As deadline looms, ‘big, complex’ deal to buy U of M Medical Center still unresolved

With the deadline for a definitive agreement less than three weeks away, the University of Minnesota’s new president says a final decision on the future of the University of Minnesota Medical Center depends on complicated details that still are being analyzed.

“The complexity of the issue at hand is deep,” Rebecca Cunningham said in an interview during a break Thursday from public meetings with the U’s Board of Regents.

The university is exploring whether to reacquire the medical center, which currently is owned by Fairview Health Services. The nonprofit health system acquired the Minneapolis teaching hospital in a financial bailout in 1997.

In February, Fairview and the U announced a nonbinding letter of intent for the university to purchase the facility. The parties are supposed to reach a definitive agreement by Sept. 30.

“We have aspired to the deadlines outlined in the [letter], but the most important thing is that we get these agreements right,” the university and Fairview said in a joint statement. “Our work continues with a focus on outcomes that would best serve our patients and our dedicated personnel, and that align our efforts and partnerships with the future health care needs of our state.”

The University of Minnesota Medical Center is one of the state’s largest hospitals. It’s a complex that spans the Mississippi River including an inpatient facility for adults and large outpatient clinic and surgery building on the U’s East Bank campus, plus a pediatric hospital and inpatient mental health facility near the West Bank campus.

The medical center is the primary teaching venue for students at the U Medical School and a hub for the university’s graduate medical education programs. About 70% of practicing physicians in Minnesota completed at least some of their training at the U, whether undergraduate medical education or residency/fellowship programs.

Cunningham is a physician who became the U’s president this summer after years in top leadership at the University of Michigan, which owns and operates its primary teaching hospital in Ann Arbor plus an affiliated network of medical centers and clinics.

Asked if she thought the University of Minnesota should buy the medical center complex in Minneapolis, Cunningham said: “That’s the ongoing conversation right now. We’re looking at all the details. It’s a big, complex decision with many moving parts and we’re in the middle of doing all of that important data discovery, and data analysis, so we can make that decision.”

The comments came after a meeting of the regents special committee on academic health. The group met for more than an hour in Minneapolis, but committee members barely mentioned the looming deadline.

Among the unanswered questions about the proposed deal: How much would the U have to pay Fairview to purchase the medical center?

Cunningham said she has talked previously about how it’s important for the U to govern its mission and priorities in academic health. That’s because the university has key roles to play for the state in training heath care professionals, she said, and providing patients with access to care.

Asked why the U can’t govern its mission and priorities through the existing partnership with Fairview, Cunningham said: “Those are all the data analysis components that we’re examining right now, all the options. ... It’s very complex, a lot of moving parts, many years of history. My job right now is to … have the teams extract all the data and then come to a great decision when the decision is ready.”

Cunningham did not say the Sept. 30 deadline is unworkable.

“We’re in ongoing conversations,” she said. “Everyone is working.”

The letter of intent established a ticking clock not only for reaching a definitive agreement by month’s end, but also for the U to pay Fairview 51% of the negotiated price for a majority stake in University of Minnesota Medical Center by the end of this year.

Funds for the health system’s remaining stake would be placed in escrow. That money would transfer when the deal finally closes by the end of 2027.

In May, U officials introduced to the regents a team of consultants who are advising administrators on the proposed acquisition. In response to a Star Tribune data request, the U said this week that it’s paid those consultants more than $1.5 million so far.

At a board retreat in July, Cunningham said her initial assessment suggested there was “a lot to be proud of” in the ongoing partnership between the U and Fairview. The health system, which is Minnesota’s fourth-largest nonprofit group, operates a broad network of hospitals and clinics including Fairview Southdale in Edina and St. John’s in Maplewood.

These operations have been jointly run by Fairview and the U with the brand M Health Fairview since they re-negotiated their affiliation agreement in 2018. This agreement significantly increased the health system’s annual financial support to the university, but Fairview officials now say they can’t afford going forward with the higher payments.

The U and Fairview are negotiating terms for a new long-term affiliation in tandem with the talks about the possible sale of the medical center.

“If the university is expected to effectively serve the state and maintain the medical school’s stature, then we have to govern our health care mission to match up our world class faculty with world class clinical health care delivery,” Cunningham told the regents during the retreat in July. ”Every top medical school either owns or has a strong partnership with a clinical health system.”

During the board retreat, Cunningham said her administration needed data from Fairview to develop a valuation for University of Minnesota Medical Center as well as sound financial projections for its future operations.

In negotiations over the deal, Cunningham said she would “strive for a solution that’s win-win with Fairview and the university. Any good negotiation strives for a win-win.”