What you need to know about the Sanford-Fairview mega-merger

How do you unscramble eggs?

And if you could figure out how, what would it cost?

The questions come to mind with the unfolding saga of Sanford Health's proposed merger with Fairview Health Services.

Fairview owns the University of Minnesota Medical Center and U leaders have not been supportive of the merger. The impasse prompted Sanford's CEO to suggest the university might want to reacquire the teaching hospital and the U is now pursuing that option.

The University of Minnesota Medical Center isn't just a building — it's actually four somewhat distinct operations on opposite sides of the Mississippi River with different pieces owned by the U and Minneapolis-based Fairview.

The main teaching hospital on the East Bank campus is owned by Fairview, although the U owns the land underneath. Fairview's ground lease has an auto-renewal clause, the health system told the Star Tribune, and "the U doesn't have the authority to take the land back."

The U owns both the land and the building at M Health Fairview Clinics and Surgery Center- Minneapolis, a large structure for outpatient care that opened in 2016 on the East Bank campus.

Fairview has a lease for clinics in part of the building. The rest is leased by a joint venture between Fairview and University of Minnesota Physicians, the nonprofit that runs the group practice for U doctors.

Over on the West Bank, Fairview owns the land and the buildings at Masonic Children's Hospital as well as the old Fairview Riverside hospital.

Which pieces would Fairview be willing to sell? The U wants all four parts, but at what cost?

Here are other things you need to know about this complex merger that could significantly shake up the market for hospital and clinic care across Minnesota:

Q: Why do Sanford and Fairview want to merge?

A: Sanford is the largest rural health system in the country. Fairview is a large hospital and clinic operator in the Twin Cities metro, with some facilities in northern Minnesota, as well.

Executives say the geographic footprints are complementary. They contend the combined health system would be better positioned for bringing patients good access to high-quality and equitable care.

Economists argue that health systems pursue mergers in part to gain leverage for negotiating higher payment rates from health insurers. Combinations can lead to more efficiency, they say, but health systems often don't pass along savings to consumers. Some are skeptical that mergers, in general, will help much with current financial challenges at hospitals.

Q: Would this be a take-over by a South Dakota health system?

A: The new system would be called Sanford Health with headquarters in Sioux Falls. Sanford's CEO Bill Gassen would lead the combined system. Fairview chief executive James Hereford would be co-CEO for one year after the closing. The health system would maintain a corporate office in the Twin Cities.

Q: What's the timeline for this?

A: The two health systems first announced intentions to merge in November. On Jan. 10, Minnesota Attorney General Keith Ellison said he believed the health systems were trying to complete the merger by March 31. Myron Frans, the senior vice president of finance and operations at the U, said on Jan. 12 he thinks an end-of-March closing is too quick to resolve the university's unanswered questions with the merger.

Q: Why is this merger proposal getting so much attention?

A: Most health care mergers of this size attract some interest. The new health system would employ about 78,000 people while operating more than 50 hospitals across the Dakotas and Minnesota.

This merger is unique, however, because of its potential impact on the University of Minnesota. The U's medical school trains about 70% of all practicing physicians in the state. For decades, Fairview has run the primary teaching hospital for doctors-in-training at the U. Fairview also provides financial support for the U's academic medicine mission, which goes beyond teaching to include medical research and direct patient care.

This year, Fairview is providing more than $83 million to support medical education, research and patient care at the U. Fairview, the U and a group called University of Minnesota Physicians jointly market health care services under the brand M Health Fairview.

Q: Why doesn't the U support this merger?

A: University officials say that the merger has been proposed primarily for business reasons. Health care analysts note that Sanford has tried and failed to complete other large mergers in recent years to continue its growth trajectory. Fairview, meanwhile, has had several years of operating losses, making the health system relatively weak financially among its peers in Minnesota.

The U says the primary question should be: How would a merger affect the health care mission at the university? Until the impact for the U is better understood, the university says state leaders should block the merger.

An affiliation agreement calls for Fairview to continue providing financial support to the U through 2026. It's unclear what happens after that date.

Q: The U wants a new hospital that would cost more than $1 billion?

A: Yes, but the plan is vague. The university doesn't have precise estimates for what the new facility would cost or when it would be built. At a Jan. 12 news conference, Frans suggested that a new hospital of the size the U is considering can't be built for less than $1 billion; he suggested construction would take five years following a ground breaking. Plans for the hospital, which would be at the eastern edge of the Minneapolis campus, are at a beginning stage.

Before building a new facility, however, the U wants to take back the medical center currently controlled by Fairview. It's not clear how much the university would have to pay, although U officials said taxpayer support would be needed.

Q: What does the merger have to do with access to abortion and health care services for LGBTQ communities?

A: Doctors at the U perform a relatively small number of abortions each year in medically complex situations within Fairview hospitals. They want abortion access to continue and are concerned it might be curtailed with a Sanford-Fairview merger.

Sanford says its physicians provide medically necessary abortion care in accordance with the applicable state and federal laws where the health system operates. Fairview says there will be no change in access to abortion with the merger — policies will continue to be driven by medical leadership.

The health systems say gender-affirming care sought by transgender patients will continue to be provided across the Sanford and Fairview health systems. Patient advocates raised concerns about the future of services for LGBTQ communities during the Jan. 10 public meeting in St. Paul.

Q: Would a merger be bad news for union workers at Fairview?

A: Several unions have spoken out against the merger including SEIU Healthcare Minnesota & Iowa, Minnesota Nurses Association, Minnesota Farmers Unions and MN AFL-CIO. Health care workers represented by unions voiced opposition during the public meeting in St. Paul, saying they believe the combination would threaten union contracts.

Hereford said that both Sanford and Fairview have long had unionized workforces in Minnesota. The new health system would continue, he said, to honor collective bargaining agreements.