M Health Fairview-Sanford merger: Experts weigh in

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The proposed merger of Sanford Health and Minneapolis-based Fairview Health Services has drawn widespread reaction, including an investigation by Minnesota Attorney General Keith Ellison’s office, which regulates charities and reviews anti-trust concerns.

Combined, the two hospital networks would be one of the largest health systems in the nation. Sanford, based in Sioux Falls, S.D., is already the country’s largest provider of rural health care, and the health care giants have said joining forces could improve patient outcomes and the patient experience while providing more affordable care.

Critics have already deluged the attorney general’s office with concerns. The proposed merger has raised questions around reducing choice and competition, as well as moving Minnesota assets, including control of the state’s two teaching hospitals on the University of Minnesota campus, out of state.

Industry analysts say those fears are not unfounded.

“It’s hard for a system that has had no experience with a major teaching hospital to figure out how to manage it,” said Vivian Ho, a health economist at Rice University in Texas.

“You’re offering completely different services,” Ho said. “You’re helping the sickest patients with the most complicated care. It’s a whole different level of expertise and technology. Rural hospitals don’t have competition. They’re usually the only hospital in the market.”

Teaching hospitals, financial challenges

University of Minnesota officials issued a public statement in November noting the teaching hospitals educate the majority of Minnesota’s doctors, and questioning whether the Fairview-Sanford merger would respect “faculty independence,” as well as patient care, and how it would address Fairview’s financial challenges.

Fairview Health Services’ net operating loss last year reached $132 million, though it recently eliminated core services at St. Joseph’s Hospital and the former Bethesda Hospital in St. Paul, which accounted for a large part of the losses.

When merger talks surfaced between Sanford and Fairview in 2013, then-Gov. Mark Dayton suggested removing the teaching hospitals from the negotiations and giving them back to the U.

“The university health system is probably one of the most attractive things about Fairview to Sanford,” said Allan Baumgarten, a health care market analyst based in St. Louis Park. “Whether Fairview would be attractive to Sanford if the academic health center was separated out from the deal is an open question. My sense is not. I don’t give this (merger) better than a 50-50 chance of coming to completion.”

And if Sanford acquired the two teaching hospitals?

“I think Sanford is attracted to the prestige of a teaching hospital,” Baumgarten said, “but I think it would have less patience for how much that costs, and how much you have to scramble to find that money elsewhere in your system, or cut back on some of those key functions of the academic health center.”

Diverging cultures, from abortion to urban care

People exit M Health Fairview’s Midway Clinic on University Avenue in St. Paul on Nov. 15, 2022. (Ellie Roth / Pioneer Press)

Then there are questions about diverging corporate cultures and the potential impact on consumers in terms of both prices and services. For instance, the Fairview system, which includes 11 hospitals and more than 80 primary and specialty care clinics, is heavily unionized, and Sanford’s 47 medical centers are not.

The two health networks both provide assisted-living housing with senior care services, but their services diverge elsewhere. Sanford, as a matter of policy, does not offer elective abortions, which are banned by state law in South Dakota except in limited circumstances.

Fairview does not openly advertise abortion services beyond “Plan B” emergency contraception, but it does invite patient questions about abortion, and a spokesperson issued a written statement Thursday in support of doctor-patient autonomy and “all aspects of reproductive healthcare.”

“There are no changes contemplated to Fairview’s care policies — including on reproductive health and gender care — as a result of this merger,” said Fairview spokesperson Aimee Jordan, in the statement.

Abortion rights in Minnesota expanded this summer when a Ramsey County District Court judge struck down a series of restrictions, such as the state’s 24-hour mandatory waiting period and a requirement that both parents be notified before a minor has an abortion.

Some industry analysts have already begun to call the merger more of an acquisition, given that Sanford will be the new parent company, it has some 45,000 employees compared to Fairview’s 31,000, and Sanford’s chief executive officer Bill Gassen will oversee the entire merged company after one year of co-leading with Fairview president and CEO James Hereford.

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