Star Tribune analysis. Of the 12 largest nonprofits in the state last year, only Fairview was losing money on operations β€” a trend that has continued this year. Some competing health systems, such as Allina and North Memorial, also saw their finances deteriorate in the first half of this year.

Hereford said the Sanford merger in recent years has seen St. Joseph Hospital and Bethesda Hospital campus closings were not caused by Fairview’s relatively poor financial performance.

“We have to be able to drive innovation and drive new approaches,” Hereford said. “And I think what’s really different at this point is that the combination of the two organizations brings such important and complementary core competencies to do just that.”

Sanford Health’s origins date back to the opening of a hospital in Sioux Falls in 1894. It was later named after businessman and philanthropist T. Denny Sanford after his $400 million charitable gift in 2007.

With approximately 45,000 employees, Sanford’s largest hospitals are located in Sioux Falls, as well as in Fargo and Bismarck, ND Sanford Bemidji Medical Center is the health system’s largest hospital in Minnesota, with 19 hospitals, 70 clinics and more than 7,000 employees.

Sanford Health made money from operations last year, while earning slightly more revenue ($7.14 billion) than Fairview. It operates a health insurance plan as well as a network of senior care facilities.

Sanford recently failed to complete its proposed mergers with Utah-based Intermountain Healthcare and Iowa-based UnityPoint Health.

Sanford walked away from the Intermountain merger, Gassen said, after he became CEO and decided with his board that it wouldn’t lead to significant improvements in health care. Fairview offers more opportunities, he added, including a partnership with Sanford’s initiative to increase virtual care in rural areas.

In 2021, a new virtual care center was announced as part of T. Denny Sanford’s $350 million philanthropic gift. Its total revenue to the healthcare system over the years is about $1.5 billion.

“The challenges that healthcare has faced in the last few years, everything from the pandemic to some of the economic challenges we face today, probably haven’t gone unnoticed,” Gassen said. “The opportunity to bring together two organizations with extremely similar missions … is an incredible opportunity that we simply do not want to miss.”

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