U puts a number on acquiring its buildings from Fairview: $950 million

A person stands behind a podium with the university logo.
The University of Minnesota Dean of the Medical School Jakub Tolar speaks on the plan to ask for assistance from the state to buy back M Health facilities from Fairview in January. The university said Friday it wants the state to provide $950 million to fund the move.
Michelle Wiley | MPR News

The University of Minnesota released what it plans to ask state lawmakers to provide as it works to acquire its buildings from Fairview Health Services, in the midst of a proposed merger with Sanford Health, based in Sioux Falls, SD.

“Before us is a once-in-a-lifetime opportunity to channel the University’s 170-plus year legacy of discovery, service and world-class impact to elevate the health of Minnesotans for generations to come,” said Joan Gabel, university president, in a statement.

“But we can only do so through a strong partnership with the state. The positive return on this investment is clear,” she said.

The preliminary estimate made public Friday includes $300 million to acquire the four facilities — University Medical Center East and West Bank facilities, Masonic Children’s Hospital and the Clinics and Surgery Center — as well as funding for staff, union contracts and leadership for the new organization.

The remaining $650 million would operate those facilities, and includes three months of “operating capital” to cover payroll and supplies, as well as other expenses.

“This funding provides the opportunity to turn around not only the operations to the university, but also to begin to reduce those losses and turn it into positive financial results going forward,” said Myron Frans, senior vice president for finance and operations.

The U of M announced it would pursue state funding for the acquisition in early January, during discussions over the proposed merger between Fairview and Sanford. While the plan to obtain University control of these buildings has been in the works for some time, officials told MPR news the proposed merger accelerated their timeline.

“Control of Minnesota’s academic health care assets by a South Dakota-based entity is a non-starter,” said Dr. Jakub Tolar, dean of the university’s medical school and vice president for clinical affairs, in a statement. “The charitable assets of the University’s academic health facilities and operations have been supported by Minnesotans and must be governed by the University of Minnesota.”

UMN’s current partnership with Fairview under the M Health Fairview name is currently slated to last through 2026, an agreement both sides have said they plan to honor.

Frans said the financial request next requires formal action by the Board of Regents.

“It really is the prerogative of the Board of Regents to make requests to the legislature for funding,” he said, and confirmed the financial request is on the agenda for the board’s March 10 meeting.

But, the U will debut the plan to legislators before then, at a hearing before the Senate Health and Human Services committee on March 7.

The proposal also provides more details into the ownership configuration of the four facilities. One of the four buildings is currently owned, both facility and land, by the U of M, while two others are owned by Fairview. The East Bank hospital has a unique arrangement where the University owns the land, but transferred building ownership to Fairview in 1997.

“So it is a very complicated legal structure, but one that we think we can come to some terms and bring all of those under the governor's control, and operation of the University of Minnesota,” Frans said.

Sanford and Fairview say the current timeline for the merger anticipates completion by the end of May.

Editor's note (Feb. 24, 2023): This story has been clarified as to the university’s previous ownership of facilities.

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