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Possible Sanford-Fairview Health merger faces scrutiny from Minnesota attorney general

Minnesota Attorney General Lori Swanson said she will hold hearings on a potential “takeover” of Twin Cities-based Fairview Health. Special to The Forum

FARGO – A possible merger between Sanford Health and Twin Cities-based Fairview Health Services faces scrutiny from the Minnesota attorney general.

Attorney General Lori Swanson said she will hold hearings beginning April 7 to investigate what she characterized as a potential “takeover” of Fairview Health, whose locations include the University of Minnesota Medical Center.

“It raises a number of regulatory concerns,” Swanson said, describing Sanford as an “out-of-state” entity while noting that Fairview is a century-old charitable organization, and the University of Minnesota Medical School is a treasured state asset.

Both Sanford, based in Fargo and Sioux Falls, S.D., and Fairview said exploratory talks are in the early stages, and no agreements have been made.

“It is an unfortunate description of these timely and well-intended talks as some kind of ‘takeover’ or acquisition,” Kelby Krabbenhoft, Sanford’s chief executive officer, said in a statement.

Krabbenhoft added that he hopes the “complex and significant process” of merging or combining the two similarly sized organizations will begin soon, and chafed at suggestions Sanford is an out-of-state suitor.

Sanford, chartered in North Dakota, has more than $1 billion in revenues in South Dakota and more than 6,000 employees in Minnesota, Krabbenhoft said.

“If the merger of these two organizations found its new charter in Minnesota, it would not diminish the historic Sanford and might actually enhance service for all,” he added.

Fairview issued a statement acknowledging discussions with Sanford are taking place.

“Fairview’s Board of Directors is exploring whether a merger or other type of partnership makes sense,” the statement said.

“Our talks with Sanford Health are in the very early stages, which is why there has not been broad public discussion. No agreements or formal commitments have been made.

“And nothing will move forward unless we and our partners at the University of Minnesota believe there is merit to a merger,” the Fairview statement said.

No comment was available from the University of Minnesota Medical School, which has been affiliated with Fairview since 1997.

Fairview said its board and senior management are “gathering information from many sources,” and will continue its dialogue with Swanson.

In Minnesota, the attorney general regulates charitable institutions. Sanford and Fairview are nonprofit health systems.

Swanson said the Fairview board is scheduled to meet for a retreat on April 8, and she is concerned it could vote to join Sanford Health.

“Fairview is an integral part of our health care system and exists because of 100 years of goodwill, generosity and financial support of the people of Minnesota,” Swanson said.

“There should be a significant public dialogue about any potential transfer of control of this century-old Minnesota charitable institution to Sanford Health of South Dakota.”

Although Fairview announced almost a year ago that it would embark on a search for a new chief executive officer, Swanson’s office has learned that no search has yet been undertaken.

Sanford Health, which in 2009 merged with Fargo-based MeritCare, has 35 hospitals, 140 clinic locations and has more than 26,000 employees.

Fairview Health, one of Minnesota’s largest health systems, operates nine medical centers and employs 22,000.

Both organizations have about $3 billion in net revenues and have complementary service areas, with Sanford covering western Minnesota, Iowa, North Dakota and South Dakota, while Fairview serves eastern and northeastern Minnesota.

“There are a number of health care systems in our region operating in more than one state,” said Wendy Burt, vice president of communications for the Minnesota Hospital Association.

They include the Mayo Clinic, Health Partners, Essentia Health and Allina.

Fairview and Sanford have hospitals belonging to the Minnesota Hospital Association, and the organization has no direct knowledge of a possible merger, and no official position, Burt said.

“They’re private entities making private business decisions,” she said. “I think it’s too soon to talk about what a new map might look like.”

Patrick Springer, INFORUM

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