University of Minnesota offers to buy Fairview’s stake in large clinic and surgery venture in Minneapolis

University of Minnesota officials have offered to buy Fairview Health Services’ stake in a joint venture that provides patient care inside a large outpatient clinic and surgery center (CSC) on Fulton Street on the U’s East Bank campus.

The offer apparently is connected to a variety of contentious matters between the U, its physicians and Fairview, all of whom partner on services under the M Health Fairview brand.

The Minnesota Star Tribune has learned that Minneapolis-based Fairview and University of Minnesota Physicians (UMP) have been in arbitration to settle a variety of disputes that touch on operations at the CSC, although details Wednesday weren’t available.

Currently, ownership in the joint venture is split 50-50 between Fairview and UMP, the stand-alone nonprofit that runs the group practice for U doctors. The U built and owns the $160 million building, which opened in 2016.

The Fairview-UMP joint venture leases a portion of the facility for outpatient clinic and surgical care.

On Wednesday, health system leaders distributed a staff memo saying the university’s offer to buy Fairview’s interest in the joint venture includes several unacceptable conditions. One is a requirement, Fairview says, for the health system to forgive more than $100 million in debt.

“The CSC [joint venture] is managed by UMP and has operated at a financial loss for years,” Fairview said in the memo. “To date, Fairview is owed more than $100 million for supplies and services provided to the CSC JV [joint venture.]”

Fairview Health Services is one of the state’s largest operators of hospitals and clinics.

It acquired University of Minnesota Medical Center in Minneapolis in a financial bailout in 1997. Ever since, the partnership has featured a number of business controversies including a 2022 episode where the U accused Fairview of mismanagement and Fairview accused the U of hogging M Health Fairview profits.

Amid the acrimony, the relationship is important because Fairview is a key source of funding for the U’s training programs, which include the largest and only public medical school in Minnesota. About 70% of physicians practicing across the state completed at least some of their training at the U.

Fairview is providing tens of millions of dollars each year for training programs at the university as well as certain high-end specialty services that are part of the U’s academic health mission.

In the past decade or so, the health system and the U have floated a variety of structural, contractual and ownership changes — including two failed attempts by Fairview to merge with South Dakota-based Sanford Health — with the goal of improving financial support for the academic health program.

In early 2024, the U announced one such plan, saying it wanted to buy back the University of Minnesota Medical Center. That deal apparently has stalled after the university offered in December to pay $600 million for the sprawling hospital complex, which consultants have valued at about $1.2 billion.

The CSC building is part of UMMC.

In January, the U announced plans to create an “all-Minnesota health system solution” with Duluth-based Essentia Health, where Fairview would merge assets into a new nonprofit led by Essentia’s CEO.

Gregg Goldman, the U’s executive vice president for finance and operations, sent a memo to staff March 5 saying a deal for the university to “acquire Fairview’s 50% interest” in the CSC joint venture would further the U’s vision of creating the new nonprofit health system with Essentia.

Fairview has opposed the merger idea, while suggesting a “strategic partnership” could be negotiated.

“As a non-profit entity, we believe they have a responsibility to work with the University and Essentia toward the best possible solution for our patients and Minnesota,” Goldman wrote in his memo. “At the same time, we are taking decisive action, including making the CSC offer, to begin to realize the vision for our all-Minnesota solution for generations to come.”

The Star Tribune obtained a Nov. 13 letter from Goldman that referenced a settlement agreement “to resolve disputes that are the subject of a current arbitration process between UMP and Fairview.”

On Wednesday, Fairview’s staff memo linked to a letter from Joe Gaylord, the health system’s chief financial officer, asserting that Fairview is now running a profitable operation across its network of hospitals and clinics — with the exception of the CSC joint venture.

“The only asset whose performance has declined is the CSC JV, which is managed by UMP,” Gaylord wrote in the March 6 letter, which the Star Tribune obtained. “Asking Fairview to forgive debt that we are owed despite multi-year losses at the CSC JV is not a reasonable demand for the University to make.”

In a statement Wednesday, UMP said management decisions at the clinic and surgery center are brought to, and ultimately decided by, a joint board where Fairview and UMP control equal halves.

“Fairview’s reference to the CSC JV finances is incorrect,” UMP said. “Our 2024 net operating income was substantially improved over 2023, and early results from 2025 suggest robust, continued improvement.”

In an interview earlier this month, Goldman said the U has not specified the price it would pay for Fairview’s interest in the CSC joint venture.

“We gave them notice of our intent to open negotiations,” he said.