Sanford Health, Fairview Health Services' 58-hospital merger deal is no more

Sanford Health and Fairview Health Services have called off their 58-hospital merger plans after multiple delays and opposition from “certain Minnesota stakeholders,” the former system announced Thursday evening.

The deal was announced in November and would have yielded an organization employing nearly 80,000 people that, according to the nonprofits, would improve care quality, outcomes, patient experience and equity across their home states.

Originally set to close on March 31, it was bumped back to May 31 and then postponed indefinitely after requests from the Minnesota Attorney General for time to review the deal.

“This is the right decision for our patients and residents, our people and the communities we serve,” Bill Gassen, CEO and president of Sanford Health, said in the announcement. “We remain committed to providing world-class care to patients across our footprint. We are extremely grateful for the support we have received from many Minnesotans who share our vision to invest in healthcare delivery and enhance access to care in both rural and urban areas.” 

The deal—Sanford and Fairviews’ second merger attempt following a failed bid back in 2013—has faced external opposition and scrutiny nearly since the get-go.

Alongside thousands of public comments submitted to the attorney general’s office or voiced during public hearings, local stakeholders voiced concerns that the University of Minnesota’s hospitals, owned by Fairview, would become governed by an out-of-state entity should the deal go through. Sanford is based in Sioux Falls, South Dakota, whereas Fairview is headquartered in Minneapolis.

At one point, the university requested nearly $1 billion from the state so that it could buy back its healthcare facilities from Fairview prior to the deal’s close.

In late May, Minnesota legislators and Gov. Tim Walz enacted a new law that would give the attorney general more power to enjoin and unwind any healthcare transactions that would hamper the school’s M Health Fairview University from pursuing its public care mission, put the school under the control of a for-profit or out-of-state entity, or otherwise damage market competition in the state. Statements from the organizations shortly after the bill’s passage suggested that they were still interested in closing the deal.

Labor groups were also staunchly opposed to the deal over concerns that the merger could increase care costs, limit access to care and hamper workers’ jobs and working conditions. In a Thursday statement, the Minnesota Nurses Association, Minnesota Farmers Union and SEIU Healthcare Minnesota & Iowa celebrated the news.

“This news is a big win for Minnesotans who want our state to be a leader in providing world-class healthcare for families in our state,” SEIU Healthcare Minnesota & Iowa President Jamie Gulley said in a statement. “By standing up in opposition together as patients, healthcare workers and community supporters, we were able to stop this corporate consolidation that was bad for patients, bad for workers, and bad for Minnesota.”

“Minnesotans have come to expect a high standard of care and nurses are relieved that we will continue to be able to provide that care and protect our profession,” Minnesota Nurses Association President Mary Turner said in a statement.

In follow-up comments, a Sanford representative said that the system’s board had made its decision to call off the merger at noon on Thursday, with Fairview leadership being notified shortly after. Sanford’s statements did not point to any specific roadblock that had torpedoed the deal.

“The significant benefits we identified for a combined system with Fairview Health Services compelled us to exhaust all potential pathways to completing our proposed merger,” Gassen said in the statement. “However, without support for this transaction from certain Minnesota stakeholders, we have determined it is in the best interest of Sanford Health to discontinue the merger process.” 

Sanford Health is the larger of the two systems and often describes itself as the country’s largest rural health system. It employs about 48,000 across 47 medical centers, 224 clinics and hundreds of other facilities. It serves over 1 million patients and 220,000 health plan members, according to its website, and each year logs 5.2 million outpatient or clinic visits, nearly 83,000 admissions, about 128,000 surgeries and procedures and roughly 195,000 emergency department visits.

Fairview Health Services employs about 31,000 people across 11 hospitals as well as dozens of clinics, pharmacies and other facilities. It includes a network of over 5,000 doctors after merging a few years back with fellow Twin Cities system HealthEast and due to partnerships with University of Minnesota Health specialists.

Sanford and Fairview’s ill-fated deal comes about a decade after their first attempt to merge, which was similarly hamstrung by the state’s attorney general due to concerns involving the University of Minnesota’s teaching hospital.

It's also the latest in a string of failed combinations for Sanford. Those attempts included an $11 billion merger planned with UnityPoint Health in 2019 and a failed 2020 combination with Intermountain Healthcare, the latter of which came after the sudden resignation of controversial Sanford CEO Kelby Krabbenhoft.

Even without Sanford and Fairview’s deal, there’s plenty of M&A action brewing in the Midwest.

Last October Minnesota-based Essentia Health and Wisconsin-based Marshfield Health System kicked off plans to form a 25-hospital nonprofit servicing over 2 million rural and mid-urban Midwest residents. Just yesterday those efforts took a major step forward when the two announced they had signed an agreement to integrate.

In April, Wisconsin nonprofits Froedtert Health and ThedaCare signed a letter of intent to combine and form an 18-hospital system. Pending due diligence and regulatory approvals pan out, the systems said they hope to put together a definitive agreement and then launch the combined health system before the end of the calendar year.

Finally, just a few weeks back, St. Luke’s Duluth in Minnesota and Aspirus Health in Wisconsin signed a letter of intent to join and form a nearly 14,000-person, 17-hospital entity. That deal aims to close in early 2024.