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Fairview Health offers to sell teaching hospital to proceed with $14 billion Sanford merger

by John R. Fischer, Senior Reporter | March 10, 2023
Business Affairs
University of Minnesota Medical Center - East Bank (photo courtesy of M Health Fairview)
Fairview Health is willing to sell its teaching hospital to the University of Minnesota to move ahead with its $14 billion merger with Sanford Health, in South Dakota.

The University of Minnesota Medical Center is made up of the university's West and East Bank hospitals in Minneapolis and trains 70% of the state's doctors. The merger would put Sanford, an out-of-state provider, in charge of it, to the chagrin of the university, according to the Star Tribune.

"We support and formally endorse the University's five-point plan, as we currently understand it, to include the preliminary step of acquiring these assets," said Fairview CEO James Hereford and Sanford CEO Bill Gassen in a letter.

The plan in question is a $950 million one proposed by the university, which includes a $300 million acquisition of the East and West Bank hospitals, including the Masonic Children's Hospital, reported the Star Tribune.

The university thanked Gassen and Hereford for offering to sell the teaching hospital. "It is clear that you have a deeper understanding now of why we are opposed to the merger as it is contemplated," said Myron Frans, a University of Minnesota senior vice president of finance and operations, and Dr. Jakub Tolar, dean of the medical school, in an email.

The two, however, have not yet reached a consensus on price, with Fairview expecting it to be higher than the one proposed by the university, or how the transfer will take place.

Back and forth with the university
Fairview purchased the East Bank hospital from the university in 1997 for $87.5 million and merged it with the Riverside hospital on the West Bank. At the time, the university was struggling financially because of its restrictive network and an increase in managed healthcare plans.

It has since said it is in a better position to run the hospital, as it has more faculty clinicians who can refer patients to its hospitals and receives compensation from the state to train doctors.

Because Fairview runs all its hospitals under the M Health Fairview brand, it refers patients to the university through a broad network of clinics and hospitals. Following the merger, the university is seeking clinical partnerships with Fairview or other providers to preserve its patient referral numbers.

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