University of Minnesota, Essentia Health propose $1B partnership on academic medicine

The University of Minnesota and Duluth-based Essentia Health announced ambitious but vague plans on Friday to create an “all-Minnesota health system solution” through a $1 billion joint investment over five years.

The U and Essentia, which operates hospitals and clinics in northern Minnesota, described what they called a “proposed framework” for creating a new nonprofit entity to provide patient care while supporting the university’s academic health training programs, which produce a large share of the state’s health care workforce.

This new entity would reinvest in medical facilities on the university campus in Minneapolis, the U says, while bolstering health care in rural communities and access to specialty care.

The proposal raises a number of questions, however, that couldn’t be immediately answered, such as how patients might eventually be impacted. Currently, the concept is not even grounded in a formal agreement between the U and Essentia.

It’s also unclear how the proposed framework would impact the U’s current partnership with Minneapolis-based Fairview, one of the state’s largest operators of hospitals and clinics.

“We are at an inflection point in our relationship with Fairview Health Services that requires an urgent and innovative solution,” Dr. Rebecca Cunningham, the U’s president, said in a statement.

“We envision this model as a new path forward in our relationship, one that builds on the momentum all those at M Health Fairview have built and that continues to put patients first, consistent with our organizations’ shared priorities. We have begun conversations and invite further discussion with Fairview to bring this concept to life for Minnesota.”

In a statement Friday, Fairview officials said they were only just learning about the idea, which they described as a “sudden change” in the U’s previously stated desire to purchase the University of Minnesota Medical Center in Minneapolis.

Fairview acquired the U’s teaching hospital assets in a financial bail out in 1997.

“Fairview became aware of the University’s discussions with Essentia within the last 24 hours and has not been provided with details on the concept,” the health system said in a statement. “Fairview is an independent, nonprofit organization and decisions about our future will remain under the purview of our Board of Directors and leadership team.”

The U and Fairview currently operate the teaching hospital facility as well as the larger M Health Fairview health system through an affiliation agreement; Fairview owns most of the jointly operated hospitals and clinics. The U and Fairview have been re-negotiating their affiliation agreement, which is set to expire at the end of 2026.

Currently, Fairview provides tens of millions of dollars each year in financial support for the U’s programs for training health care professionals.

In 2022, Essentia Health was the state’s 8th largest nonprofit organization by revenue. It owns or operates 14 hospitals, 78 clinics and 24 retail pharmacies plus a number of long-term care and assisted living facilities, mostly in Minnesota, and employs about 15,500 people.

The Duluth-based health system primarily operates in northern Minnesota, whereas Fairview — the state’s fourth largest nonprofit — runs a number of hospitals and clinic in the Twin Cities metro.

“This is the beginning of an exciting, ambitious — and critically needed — conversation about the future of care in our state," Dr. David Herman, the Essentia Health chief executive, said in the joint statement with the U.

Herman added: “With nearly 70% of all Minnesota physicians having been trained at the university, we know that continuing to deliver excellent patient outcomes while building a sustainable health care future rests on the foundation of a strong medical school. These are the key reasons why Essentia leadership has begun exploring opportunities to build a new framework for health care in Minnesota.”

Friday’s announcements raises a questions about the future of academic medicine at the U, where it’s not clear exactly what sort of partnership the university should have with a health system or multiple health systems.

Such partnerships are critical for tapping clinical revenue to provide financial support for training programs. Fairview, however, has said the funding it currently provides to the U isn’t sustainable.

Members of a task force convened in the fall of 2023 by Gov. Tim Walz to explore solutions for the U’s training programs talked about ways to expand their funding base, but didn’t land on an easy answer.

All the maneuvering followed the collapse in July 2023 of Fairview’s proposal to merge with South Dakota-based Sanford Health — a deal that the university opposed. There have been tensions for decades between Fairview and the U, some of which surfaced during deliberations over the Sanford deal.

The announcement in February 2024 of a letter of intent for the U to acquire University of Minnesota Medical Center broadly suggested a new path forward, but the parties missed deadlines last year to make the proposal a reality.

It’s not clear what the U would have to pay to acquire University of Minnesota Medical Center — and the benefits aren’t exactly clear, aside from granting the U its wish for more control over the teaching hospital. The future of the affiliation agreement with Fairview is unclear as well.

On Friday, the U and Essentia said the proposed framework wouldn’t just form new partnerships, but would go further to re-envision a wide range of patient benefits. It would create new opportunities for training health care professionals, the university says, while furthering long-term goals to decrease clinical costs, develop new models for providing care and expand health care technology for use across a larger health system.

“If realized, this new model would help Minnesotans enjoy more comprehensive care, delivered closer to home, where patients need it most, especially in rural and Tribal communities with fewer local health care options,” the U said in its news release. “The framework for this solution would preserve existing doctor-patient relationships for patients across our systems while delivering the unrivaled benefits of one of the nation’s leading research universities.”

As for the investment of $1 billion referenced in Friday’s announcement, the U did not say exactly where the funds would come from or how they might be spent.

“This broad framework not only signals the potential for a significant commitment to the health of all Minnesotans, but a significant strategic investment to help bring the vision to life in a way that is sustainable and successful for decades to come,” the U said in the news release. “The proposed new all-Minnesota health system solution would invest $1 billion over five years to bring this vision to life.”

This is a developing story. Check back for updates.