University of Minnesota seeking up to $80 million from state for health care programs

The University of Minnesota wants an additional $60 million to $80 million in annual state funding as the first step in a long-term plan to improve and expand academic health training programs, medical research and care provided at hospitals and clinics.

While specific priorities for the money would be set in conjunction with lawmakers, the funding might be used to recruit and retain more world-class doctors and researchers, the U says, while also expanding patient services and health professionals' training at the university's primary care and safety net clinics.

The longer-term vision includes the U obtaining greater control over the University of Minnesota Medical Center in Minneapolis and, eventually, building a state-of-the-art facility on the East Bank campus.

U officials outlined the proposal Wednesday at a meeting of Gov. Tim Walz's task force on academic health at the university. The group is developing recommendations by mid-January for how lawmakers might bolster the U's health professional training programs.

"This vision and plan are based on what we think needs to be a new partnership with the state," Myron Frans, the U's senior vice president for finance and operations, said during a meeting at the Capitol. "We believe that this partnership must really guide our actions, so that in the future we really touch all Minnesotans with the best health and health care we can provide."

Beyond more funding for academic health programs, the university wants the state to conduct a feasibility study that looks at capital spending needs at the current U hospital as well as other public facilities, such as those operated by Hennepin Healthcare and the Minneapolis VA Medical Center.

Frans noted that the state Wednesday issued a budget surplus projection of $2.4 billion. He also highlighted Mayo Clinic's announcement last month that it will spend $5 billion on an expansion of its Rochester campus.

"This news from Mayo really is a new marker of what it takes to deliver world-class care," he said. "We cannot be complacent for the rest of the state."

Task force members offered a mix of responses, with former Gov. Mark Dayton saying that while he supported the plan he also thought it was "timid and inadequate," with improvements for existing facilities coming "too little and too late."

What's needed, Dayton said, is a program like the Destination Medical Center project created by the state a decade ago to support infrastructure needs in Rochester as Mayo Clinic grows. Such a fund could support the U hospital, he said, and perhaps other medical centers.

"As the state budget forecast shows, there's funds available somewhere or another that could be dedicated," Dayton said. "Issuing bonds, starting at a billion dollars and growing to $5 billion — that's the scale of what's necessary and it has to happen starting now, or very soon, or your buildings are going to continue to deteriorate."

But task force member Carol Backstrom, an assistant commissioner at the Minnesota Department of Health, said the U's proposal for up to $80 million in additional state spending per year was "a lot of money."

Rep. Tina Liebling, DFL-Rochester, noted the new state surplus projection was paired with a gloomier message that deficits of a similar size are looming in the coming years.

"I have not had the one-to-one conversation with the [speaker of the House] but I'm pretty sure that it's not going to be like: 'Hey, we've got money, let's spend it,'" Liebling said. "That is not the kind of session that we're going to have this year."

The details of the U's request come as the university is renegotiating its affiliation with Fairview Health Services, the Minneapolis-based health system that acquired University of Minnesota Medical Center in 1997. Ever since, Fairview has provided significant financial support for teaching and research at the U — at least $100 million this year alone.

Fairview has said it can't keep making payments at that level. Even so, Frans said the plan presented Wednesday assumes the health system will continue that support until the current affiliation agreement expires at the end of 2026.

About 70% of physicians practicing in Minnesota trained at the U's medical school, and the task force is considering whether taxpayers, and other players across the health sector, need to provide more funding.

When Fairview acquired the U hospital, it combined the medical center's operations with the old Fairview Riverside hospital near the West Bank campus. The medical center complex has since grown to include a large outpatient clinic building on the East Bank as well as a pediatric hospital near the West Bank campus.

The U and Fairview updated their affiliation agreement in 2018 to launch M Health Fairview, the brand they use to market health care services.

Over the past five years, however, Fairview has posted a series of operating losses. This financial red ink was in the background when the health system last year proposed a merger with South Dakota-based Sanford Health.

The U opposed the combination as it would have shifted control of the teaching hospital for Minnesota's public medical school to Sanford's headquarters in Sioux Falls.

"We really need to control these University clinical assets going forward so that who decides which health care services are provided in those buildings is the University, not whoever the owner might be, whether it's Fairview or somebody else," Frans said in an interview.

When Sanford and Fairview abandoned the proposed combination over the summer, the focus turned to how the U and Fairview might salvage or restructure their fraught relationship.

In March, the Star Tribune reported how Fairview officials believed the 2018 agreement was directing more financial benefits to the U than the health system. University officials, in response, blasted what they called "the depth of mismanagement" at the health system.

Despite the bad blood, Frans indicated that the U and the health system are trying to maintain their partnership.

"We want the cooperation and the special opportunities that we get with a dedicated or special relationship like Fairview," he said. "We hope to do more of those [relationships], but certainly we need a big one — and a major one — which we think is with Fairview at this point."