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Attorney general questions proposed Fairview-Sanford merger

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Attorney General Lori Swanson
Attorney General Lori Swanson asks questions during testimony from Sanford Health representatives on the proposed takeover of the University of Minnesota Medical Center and Fairview Health Systems by South Dakota's Sanford Health during a hearing at the Minnesota State Capitol on Sunday, April 7, 2013, in St. Paul, Minn. (AP Photo/The Star Tribune, Renee Jones Schneider)
Renee Jones Schneider/AP

Minnesota Attorney General Lori Swanson is raising concerns over the University of Minnesota's plan to acquire Minneapolis-based Fairview Health Services, which is also in merger talks with rural health care giant Sanford Health.

At a Capitol hearing Sunday, representatives from the three organizations answered questions before a standing-room-only crowd, and the concerned attorney general.

Swanson has been wary of the potential merger between Sanford and Fairview for a number of reasons, especially because Fairview is a charitable institution whose net worth of $1.2 billion in assets was created by Minnesotans through tax breaks, donations, and land for the benefit of Minnesotans. 

Fairview also operates the University of Minnesota's main teaching hospital, which has had a long history of medical firsts.

Sanford Health is based in North and South Dakota and has expanded its footprint to run clinics in eight states.  It's received $600 million in donations from T. Denny Sanford, a St. Paul native who made a fortune in the bank card industry. The attorney general and the University of Minnesota worry that if Sanford Health takes over Fairview, it'll drain Minnesota assets to further the company's own expansion in other states.

The attorney general's office said Sanford refused to answer many questions it sent as part of a demand for information.  But a Sanford attorney responded that the questions the office asked didn't relate to the potential merger.

"If the two parties are not allowed to have preliminary, thoughtful and inclusive discussions with each other, and the University of Minnesota, and any materially affected party or official, then the parties are being artificially restrained," said Becky Nelson, Sanford's chief operating officer.

Gary Printup, a kidney transplant recipient at the hearing, said that he owed his life to U of M transplant surgeon John Najarian. He said he came to show his opposition to any Sanford merger.

"Some guy that has deep pockets and likes to schmooze with the president of the university wants to come over here and take over the non-profit that has saved so many people's lives," he said. "I sure hope that you can stop the takeover of any part of the University of Minnesota hospital."

Saying that its CEO was out of the country, Sanford sent two representatives to the meeting, including COO Nelson. She read a statement from the CEO in which he said the company is trying to standardize its systems, reduce costs, and hire and retain the best talent in a rapidly changing health care environment.  

Her testimony also shed some light on what the two sides have accomplished so far.  

She said Sanford's CEO determined that the combined organization could save between $40 million and $60 million a year, without cutting staff but by sharing electronic medical record systems and saving on supplies.  

In addition, Sanford and Fairview had received in the last 30 days an analysis to see if there'd be any potential anti-trust problems should they merge. And Nelson said Sanford and Fairview have been trading a so-called "synergy book" between the two organizations.

"We approach everything that we do with a focus on the patient and what's best for the patient.  So it's important that you have the conversation about what benefits the patient may experience as a result of this merger," she said.

Meanwhile, the U of M appeared to distance itself a bit from Sanford, who is a donor to the U's athletic program and is also an alumni.  The U has said it, too, is interested in making a bid to acquire Fairview. University of Minnesota General Counsel Mark Rotenberg said there would be a moratorium on all discussions of charitable gifts that could create any conflicts of interest.

"That moratorium is intended to reassure you and everyone who cares about this that this rigorous and objective process will not be tainted in any way by conflicts of interest having to do with gifts for football or sports or anything else," he said.

Fairview's interim CEO, Chuck Mooty, finished out the hearing as time ran out but didn't undergo the rigorous questioning the other representatives did.  Mooty said talks are in the early stages, but in a highly competitive health care marketplace, the Sanford-Fairview partnership is worth looking at.

"We think there's merit," Mooty said. "We think there's opportunity."

Attorney General Lori Swanson said the hearing only scratched the surface of the issues involved and that she hoped to have another hearing in two weeks.