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Published April 10, 2013, 11:30 PM

Sanford Health withdraws from Fairview merger talks

Move followed staunch criticism from Minnesota AG
FARGO – Sanford Health’s top executive, who recently termed a presence in the Twin Cities an “inevitability,” announced Wednesday that the health system is withdrawing from merger talks with Fairview Health Services.

By: Patrick Springer, INFORUM

FARGO – Sanford Health’s top executive, who recently termed a presence in the Twin Cities an “inevitability,” announced Wednesday that the health system is withdrawing from merger talks with Fairview Health Services.

The move followed staunch criticism from the Minnesota attorney general and lawmakers concerned about what they characterized as a “takeover” of the University of Minnesota Medical Center.

“Sanford Health has a philosophical policy of ‘only going where we are invited,’ and it seems as though the incredibly positive beginnings to discussions of the merger of Fairview Health and Sanford Health has turned into a situation that finds us being unwelcome by some interested parties and key stakeholders of our proposed merger partner,” Kelby Krabbenhoft, Sanford’s chief executive officer, said in a statement.

Fairview assumed control of the university medical center in 1997, and its interim chief executive has said no merger with Sanford would happen without the university’s approval.

Since the Sanford-Fairview talks exploring a possible merger recently became public, the University of Minnesota revealed it made a competing offer to acquire Fairview.

Krabbenhoft said a possible union with Fairview would have been a “merger of equals,” and rejected suggestions of one organization “acquiring or controlling” the other.

“Those terms were never contemplated because they would be rejected on their face as unacceptable to each of these historic, charitable, and successful organizations,” he said in the statement.

“Nonetheless,” he added, “this misperception has been created to serve an agenda that undermines the good faith and emerging trust that is essential in any contemplated merger of this sort.”

Minnesota Attorney General Lori Swanson, who conducted an informal hearing Sunday about the possible merger – the day before a Fairview board meeting – has raised questions about charitable assets going to an out-of-state organization.

Gov. Mark Dayton publicly expressed support for Swanson’s actions and endorsed a Fairview-University of Minnesota combination.

In another setback for Sanford-Fairview talks, Minnesota lawmakers proposed legislation to block health system mergers involving out-of-state suitors.

In his statement, Krabbenhoft noted resistance to the possible merger with Fairview, which he said has been damaging to Sanford:

“I am now concerned that the good reputation of Sanford may be injured by a process that only intended the highest of ideals and integrity for what we believed to be a compelling solution to the challenges facing health care delivery today and in the future,” he said. “As such, I think it’s time for Sanford to withdraw from this process, and only re-engage if Fairview and the University of Minnesota have sufficiently resolved issues within their relationship and secured a positive understanding by Attorney General Swanson of their intentions and plans.”

In an interview published Sunday in the Sioux Falls, S.D., Argus Leader, Krabbenhoft was asked how long he had wanted to be in the Twin Cities.

“I don’t think there was a passion to be in the Twin Cities,” he said. “I think there was an inevitability,” adding that a presence there would be a “natural milestone.”

The political firestorm over a possible Sanford-Fairview merger erupted at the same time the Mayo Clinic, which has locations in Arizona and Florida, has been asking Minnesota to lend financial support for a planned multibillion-dollar expansion of its headquarters campus in Rochester.

In a review of merger “synergies,” Sanford and Fairview estimate the two health systems would realize cost savings of $40 million to $60 million a year through bulk purchasing of supplies and sharing of electronic medical records.

Following Sanford’s announcement, Fairview’s top executive issued a statement saying it would suspend evaluations of a possible Sanford merger as well as the proposal to be acquired by the University of Minnesota:

“We understand why they would choose to step back at this time, but the news comes as a disappointment,” Chuck Mooty, Fairview’s interim chief executive officer and chairman, said of Sanford’s decision to pull back.

“Clearly we need to ensure strategic alignment between us before we can advance new ideas for the future,” Mooty added, referring to Fairview’s ties to the university. “However, we feel it is not the time to discuss any proposal that involves the University acquiring Fairview. As a result, our work to evaluate that proposal will stop.”

Swanson issued a brief statement Wednesday, noting she had not yet spoken with Fairview or the University of Minnesota hospital.

“Having said that,” she added, “I appreciate Fairview’s announcement that it will now move forward to identify a new CEO.”

In his interview with the Argus Leader, Krabbenhoft noted that Fairview was without a chief executive, and his being named CEO of a merged organization appeared “probably likely.”

Sanford is incorporated as a nonprofit in North Dakota and has its principal corporate headquarters in Sioux Falls, S.D. It has significant operations in western Minnesota, where it employs 6,000.

Formerly Sioux Valley, Sanford merged with the former Fargo-based MeritCare in 2009, and later with health systems based in Bemidji, Minn., and Bismarck.


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Readers can reach Forum reporter Patrick Springer at (701) 241-5522

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