University of Minnesota paid $2 million in legal fees on UCare litigation

The University of Minnesota spent more than $2 million on legal fees in its dispute over board composition at UCare, according to data obtained through a records request by the Star Tribune.

Officials at UCare — a Minneapolis-based health insurer — did not say how much they spent on lawyers handling the case, which stretched for 10 months in Hennepin County District Court before a settlement announced last week.

The agreement calls on UCare to make four payments of $25 million each to the University over the next three years, while the U will relinquish its majority position on the UCare board of directors.

The U's Department of Family Medicine created UCare in 1984, and the University for many years has appointed eight of 15 board members at the health plan.

"This unique case required a significant amount of briefing and multiple court hearings, particularly at the outset, as the University sought, and the court granted, a preliminary injunction preventing UCare from altering the composition of its board pending the litigation," the University of Minnesota said in a statement to the Star Tribune. "This ruling, in our view, paved the way to a successful outcome for the University."

UCare is the state's largest HMO for Minnesotans covered by Medicaid, the state-federal program for lower-income and disabled residents. In addition, many seniors receive their government-funded Medicare benefits through health plans sold by UCare, which is one of the state's largest nonprofit groups.

"As the defendant to the case, UCare acted in its members' best interests to preserve its board's independence," the health plan said in a statement to the Star Tribune. "The final agreement allows UCare and the University to continue collaborating to reduce health disparities within our communities."

The U did not say why it resorted to litigation — rather than the will of its board majority — to reach the final agreement. At the outset of the case, the U sought a temporary restraining order to stop UCare from adding board members, which would have reduced university control.

From the start of the legal proceedings, the state attorney general urged an out-of-court settlement of the dispute.

"Recognizing that the public interest would be best served if the parties could avoid a costly public dispute, the State vigorously advocated for the parties to resolve the dispute outside of litigation," Carol Washington, an assistant attorney general, wrote the court in a Nov. 4 letter.

The litigation, which the U initiated in November, suggests a history of tension between leadership at the University and the health plan.

The University purportedly opposed a 2017 plan for UCare to merge with Fairview Health Services, as well as UCare's attempt last year to a win a managed care contract in Iowa's Medicaid program, according to partly redacted sections of one court filing.

Prior to the settlement, UCare periodically made grants to the U's Department of Family Medicine including payments worth about $28 million between 2018 and 2021, according to a Star Tribune review of the health plan's financial statements.

With the money from the new agreement, the University plans a series of investments for better access to health care in rural and urban communities while improving programs for family medicine, mental health and aging residents.

"The resolution that was reached with the help of our lawyers ensures that the University is in a position to advance access to quality health care to underserved Minnesotans, consistent with the University's goal in founding UCare," the U said in its statement.

"We look forward to applying the four, $25 million payments UCare is paying the University to settle the litigation to a number of our health care programs that benefit Minnesotans directly, including many designed to serve those who need it most."