University of Minnesota Regents encourage talks with Fairview on Essentia merger

Regents at the University of Minnesota expressed support Friday for a proposed merger of the Fairview and Essentia health systems, but next steps are unclear since Fairview said no to the idea earlier this week.

The board’s academic health committee did not take a formal vote on the merger concept during a meeting earlier this week, but members enthusiastically endorsed the idea as well as continued talks, said Dr. Penny Wheeler, the health committee’s chair, during a Board of Regents meeting Friday.

“We know that there’s ways to go between here and there, and there’s future conversations that we certainly hope will take place with Fairview,” said Wheeler, who formerly was chief executive at Allina Health, one of the state’s largest health systems.

In January, the U proposed Essentia and Fairview merge in a new nonprofit health system that would support the university’s medical school and academic health programs.

Fairview Health Services, which has provided financial support to these programs for decades, said no to the merger idea Wednesday, saying the Minneapolis-based health system wants to maintain its independence.

A spokeswoman Friday reiterated Fairview’s opposition, while noting a “strategic partnership” with Duluth-based Essentia and the U remains possible.

The health system and university have considered and adopted a variety of structural changes through the years in hopes of bolstering the academic health program.

In February 2024, Fairview and the U signed a letter of intent to negotiate a deal for the U to buy back University of Minnesota Medical Center from Fairview, which purchased the teaching hospital in a financial bailout in 1997.

The U offered to pay $600 million for the facility in December, but Fairview rejected the proposal since it wouldn’t even cover debts connected to the Minneapolis hospital complex.

Dr. Rebecca Cunningham, the U’s president, announced in January the Fairview-Essentia Health merger as a new alternative. On Friday, Cunningham told the Regents that the U’s health programs and partnerships need a “reset” with the new nonprofit health system.

“What I really want the public to focus on now is: Is this idea that we have in front of you a good idea? Is it the best idea we have for how we would transform health care in the state?” she asked. “If so, how could we come together to achieve it collectively.”

Regent Mary Turner, who formerly led the Minnesota Nurses Association union, said she supported Cunningham’s vision for its potential to improve access to care across greater Minnesota.

Dr. Ruth Johnson, a regent who also is a Mayo Clinic physician, said the idea has merit because it promotes integration in a way proven to work well at Mayo.

Sources told the Minnesota Star Tribune that Fairview chief executive James Hereford presented a counterproposal to Cunningham and Essentia Health CEO David Herman on Feb. 9. Fairview described this as “an enhanced version of the asset sale outlined in the February 2024 letter of intent.”

This proposal, however, would involve a transaction, Herman said in a Friday interview, whereas the U and Essentia Health believe the merger idea would be “transformational.” He added, however, that Fairview remains “very important.”

“We’re looking forward to sitting down at the table and really discussing this in-depth,” Herman said. “We’re going to see what develops in the next week or two.”