Fairview weighs merger with University of Minnesota doctors

Twenty years after Fairview Health rescued the University of Minnesota's financially ailing hospitals and clinics, the hospital organization is considering a merger with the university's private physicians group, creating a single health care provider that can keep pace with a changing market that demands efficiency.

The U's Board of Regents is expected to vote Friday to begin merger talks between Fairview, which runs 42 clinics and seven hospitals — including the university medical center — and University of Minnesota Physicians (UMP), a large group practice of 750 doctors that also provides faculty for the U's medical school.

While the organizations are already intertwined, their separate leadership and practice plans create inefficiencies compared with competitors with salaried doctors such as HealthPartners and Mayo Clinic.

Bringing the doctors under one organization was always discussed as the Fairview-University partnership evolved because separately they spend "inordinate amounts of time fighting over nickels that don't add up to the progress of the organization," said David Page, Fairview's chief executive from 1998 to 2007.

Mergers and consolidations have accelerated in Minnesota lately as hospitals tried to share the costs of required technology upgrades such as electronic medical records. Duluth-based Essentia Health has taken over hospitals and clinics across Minnesota's north, while South Dakota-based Sanford Health and the Mayo Clinic in Rochester have expanded across the south.

Payment reforms by Medicare and private insurers also spurred consolidations and the growth of multispecialty medical practices, because they reward one-stop-shop providers that take efficient overall care of patients.

By combining, health systems can better coordinate care and deliver better quality at lower cost, said Mark Pauly, a professor of health care management at the University of Pennsylvania. "If you want to coordinate care, you have to have everybody willing to obey orders. If you're nominally independent, you may not do that."

Fairview and university leaders declined to comment until after the regents' vote, but a merger would presumably improve access for Fairview primary care doctors to UMP specialists, while giving UMP access to Fairview's patient base and resources such as home health care.

Fairview and university leaders may also want to "build up their brand" and geographic reach to improve their leverage with health insurers, said Allan Baumgarten, a Minneapolis health analyst. "They seek … opportunities to market themselves as an integrated provider network," he said.

Leaders at both organizations have envisioned integration for years and considered it closely a few years ago as a pre-emptive measure when Sanford Health made a bid to acquire Fairview.

But mergers of hospitals connected to medical schools, which carry the unique costs of education and research, have been tricky in the U.S.

And despite two decades of common history, disagreements have emerged among university and Fairview leaders and caregivers — often when the missions of academic research and clinical care came into conflict.

Internal reviews earlier this year, for example, found that some Fairview staff members didn't trust the research goals and recruiting tactics of the U's psychiatrists. A March report by bioethics professor Michael Oakes found hospital leadership "insensitive" to these real or perceived concerns.

Performance data from MN Community Measurement also suggest differences in practice patterns between Fairview and UMP doctors. The average cost per month of patients receiving primary care from UMP was $572 last year, while the comparable figure for Fairview Medical Group was $430. The rate of colorectal cancer screening for appropriate patients was 54 percent for UMP patients but 77 percent for Fairview patients.

Whether the Fairview name will recede any further is unclear. Fairview used to receive top billing in the name of the university hospital, but a series of changes have left it as the University of Minnesota Medical Center.

Despite the challenges, a merger would be in line with national trends that press academic medical centers to not only treat and research diseases but improve patient health so diseases are avoided in the first place, said Janis Orlowski, chief health care officer for the American Association of Medical Colleges. "We need to refocus how we provide care," she said.

Christopher Snowbeck contributed to this report.

Jeremy Olson • 612-673-7744