As UMN health vision gets legislative hearing, Fairview says it will sell hospitals to facilitate Sanford merger – Twin Cities

Ahead of two legislative hearings Tuesday, Sanford Health and Fairview Health Services leaders said they support selling key buildings to the University of Minnesota as part of the U’s larger vision for academic health, but the price of those facilities figures to be a major sticking point.

Soon after Sanford and Fairview publicly announced in November that they were working toward a merger, the U, which works closely with Fairview under the M Health brand, said a merger might not be in the public interest.

But in January, the U announced that it could support the merger if Fairview first would transfer to the U ownership of its teaching hospital, with locations on the east and west banks of the U’s Twin Cities campus, as well as the nearby Masonic Children’s Hospital and the clinic and surgery center that opened in 2016.

Those acquisitions are part of the U’s long-term vision for its academic health system, including a new hospital on the Twin Cities campus. That plan, which has an initial $950 million price tag, received its first legislative hearing Tuesday morning.

In letters exchanged Monday, Sanford and Fairview leaders Bill Gassen and James Hereford told U officials they “support and formally endorse the University’s five-point plan, as we currently understand it, to include the preliminary step of acquiring these assets. This is consistent with our long-standing position that Fairview and the combined system are indeed willing to sell these assets to the University to support its mission of research, education, and public health.”

The U’s Myron Frans, senior vice president for finance and operations, and Medical School Dean Jakub Tolar said in response, “It is clear that you have a deeper understanding now of why we are opposed to the merger as it is contemplated. Your support of the holistic vision is a good step forward.”

Sale or transfer?

However, the parties continue to use different language around the building acquisitions.

Sanford and Fairview consider them a “sale,” and Monday’s letter requested an agreement that would identify “third-party financial advisors to determine the value of the assets.”

The U is calling it a “transfer of assets” between charitable organizations, which implies a much lower price tag: $300 million.

Frans on Tuesday explained the U’s position to state lawmakers:

“We do not believe that there’s a fair market value analysis that goes to these assets. There’s a charitable asset evaluation about where they belong to support the academic health system, and … we believe they’re better governed under the University of Minnesota,” not the South Dakota-based Sanford, he said.

Fairview says it’s invested $911 million into the facilities the U wants since Fairview acquired the U’s East Bank teaching hospital in 1997.

Frans told lawmakers that state and philanthrophic money has gone into those facilities, too.

The U’s letter also reiterated concerns about how a merged health system of Sanford and Minneapolis-based Fairview would operate.

“The lack of clarity about the governance and operating model of the contemplated combined system remains a concern. It will be essential that these issues are resolved as a part of the next phase of this work,” Frans and Tolar wrote.

Former Govs. Mark Dayton, a Democrat, and Tim Pawlenty, a Republican, are expected to weigh in on the U’s behalf regarding those concerns at a legislative hearing Tuesday evening.

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