Minnesota Lawmakers have not hesitated to voice their concerns about the proposed merger between Fairview Health Services and Sanford Health, most recently drafting a new law that could ruin the $14 billion deal.
Governor Tim Walz (D) signed a bill on May 26 that requires that the University of Minnesota health care facilities not be controlled or owned by a for-profit or an outside entity. state unless the attorney general determines that the establishment serves the public interest. The law with immediate effect would apply to transactions formed before the bill was enacted.
The deal’s closing date, announced in November, has been delayed twice.
The University of Minnesota signed a joint clinical agreement with the school’s physician group and Fairview in 2018 to form M Health Fairview. Historic agreement to combine academic medicine and clinical trial innovation with public health care, reorganizing operations based on service routes instead of geography in an effort to transform delivery Care services. At the time, executives touted the new model as a step forward in reinventing healthcare.
Dr. Jakub Tolar, dean of the University of Minnesota School of Medicine and vice president of clinical affairs, said the mutual agreement had created great momentum for the school, but he was concerned some of that might be lost. if the merger takes place.
Beth Vessel, a partner at law firm Holland & Knight who focuses on healthcare antitrust issues, said the new law gives Walz more power to sue to prevent the merger. .
“It has the potential to slow things down even more,” Vessel said. “I think the only way to close the deal is to try to comply as quickly as possible with the notice requirements and answer AG’s remaining questions about the deal.”
The systems agreed to give 90 days notice before closing the transaction, a request from the attorney general’s office following a second postponement as Fairview addressed its financial challenges and relationship with the school. university.
Sanford, based in Sioux Falls, South Dakota, said in a statement that it remained confident of the significant benefits of the merger, was optimistic about ongoing discussions with the university and that they will comply with the new requirements of the law. Minneapolis-based Fairview said in a statement that the law would not prevent the proposed merger because the agreement meets its requirements.
Federal regulators did not oppose the merger.
Time can kill such combined efforts. For example, California-based Cottage Health and Sansum Clinic dropped their merger proposal in 2017 after battling regulatory concerns for years. In these cases, the costs of the merging parties often increase as it takes longer to go from letter of intent to close, which potentially reduces the value of the transaction.
The Minnesota law was designed and passed amid concerns that the university was once again excluded from discussion. Sanford and Fairview hope to merge in 2013, and then-Minnesota Attorney General Lori Swanson (D) said she was concerned that out-of-state Sanford would cut services in Minnesota and cause the hospital to preach. University teaching is at risk. Sanford pulled out of the deal when state lawmakers introduced a bill, which was never advanced, to delay or repeal it altogether.
“We were basically told… they would do this with or without us,” Tolar said. said, referring to the latest proposal. “My aim is not anti-Fairview, not anti-Sanford. It only favors Minnesota. … These horizontal mergers, what they usually do is create a monopoly, increase costs, increase burnout for doctors, reduce employment, reduce access and reduce services. That’s the opposite of what I’m after.”
Déjà vu
Fairview purchased the University of Minnesota Medical Center from the financially struggling school in 1997. Since then, M Health Fairview has grown into an organization of 3,300 providers covering more than 100 specialties, in addition to There are also research projects and extensive clinical trials.
The current deal is due to expire in 2026, but Tolar said now is the time to make a decision about the future of the health plan.
In many ways, this situation is a déjà vu experience from 10 years ago.
Legislation spurred by the latest merger effort would require most healthcare organizations to provide written notice to the attorney general and the health commissioner at least 60 days prior to the close of the transaction, grants Ellison the right to refuse any agreement that would substantially limit competition or create a monopoly. The parties must include any potential areas of expansion and plans to close facilities, reduce the workforce, or reduce or eliminate services, among other impacts related to the merger.
In addition, if an out-of-state entity acquires the university health system, the institution will have to repay any “charitable assets” it receives from the state, essentially guaranteeing any Tax relief will be returned to the general fund of Minnesota.
Sanctions or permits?
While Minnesota has strengthened its regulatory oversight, other states like North Carolina are loosening their grip.
On May 1, the state Senate passed a bill that exempts Chapel Hill-based UNC Health from federal and state antitrust lawsuits, allowing the system to merge with any other organization. Non-profit in any country. The House of Representatives is considering a bill that the Federal Trade Commission opposes. Greenville-based ECU Health would receive a similar exemption through a state Senate budget proposal.
In March, Mississippi Governor Tate Reeves (right) signed a bill that would protect hospital mergers and acquisitions from state antitrust scrutiny.
“Most states are taking action to protect hospitals and their transactions from,” said Barak Richman, a law professor at Duke University who focuses on healthcare antitrust policy. antitrust scrutiny. Minnesota’s law “seems to be bucking the trend and the state should be commended for it.”
Minnesotans were left to weigh the benefits and drawbacks of the proposed Sanford-Fairview binding. David Johnson, CEO of consulting firm 4sight Health, said university doctors would benefit from an expanded referral network.
“Why they’re fighting is out of my control, but there are issues of jurisdiction and control etc clearly going on here,” Johnson said. “It feels like there’s a giant game of chicken going on between Fairview and the University of Minnesota.”
Fairview’s agreement to operate the teaching hospital has benefited the university. But the dynamics are different this time because Fairview is a struggling company financially, he said.
The health system reported a net loss of $466.5 million in 2022, compared with a profit of $26.4 million the year before. Operating losses exceeded $315 million last year.
The University of Minnesota derives its influence from being a major employer and economic engine for the state. It also trains 70% of the state’s doctors.
“I just think you have the privilege and skewed view of this fact on display at the University of Minnesota, but it’s not just there. … [Academic medicine in general] Johnson is used to society picking tabs while it’s in control.
Adding to the complexity of the matter are the university’s expansion plans, including a $1 billion replacement hospital on the university’s East Coast campus—a project that will require public funding. The university, which will appoint a new interim chancellor on July 1, is also looking to acquire four facilities from Fairview: the University Medical Center that operates on the East and West Coasts, the Children’s Hospital Masonic and the Center for Clinics and Surgery.
