University of Minnesota consultant raises concerns to Board of Regents about Fairview partnership

An attorney consulting on the future of academic medicine at the University of Minnesota is casting doubts over whether Fairview Health Services is a viable long-term partner.

Consultant Cliff Stromberg's concerns arise from what he described as the health system's relative lack of prestige along with a history of financial problems.

In comments this month to the Board of Regents, Stromberg said the U should own or control its teaching hospital within a larger health system that "embraces" the university's academic medicine mission. Currently, Minneapolis-based Fairview owns the University of Minnesota Medical Center and has said its current level of financial support to the U is not sustainable.

Stromberg didn't directly say whether the future health system partner should continue to be Fairview or could instead be Fairview's proposed merger partner Sanford Health, which is based in South Dakota.

But Fairview's financial problems might limit its support for academic medicine, Stromberg suggested, and thereby hurt the U's ability to recruit top physicians and maintain recent improvements in its medical school ranking.

"We can't say 'Well, our health care partner isn't profitable, so we can't pay you what the University of Wisconsin was' to a faculty member that we're trying to recruit," he said during a board retreat this month in Victoria.

"It is very hard for medical schools to maintain a top ranking without a hospital partner that's in a similar range," Stromberg said at another point in the meeting. "... The number of medical specialties in which Fairview is ranked nationally is zero. And that's not a new experience. ... So, we have this disjunction between how well [the University is] doing and how well Fairview is doing."

In a statement Tuesday to the Star Tribune, the U said it "would not be right to say that the University has doubts about the future of a partnership with Fairview."

"Our current agreements [with Fairview] go through 2026," the statement said. "... We are continuing to assess both Fairview and Sanford as viable partners with the best interests of Minnesotans and our public academic health system in mind."

Fairview said its financial and operating plans are overseen by a board of directors that includes representatives from the University of Minnesota.

The partnership has delivered "world-class care during a global pandemic," Fairview said, and an "upward financial trajectory" in recent quarters despite financial challenges confronting the industry.

"Instead of hiring high-priced D.C. legal consultants to advise them, university leadership would be wise to speak directly to those with actual insights and expertise in health care delivery, including the leaders who have responsibility over the health care we provide to our community," the health system said in a statement to the Star Tribune. "... The time for finger pointing is over. It's time for constructive dialogue."

Stromberg works for the Washington, D.C.-based firm Hogan Lovells, which started working for the U on the Fairview-Sanford merger and related issues in August 2022.

Information the Star Tribune obtained through a data request shows that, by this spring, the University had paid $454,283 to Hogan Lovells and had an outstanding invoice for $126,292.

Fairview and Sanford announced in November plans for a merger to create a health system with some 78,000 employees and more than 50 hospitals. The University of Minnesota has opposed the merger because it would shift control of the U's teaching hospital out of state.

Attorney General Keith Ellison is conducting an investigation of the proposed combination. Under legislation passed this year, the U has a "consultative role in the Attorney General's public interest review," the university said in its statement.

The timeline for the merger has been delayed several times over the past eight months. Fairview says the talks are continuing.

Fairview bought the U hospital in a deal that closed Jan. 1, 1997.

During this month's meeting, Janie Mayeron, chair of the Board of Regents, said she understood one reason the U stopped running the medical center was "we weren't doing it very well and we thought there were others who had better expertise."

In January, the university proposed resuming control of University of Minnesota Medical Center with $950 million in state funding to acquire and initially operate the hospital, although a top U official later suggested $300 million would be the upper limit of the state investment.

When Mayeron asked if other universities had taken back their teaching hospitals — an idea that she described as potentially "dicey" — Stromberg said the University of Southern California and University of Cincinnati were among the schools that had done so. But he also advised: "Your cautionary observations are exactly right."

"I can give you observations; I wouldn't give you a recommendation at this point," Stromberg said.

Fairview officials have been wrong in public comments, Stromberg said, to suggest that the health system's financial problems are a function of being linked to an academic medical center.

Fairview's financial support for academic medicine at the U increased through a 2018 agreement that launched M Health Fairview, a joint clinical enterprise between the parties. Whereas Fairview previously was providing about $35 million per year in support, the figure now is about $90 million — a number that Stromberg said is comparable to or less than sums provided elsewhere.

"They were getting a bargain and we were not being helped," Stromberg said. "And now we believe that number is appropriate."

Going it alone, however, would not be a very good option for the U. Academic medical centers should be connected to a large patient population, he said, through a network of hospitals and clinics that generate enough complex cases to keep sub-specialty physicians busy.

In his presentation, Stromberg said Fairview's leadership has lacked strategic vision.

He said health system leaders "fumbled their foray into managed care" and had to sell PreferredOne, a health plan based in Golden Valley. Fairview has not developed the broad network of ambulatory care sites that it needs, he said. And the lack of a solution to financial problems, including four consecutive years of operating losses, shows "a demonstrable lack of leadership," Stromberg said.

"In my experience it's unprecedented to go year-after-year-after-year with operating declines and then losses without the board demanding an actionable, immediate plan — and if management can't do it, then bring in a consultant," he said. "But that has not happened at Fairview. So, where do we go from here?"

Fairview said in a statement that its board, "including three prominent University of Minnesota leaders," approved the health system's current three-year finance and operating plan.

"We're currently performing ahead of that plan with a continued positive trajectory, thanks to the diligent work of our employees — including the academic faculty — all while having the best patient safety scores and the best customer experience scores of the last decade," Fairview said.