North Memorial buys Fairview Health's stake in Maple Grove Hospital

North Memorial Health will become sole owner of Maple Grove Hospital, buying out partner Fairview Health Services in a deal announced Thursday.

The transaction follows friction between the two large health systems, which have co-owned the suburban hospital since its start 13 years ago, and paves the way for expansion.

"The new ownership structure supports North Memorial Health's vision to create a comprehensive modern medical campus to meet the growing needs of Maple Grove and the northwest metro communities," the hospital said in a statement.

In the deal, North Memorial, which owned a 75% stake in Maple Grove Hospital, is buying the 25% stake owned by Fairview. Terms weren't disclosed, though the hospital systems said they expect to complete it in May.

In September, Dr. Kevin Croston, North Memorial's chief executive, briefed Maple Grove city officials about a proposed $191 million expansion to the hospital. It would grow staffed beds from 130 to 170 while expanding the emergency department and the neonatal intensive care unit.

One sticking point, Croston said at the time, was a "frustratingly slow" process of reaching an agreement with Fairview, which would have had to pay one-quarter of the costs.

In an interview Thursday, Croston said sole ownership "eliminates financial complexities that have caused delays in our ability to expand."

The project's price tag of $191 million is now outdated, North Memorial says. Renderings shown to the City Council were drawn up in 2019 before the pandemic, which has driven changes, Croston said, in thinking about how handle airflow in new inpatient spaces.

While North Memorial had hoped for a groundbreaking this spring, the health system on Thursday said it was revisiting its original plans and timelines.

Fairview said in a statement that "the sale of our stake in Maple Grove Hospital will allow us to further our mission of delivering high-quality care on behalf of patients and the community."

Maple Grove Hospital has been one of the most profitable medical centers in the Twin Cities and is home to one of the state's largest obstetrics units, hospital officials said, with more than 5,000 deliveries last year.

The distinction with delivering babies fits with the younger population in the northwest metro, Croston said, but North Memorial sees a need to add services for patients with more complicated and complex health-care needs.

In his address to the City Council, Croston said the expansion plan would transform Maple Grove Hospital into a "destination health campus."

The hospital had hit a ceiling for growth in its current space, he said, and needed more room to offer services for more seriously ill patients as well as a new observation unit for patients who don't qualify for admission.

The vision fit, Croston added, with a nearby mixed-use development for 550 rental units by Ryan Cos. called Minnesota Health Village.

But North Memorial and Fairview were struggling to agree, Croston said, on a vision for the hospital expansion. Initially, there was conflict over the business case for growth, he said during the City Council meeting, followed by strategy questions.

"It's been a little combative," he said. "You take two health systems, both with big egos, and you're bound to have some things."

He said the systems were working through the conflict. "We probably have a role in some of that," he added.

Fairview did not immediately respond to questions about the disagreement.

Fairview is one of the state's largest hospital operators, including University of Minnesota Medical Center in Minneapolis and Fairview Southdale Hospital in Edina. It uses the brand M Health Fairview for health-care services offered in conjunction with the University of Minnesota Physicians.

North Memorial is a two-hospital system, with its larger namesake hospital located in Robbinsdale. North Memorial also runs a large service for getting emergency patients to hospitals with more than 130 ambulances and 10 medical helicopters.

Maple Grove Hospital had 1,137 employees at the end of 2021. The deal announced Thursday shouldn't bring any immediate changes for employees, Croston said, or hospital operations.

"This is a growing campus," he said, "and it's going to continue to grow."

For Fairview, it's the third sale of a visible portion of the health system in the last two years.

In the fall of 2020, Fairview sold 80% of its hospice and home-care business to a Texas company for $53.6 million. In August, Fairview sold its health insurance business, called PreferredOne, to UnitedHealthcare.