Q&A with Fairview CEO James Hereford

As Fairview Health's president and CEO, James Hereford was one of the chief architects and proponents of his medical care system's merger with South Dakota-based Sanford Health. He's spent months as the deal's champion, but in late July, the merger was terminated. Earlier this month, Hereford provided answers via email to questions from Jill Burcum, a Star Tribune editorial writer:

Q. Who decided first to "discontinue" the merger — Fairview or Sanford?

A. Our focus today — and every day — are the patients and communities we serve and our people. Both sides agreed that it was in the best interest of our respective organizations to stop the process given the inability to make sufficient progress that would allow us to close the deal. I continue to believe a combined Fairview/Sanford organization held important strategic advantages, and there are still many paths forward for our organization. Our focus now is not on the past, but on our collective future. It is on continuing to build a sustainable future to continue to do right by our people and patients for generations to come.

Q. The Minnesota Legislature broadened the Minnesota attorney general's authority over health care mergers, especially ones that could result in out-of-state control of the University of Minnesota Medical Center. How much of a role did legislation play in the decision to end the Fairview-Sanford deal? Also, did you receive an indication from the Minnesota attorney general that the merger would not be in the public interest?

A. Fairview is a nonprofit health system. Everything we do is in service to the public interest. With Sanford, we found a partner who shared that mission, so the new legislation put in place this year didn't deter our plans because we knew that, together, we would continue to serve that public good.

The specific piece of the legislation that you cite relates to our hospitals on or adjacent to the University of Minnesota campus. The issue of "control" over these facilities is an important one, and we've said for months now that we're eager to find resolution and are willing to discuss ownership of the facilities with the university. Fairview and the university are separate entities; the university must decide for itself its future path, and Fairview wishes to be supportive of that vision wherever possible. So, no, new legislation didn't significantly influence on the ultimate outcome. More than anything it reinforced the need for a clear direction from the university about its plans.

Q. Is there a Plan B for Fairview now that the merger isn't happening? Fairview's finances are concerning, with a recent Star Tribune story headlined "Fairview's operating loss grew to over $315 million last year." If the Sanford merger is off, what are next steps to strengthen your health care system's bottom line? Will you seek a merger with a Minnesota health care system, for example?

A. Coming out of COVID — and even before the pandemic — I think you'd struggle to find any health care delivery organization that hasn't been forced to consider significant changes and even reinvention. Health care delivery systems are navigating difficult waters — tight labor markets, the highest inflationary period in 40 years, stagnant reimbursement rates. We exist in a health ecosystem that is driven by for-profit organizations. As an example, close to home, other health care systems are forced to make difficult decisions regarding recently announced programmatic closures and layoffs while for profits in other parts of our health care ecosystem are announcing staggeringly large profits.

We are making good progress and are on an upward trajectory financially, and have been since last September. Through the first half of the year, we're seeing some of the most positive indicators in our recent history. In addition to positive trends in financial performance, scores reflecting customer experience and patient safety are at their highest levels in the organization's history. As we analyze our Q2 performance, which is shared publicly next week, we're happy to see these trends continue.

This progress is the result of decisive planning and hard work by our leaders and our teams across the organization who are staying focused on our patients and the communities we serve. All of these plans were put in place assuming Fairview would operate as it is today, without merging with another system.

The insinuation that Fairview's financial health depends on a merger is false.

Fairview is not currently pursuing a merger with another health system. Sanford presented a uniquely beneficial match. To your question about the possibility of a merger with a Minnesota health system, it's important to note that a merger like that would have unique issues under Federal Trade Commission regulations due to the potential of overlapping markets. Our proposed merger with Sanford had already passed FTC review and was found not to have antitrust concerns.

Q. Would Fairview seek to continue its operational partnership with the U after 2026 if the current financial support arrangement could be reduced? Is it even possible to continue it given the ill will that became public during the merger attempt?

A. First and foremost, we have not and cannot lose sight of the crucial work our Fairview teams are doing with our faculty partners at the university as M Health Fairview. There are tens of thousands of people — Fairview employees and university faculty — who, together, are delivering exceptional care to patients across Minnesota. They are rising above all of this. It never deters them.

There are many examples, but a recent one: U.S. News and World Report just named three of our hospitals among the top 10 in the state, an improvement from previous years and a reflection of what we are achieving, together.

I believe there remains incredible potential in the integration of academic medicine with a community-based care delivery system like Fairview. I believe there is benefit to Minnesotans — the patients we serve and our own people. That said, any new partnership we enter into with the University of Minnesota must satisfy the twin objectives of achieving the ability to compete in a very challenging market that includes the delivery systems like Allina and Mayo, and the University of Minnesota's key role in serving public health through its teaching and research missions. That's what we seek — a partnership that equally benefits our people, the patients and communities that rely on us, and academic medicine — as we look at the potential of a partnership beyond our current 2026 agreement.

Q. Is the financial support for the U currently provided by Fairview an obligation that another health care system will be willing to take on? Is this something that the state should provide instead of a private entity?

A. I can't speak for other health care systems. I do believe that Fairview has served a unique role in supporting the university, and as a state entity [the U] must benefit all Minnesotans through its research and teaching missions.

The university's ability to deliver academic medicine is inextricably tied to the need for a care delivery partner. As an organization, we have done a great deal through our partnership — as evidenced by the amazing work that has come out of our joint clinical enterprise — but we can't set the path for the university. They must decide for themselves what their future looks like, and recommit to the concept that in a partnership, we either succeed together or we fail together.

Q. University officials have been sharply critical of Fairview's management under your watch. Is that fair and accurate? I'd like to give you a chance to respond to those concerns.

A. I think the recent criticism is disrespectful of the work our M Health Fairview teams are doing. Our teams have focused on doing the incredible work that we are privileged to do, namely taking care of people who need us, and we have done that through fundamental shifts in how care is delivered, a worldwide pandemic and the most challenging labor and inflationary environment that our economy has faced in 40 years. It is easy to criticize others, but the real test is doing the work. And I stand by our work.

Health care is a complex and serious endeavor with patients at the end of every decision. Negotiating a partnership through the news media does not allow for the thoughtful dialogue we need to develop the best possible plans to ensure stability for our staff and continuity of care for the patients we serve. Our patients and our staff need and deserve our focus and resolution now rather than later.

Despite all the external noise, I'm thankful for the focus of our employees on delivering the best care to our community. Those staff, working together as M Health Fairview, continue to prioritize both care delivery and all of our key outcomes as a delivery system, so we can continue to serve for years to come. Fairview's board, representing both community members and top university leadership, has continued its rigorous oversight and support of our financial and operational plans — and we continue to meet and exceed those plans.

Q. Any other comments?

A. I believe in our organization and our resiliency. We have been through a lot over the last few years, and we have emerged stronger and on a solid path forward. We continue to listen and engage with our patients and the communities that we serve about Fairview's unique role as an anchor institution in Minnesota. Everything we've heard informs our progress forward. While plans for the merger have stopped, our commitment to our people and our patients has not and will not.