Essentia Health and the University of Minnesota are in early talks to form a new nonprofit “all-Minnesota health system solution” the organizations said would address healthcare issues in the state, such as high costs and workforce shortages.
The pending entity was announced by both organizations Friday as a “broad framework” that would receive $1 billion of new investment over the next half decade.
The $3 billion Essentia said the agreement would secure its access to the university’s pipeline of new clinicians and “open the door to significant re-investment in rural healthcare and increased access to elevated levels of specialized care,” according to its release.
“Essentia Health has a long and committed partnership with the University of Minnesota,” Essentia CEO David Herman, M.D., said. “With nearly 70% of all Minnesota physicians having been trained at the university, we know that continuing to deliver excellent patient outcomes while building a sustainable health care future rests on the foundation of a strong medical school.”
The university’s announcement reiterated that the new model would translate to career opportunities for healthcare professionals, investments into on- and near-campus medical facilities and broader patient access to the research university’s clinical trials and other care innovations.
"This would be possible by leveraging the assets of the combined proposed system to unlock financing, and the vision for our shared future to inspire philanthropic support for this not-for-profit all-Minnesota solution," the university said.
More broadly, the pair said their proposed model would “decrease clinical costs, allow more sustainable and innovative models (e.g., home health, telehealth, pharmacy services) and scale expensive healthcare technology for use across a large system.”
“This bold new path would shift us away from business as usual and position us to join with Minnesotans in the years ahead to address our state’s challenges head-on and deliver real transformational solutions in healthcare,” University of Minnesota President Rebecca Cunningham said in a release.
The organizations did not specify the operating structure of their proposed entity and did not characterize their plans as a merger or integration.
The announcement is a curveball for Fairview Health, with which the University of Minnesota had been renegotiating their joint clinical enterprise. M Health Fairview was formed in 2018 after more than two decades of collaboration but is set to expire at the end of 2026.
A letter of intent signed in February 2024 outlined plans for the university to buy out four academic health facilities of the M Health Fairview University of Minnesota Medical Center by Dec. 31, 2027.
At the time, the university said it had provided Fairview with a notice of non-renewal for M Health Fairview and that it and its physician group would be hashing out new agreements with the nonprofit health system. Just last month, an open letter from Cunningham and other leadership said the asset purchase plan was still ongoing while the university reconsidered its operations and physician group governance structure to create “a reimagined, U of M-led health system.”
“The conclusion of existing M Health Fairview agreements in 2026, along with our ongoing collaboration with Fairview to forge a new path, presents an exciting opportunity to build and implement this vision for the future,” leadership wrote. “We must invest now to further strengthen the University’s position and prepare for our successful shared future."
The university and Essentia wrote in their Friday announcements that they have informed Fairview of their proposal.
“We are at an inflection point in our relationship with Fairview Health Services that requires an urgent and innovative solution,” Cunningham said. “We envision this model as a new path forward in our relationship, one that builds on the momentum all those at M Health Fairview have built and that continues to put patients first, consistent with our organizations’ shared priorities. We have begun conversations and invite further discussion with Fairview to bring this concept to life for Minnesota.”
Duluth, Minnesota-based Essentia Health runs 14 hospitals and employs more than 15,000 people. The nonprofit reported just under $3 billion of revenue during the fiscal year ended June 30, 2024, as well as a $20.4 million operating income and $163.5 million bottom line.
Earlier that year, it scuffed a pending deal to merge with Wisconsin-based Marshfield Clinic Health System to form a 25-hospital system. Minnesota Attorney General Keith Ellison had been reviewing that deal in line with 2023 legislation giving his office the authority to scuttle healthcare deals—and so would be slated to look over the proposal from Essentia and the University of Minnesota.