The University of Minnesota proposed a $600 million offer to repurchase its large teaching hospital complex in Minneapolis from Fairview Health Services, but the health system turned down the proposal in December, stating that the amount was insufficient to cover debts related to the facility.
Financial details shared with the Minnesota Star Tribune by sources involved in the negotiation shed light on how the University shifted from its original plan to reacquire the University of Minnesota Medical Center to its current proposal for a new statewide nonprofit health system that would merge Fairview with Essentia Health, based in Duluth.
On Wednesday, Fairview, located in Minneapolis, rejected the University’s merger proposal and suggested a potential “strategic partnership” to support the university’s academic health program instead.
However, the possibility of reaching any agreement is uncertain, as both sides issued conflicting statements on Thursday about who ended the sale negotiations. Their relationship has been troubled for years, dating back to Fairview’s 1997 acquisition of the University of Minnesota Medical Center in a financial rescue.
In a document dated February 10, the University acknowledged the long-standing issues, stating, “As is widely known, the relationship has been fraught with challenges for many, many years.” It went on to say, “There is no solution in sight… We look forward to engaging with Fairview to design a practical transaction process [for the merger] … with the goal of closing on the transaction by the end of 2025.
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The University and Fairview currently run the M Health Fairview network of hospitals and clinics under an affiliation agreement set to expire at the end of 2026.
Fairview CEO James Hereford stated in a letter to employees on Wednesday that the expiration of the agreement would cause only minimal disruptions. However, University President Dr. Rebecca Cunningham offered a more pessimistic view, expressing concerns about disruptions to doctor-patient relationships, patient care, and the training of the state’s healthcare workforce once the agreement expires.
The affiliation agreement, along with the University’s proposals to reacquire the hospital and merge Fairview with Essentia, are critical to the financial backing of the University’s Medical School, which is the largest and only public physician training program in Minnesota. Fairview contributes tens of millions of dollars annually to the Medical School, funding that the health system claims it can no longer sustain.
Around 70% of doctors practicing in Minnesota received part of their training at the University of Minnesota, which is why Governor Tim Walz established a task force in 2023 to address the sustainability of funding for the University’s academic healthcare program.
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