Fairview's operating loss grew to over $315 million last year

Fairview Health Services lost more than $300 million on operations last year, marking a fourth consecutive year of red ink at the Minneapolis-based health system.

Executives said the results reflect financial pressure at nonprofit health systems across the country as hospitals and clinics struggle with labor shortages and inflation.

Fairview operates the University of Minnesota Medical Center in Minneapolis and is negotiating a mega-merger with South Dakota-based Sanford Health. The deal would create one of the largest networks of hospitals and clinics across the Upper Midwest — a health system that executives suggest could better confront financial headwinds in the health care industry.

But, Fairview said Monday, it is beginning to see financial benefits from a plan approved late last year by its board of directors to reverse annual operating losses that date back to 2019.

"March 2023 [is] expected to be the most financially healthy month in the organization's recent history," the health system said in a statement to the Star Tribune.

In a filing with bondholders last week, Fairview said it posted an operating loss of $315.4 million on $6.7 billion of revenue last year. Financial statements show that between 2019 and 2021, annual operating losses at Fairview ranged from $96.2 million to $208.8 million.

Allina Health System and North Memorial Health, both based in the Twin Cities, also posted losses on operations last year.

The University of Minnesota has opposed the merger between Fairview and Sanford, warning against out-of-state control for its teaching hospital and asking the Legislature for money to regain control of the University of Minnesota Medical Center (UMMC).

Since acquiring the teaching hospital in 1997, Fairview has supported the university's academic medicine mission, including $93 million in payments last year to the U and the group practice for university physicians.

In March, the Star Tribune reported how Fairview, in the lead-up to last year's merger announcement, asked for permission to reduce its financial support for the U. The health system's CEO said the U "appears to be profiting significantly" from their patient care collaboration while Fairview wasn't receiving the intended financial benefits from the partnership.

"There are ongoing conversations about the potential academic affiliation between the University, UMPhysicians and the combined system," Fairview said in the financial statement. "Fairview remains supportive of the University and UMPhysicians vision for the future, and conversations continue about potential alternatives, including ownership of the current UMMC campus buildings."

Nearly 60% of the hospitals in the U.S. are nonprofits, and more than half of them lost money last year, Fairview said in a statement. Sanford Health last year posted operating income of $187.9 million on $7.1 billion of revenue.