Minnesota Lawmakers haven’t been shy about their concerns over the proposed merger between Fairview Health Services and Sanford Health, recently drafting new legislation that could scuttle the $14 billion deal.
Village. Tim Walz (D) signed a bill on May 26 that states that University of Minnesota health facilities cannot be controlled or owned by a for-profit entity or entity from outside the state, unless the Attorney General does not determine whether it is in the public interest. , The law, which comes into force immediately, will apply to transactions made prior to the enactment of the bill.
The deadline for the deal announced in November has been delayed twice.
University of Minnesota entered into a joint clinical agreement With the University Physicians Group and Fairview in 2018 to form M Health Fairview. The landmark deal combined academic medicine and clinical trial innovation with community healthcare, reorganized operations based on service lines rather than geography in an effort to transform care delivery. At the time, officials described the new model as a step forward in strengthening healthcare.
Dr. Jacob Tolar, dean of the University of Minnesota Medical School and vice president for clinical affairs, said the combined agreement has created a lot of momentum for the school, but he worries some of it could be lost if the merger goes through.
The new law gives Walz more latitude in bringing litigation intended to block the merger, said Beth Wessel, a partner at the law firm Holland & Knight, who focuses on healthcare antitrust issues.
“It’s likely to slow things down even more,” Wessel said. “I think the only way to complete the deal would be to try to comply as quickly as possible with the notice requirements and answer the AG’s remaining questions about the deal.”
The systems agreed to give 90-days notice before closing the transaction, following a second postponement a request from the attorney general’s office as Fairview addresses financial challenges and its relationship with the university.
Sanford, based in Sioux Falls, South Dakota, said in a statement that it is confident in the significant benefits of the merger, is optimistic about ongoing discussions with the university and that it will comply with the new requirements of the law. Minneapolis-based Fairview said in a statement that the law would not block the proposed merger because the deal met its requirements.
Federal regulators have not objected to the merger.
Time can kill such attempts at combination. For example, the California-based Cottage Health and Sunsum Clinic called off their proposed merger in 2017 After battling regulatory concerns for years. In these cases, the merging parties’ expenses typically take longer to accrue from letter of intent to closing, potentially reducing the value of the transaction.
The Minnesota law was designed and passed amid concern from the university that it was once again being left out of discussions. Sanford and Fairview were expected to merge in 2013, and then-Minnesota Attorney General Lori Swanson (D) said she was concerned that out-of-state Sanford would cut into services in Minnesota and jeopardize the university’s teaching hospital. Sanford pulled out of the deal when state legislators introduced a bill, which never moved forward, to delay or eliminate it entirely.
“We were told essentially that … they would do it with or without us,” Toler Citing the latest proposal, he said. “My goal is not to be anti-Fairview, not to be anti-Sanford. It’s just pro-Minnesota. … These horizontal mergers, what they usually do is they create monopolies, they raise prices, they increase the prices of physicians. They increase burnout, they reduce jobs, reduce access and reduce facilities. Which is the opposite of what I’m looking for.
deja vu
Fairview purchased the University of Minnesota Medical Center from the financially troubled school in 1997. M Health Fairview has grown into an organization with 3,300 providers covering more than 100 specialties, in addition to extensive research projects and clinical trials.
The current agreement expires in 2026, but Tolar said now is the time to make a decision about the future of the Medicare program.
In many ways, the situation is similar to the old experience 10 years ago.
The legislation inspired by the latest merger effort will require most healthcare entities to provide at least a written notice to the attorney general and commissioner of health. 60 days prior to the closing of the transaction, giving Alison the right to cancel any deal that would substantially restrict competition or create a monopoly. The parties must include any potential areas of expansion and plans to close facilities, reduce the workforce or cut or eliminate services, among other effects related to the merger.
In addition, if an out-of-state entity acquires a university health system, the organization must repay any “charitable assets” it receives from the state, essentially ensuring that any tax breaks are paid back to Minnesota. be done in the general fund of
Punishment or Permit?
While Minnesota has tightened its regulatory oversight, other states like North Carolina are loosening their grip.
On May 1, the state Senate passed a bill that would exempt Chapel Hill-based UNC Health from federal and state antitrust lawsuits, allowing the system to merge with any domestic, non-profit entity. The State House is reviewing the bill, which the Federal Trade Commission opposes. Greenville-based ECU Health would be granted a similar exemption through a state Senate budget resolution.
In March, Mississippi Gov. Tate Reeves (R) signed a bill that would protect hospital mergers and acquisitions from state antitrust oversight.
“Most states are working to protect hospitals and hospital transactions from antitrust scrutiny,” said Barak Richman, a law professor at Duke University. The Minnesota law “seems to buck the trend, and the state should be commended for that.”
Minnesotans are left to weigh the benefits and drawbacks of the proposed Sanford-Fairview tie up. David Johnson, CEO of advisory firm 4sight Health, said university physicians would benefit from an expanded referral network.
“Why they would fight is beyond me, but there are issues relating to jurisdiction and control and that are obviously at play here,” Johnson said. “It looks 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 been beneficial to the university. But the dynamics are different this time because Fairview is struggling financially, he said.
The health system posted a net loss of $466.5 million in 2022, compared to a profit of $26.4 million in the previous year. Operating losses exceeded $315 million last year.
The University of Minnesota derives its influence from being a large employer and economic engine for the state. It also trains 70% of the state’s physicians.
“I think you’re privileged and have this distorted view of reality displayed at the University of Minnesota, but it just doesn’t belong there. … [Academic medicine in general] It is used to pick up the tab while society gains control,” Johnson said.
Adding to the complexity of the issue are the university’s expansion plans, which include a $1 billion replacement hospital on its East Bank campus – a project that will require public funding. The university, which will install a new interim president on July 1, wants to buy back four facilities from Fairview: University Medical Center East and West Bank Operations, Masonic Children’s Hospital and Clinic and Surgery Center.