Fairview, South Dakota-based Sanford Health announce merger plans – Twin Cities
A decade after merger talks collapsed amid intense scrutiny from Minnesota lawmakers and the state attorney general’s office, the Minneapolis-based Fairview Health Services hospital network has announced its intent to combine with Sioux Falls-based Sanford Health, the largest rural health system in the nation.
The new nonprofit health entity would be led by parent company Sanford Health and Sanford Health chief executive officer Bill Gassen, with Fairview chief executive officer James Hereford serving as co-CEO for a year post-merger.
Fairview officials, in a written statement, said each existing health network would otherwise keep individual boards and leadership in their individual markets.
The boards of the two nonprofit hospital networks have already approved a non-binding letter of intent that seeks to cement the merger in 2023, but uniting the two hospital systems would require an anti-trust review, among other regulatory hurdles and closing conditions.
As in 2013, the prospect of a merger raises key questions about the fate of two teaching hospitals affiliated with the University of Minnesota but owned and managed by Fairview Health Services.
‘A combined system’
The possibility of a fresh merger effort was first reported last week by the Dakota Scout, a newspaper covering South Dakota politics. Combined, the two health networks — employing 34,000 and 47,000 employees respectively — would form an entity larger in size than the Mayo Clinic.
“As a combined system, we can do more to expand access to complex and highly specialized care, utilize innovative technology and provide a broader range of virtual services, unlock greater research capabilities and transform the care delivery
experience to ensure every patient receives the best care no matter where they live,” said Gassen, in the written statement.
Officials with both hospital networks noted that M Health Fairview’s urban footprint and expertise in medical research and clinical trials complements Sanford’s focus on rural care.
“With Sanford Health, Fairview Health Services has found a partner that shares our midwestern values and our commitment to affordable, accessible and equitable care delivery,” said Hereford, in the written statement. He said “complementary capabilities” would make the health networks “uniquely positioned to improve clinical outcomes, develop new care delivery models, expand opportunities for employees and clinicians across our broader operational footprint and apply our combined resources” to positively impact patients and communities.
Urban, rural footprint
Sanford, South Dakota’s largest private employer, oversees 47 medical centers and 224 clinics, including walk-in clinics, eye clinics, hospice care and other specialty centers in Bemidji, East Grand Forks, Cass Lake, Thief River Falls and other rural corners of northern Minnesota, as well as Fargo and Bismarck in North Dakota.
The health system also maintains a handful of clinics in Iowa, Nebraska, Oklahoma, Oregon and California. In October, Glassen — who has led Sanford since November 2020 — announced layoffs of an undisclosed number of non-clinical staff, even as the health network faces a shortage of medical providers.
Through M Health Fairview — a contractual partnership between the University of Minnesota, University of Minnesota Physicians and Fairview Health Services — Fairview maintains 12 hospitals and medical centers, most of them in the Twin Cities, as well as a wide network of clinics.
In recent years, Fairview has taken cost-cutting steps to reduce its own financial exposure, shuttering the state’s first hospital — St. Joseph’s Hospital in downtown St. Paul, which had been hemorrhaging money — and repositioning the location as a wellness hub. The “Center for Community Health Equity” is now home to a federally-qualified primary care clinic run by Minnesota Community Care, a food packing effort and other health services.
Led by Hereford since 2016, the health network also closed the Bethesda Rehabilitation Hospital near downtown St. Paul, which is poised to become a 144-inpatient bed, stand-alone mental health center.
While Fairview will retain some ownership, the mental health center will be largely controlled by Tennessee-based Acadia Healthcare, a publicly-traded company gaining a foothold in a nonprofit health environment.
Why 2013 merger talks dissolved
In 2013, merger talks between Sanford and Fairview dissolved following public hearings hosted by then-Minnesota Attorney General Lori Swanson. Critics argued for keeping local control of the teaching hospitals used by the University of Minnesota, and Democrats in the state House introduced bills to block transferring those medical centers from Fairview to an out-of-state entity.
At the time, then-Gov. Mark Dayton supported a plan for the university to take over the entire Fairview system, or at least its two Minnesota teaching hospitals — the University of Minnesota Medical Center and the University of Minnesota Amplatz Children’s Hospital. Fairview bought the U’s East Bank medical school hospital in 1997.
Since then, a partnership between the University of Minnesota, University of Minnesota Physicians and Fairview Health Services created the M Health brand in 2013, followed by the M Health Fairview brand in 2018. The organizational structure approved by the University of Minnesota’s board of regents defines responsibilities for each entity but stops short of a formal merger.
During the 2013 talks, Swanson expressed concern that merging Fairview and Sanford would generate business for firms related to billionaire philanthropist T. Denny Sanford.
Born in St. Paul and educated at the University of Minnesota, Sanford, now 86, is the founder of First Premier Bank, a provider of subprime credit cards that gained notoriety for offering high interest rates to consumers with low credit scores.
Sanford does not sit on the board of the hospital network that bears his name, but he remains chairman of First Premier Bank’s holding corporation, United National.
In 2019, according to the Dakota Scout, Sanford was set to merge with Des Moines-based UnityPoint, but UnityPoint’s board pulled out of the deal. A year later, Sanford’s announced merger plans with Intermountain Healthcare of Salt Lake City, Utah, also dissolved.