AG brokers new talks over future of Fairview, Essentia and academic medicine in Minnesota

Attorney General Keith Ellison is intervening in a complex proposed megadeal among the University of Minnesota and the Fairview and Essentia health systems that could reshape academic medicine in Minnesota.

Ellison on Wednesday announced that he is selecting a “strategic facilitator” to broker talks among the parties, which have agreed to foot the bill. The negotiator will set a timetable and “take a look at all potential solutions” for how to align the university’s medical school, researchers and specialists with two of the state’s largest providers of hospitals and clinics.

“Given the current status of the talks, the time pressure, and the importance of the public interest in getting this right, my office is taking a more active role,” Ellison said in a statement.

The development follows the surprise news in January that the U is in talks with Duluth-based Essentia to create a nonprofit entity to provide patient care and support the university’s health training programs. Minneapolis-based Fairview has balked at the U’s proposal.

The U’s medical school and affiliated physicians provide health care with Fairview under the M Health Fairview brand, but that turbulent agreement expires after 2026.

The Legislature in 2023 gave sweeping powers to the attorney general to intervene in large transactions that affect how Minnesotans afford and access health care. Lawmakers at the time were worried about a merger between Fairview and South Dakota-based Sanford Health that could have put control of the U’s taxpayer-subsidized medical center in out-of-state hands.

Since that time, Ellison has used his expanded authority to review the completed merger of St. Luke’s in Duluth with Wisconsin-based Aspirus Health, and the attempted merger of Essentia with Wisconsin-based Marshfield Clinic.

Neither deal presented the complexity, public impact or private infighting as the current one.

M Health Fairview operates 10 hospitals and 60 clinics, which financially support a medical school that has trained 70% of the doctors statewide and a university that ranks 23rd nationally for federally funded scientific research.

Relations between U and Fairview leaders have soured since 2018, when they inked the M Health Fairview partnership that was supposed to drive more patients to Fairview clinics and more money into the university coffers for research and academic support.

U leaders were irked by the lack of input in 2022 when Fairview tried for the second time in a decade to stabilize their health system’s finances by merging with Sanford. Fairview leaders were similarly upset in January when they were given less than a day’s notice before the U went public with its billion-dollar plan to partner with Essentia and expand training and clinical opportunities across rural Minnesota.

And both sides quarreled over the price of the university hospital buildings, which Fairview acquired in 1997 in a merger that bailed out the financially strapped medical center. The U has proposed buying them back in order to sever ties and become independent once again, though it is unclear where it would get the money.

Ellison said in his statement Wednesday that “the parties ... welcome the chance for a fresh start.” After selecting a facilitator to resume talks, Ellison said his office will retain the power to intervene if any resulting deal presents antitrust concerns or threatens Minnesotans' cost or access to care.

Dr. Rebecca Cunningham, the U’s president, has expressed hopes that a three-way partnership could recreate the success at the University of Michigan, where she previously served as vice president for research and innovation. Michigan ranks third nationally among federally funded research institutions.

However, Fairview CEO James Hereford has stated in an internal memo that the health system does not plan to merge with Essentia. Fairview-employed doctors also wrote a letter opposing any merger that could interfere with their approach to patient care.

In a written statement Wednesday morning, Fairview said it welcomed the attorney general’s “structured facilitation process in an effort to find a resolution that is fair, transparent, and in the best interests of those we serve.”

But the deal is even more complex than aligning a public teaching hospital with two competing nonprofit health care systems.

While Fairview doctors serve as the backbone of primary care and other medical services in the health system, much of its specialty care and clinical research is provided by U doctors who are part of a stand-alone group practice called University of Minnesota Physicians. And this powerful group has been wary of any agreement that undercuts its independence.

Other interested parties include CentraCare, which announced plans with the U in 2023 to create a teaching hospital in St. Cloud that would increase training opportunities for medical students and confront the worsening shortage of physicians across rural Minnesota. Its first class of medical students is schedule to start this fall.