Sanford Health Withdraws From Fairview Partnership Discussions

MINNEAPOLIS (AP) — South Dakota-based Sanford Health pulled the plug on its merger discussions with Minneapolis-based Fairview Health Services on Wednesday, citing the hostile reception the proposal has faced in Minnesota.

Sanford Health CEO Kelby Krabbenhoft said in a statement that his health care system has a policy of "only going where we are invited." He said discussions with Fairview had "incredibly positive beginnings," but added that Sanford now finds itself "unwelcome by some interested parties and key stakeholders of our proposed merger partner."

Fairview is one of Minnesota's largest health care providers with nearly 100 clinics and eight hospitals including the University of Minnesota Medical Center. Sioux Falls-based Sanford Health runs 35 hospitals and more than 140 clinics in eight states.

Minnesota Attorney General Lori Swanson exposed the merger discussions last month and held a hearing Sunday to air her concerns about putting the Fairview system under the control of an out-of-state company. The university, meanwhile, advanced its own proposal to acquire Fairview.

"It is inconceivable and unacceptable to me that we would ever propose a merger without the affirmation of these parties," Krabbenhoft said.

Krabbenhoft said Sanford Health would re-engage only if Fairview and the university work out their relationship and secure a "positive understanding" from Swanson.

"Until those conditions seem resolved it appears prudent for Sanford to disengage from this effort and will do so immediately," he said.

Chuck Mooty, Fairview's chairman and interim CEO, issued a statement saying he's disappointed but respects Sanford's decision. He also said Fairview won't consider the university's proposal to acquire Fairview and will now proceed with recruiting a new CEO.

"Clearly, we need to ensure strategic alignment between us before we can advance new ideas for the future," Mooty said. "However, we feel it is not the time to discuss any proposal that involves the university acquiring Fairview. As a result, our work to evaluate that proposal will stop."

Swanson issued a statement saying the last few weeks had given Minnesotans the chance to participate in a dialogue about the impact of the deal. She said she had not spoken with Fairview or university officials since receiving Sanford's statement, but added that she appreciated Fairview's announcement that it will now hire a new CEO.

"That's great that they've decided to take a step back," said Rep. Dan Schoen, DFL-St. Paul, another critic of the proposal.

In an email Wednesday to University of Minnesota leaders, university President Eric Kaler said he is disappointed that Fairview won't consider the university's proposal to acquire Fairview, "given my strong belief that the status quo is not sustainable." The university is not commenting on Sanford's decision and is not granting any interviews, university spokesman Chuck Tombarge said.

After Sanford's discussions with Fairview came to light, Schoen and Rep. Joe Atkins, DFL-Inver Grove Heights, introduced a bill that would block any entity from outside the state from taking control of the university's hospitals. Schoen said that bill didn't specifically target Sanford, and that the larger concerns of any outsider taking over a Minnesota-based health system still need to be addressed.

Atkins expressed similar concerns. He said he still intends to hold hearings on the legislation and that he wants Fairview's chief executive to attend.

"Another non-Minnesota-based entity could still try to acquire Fairview and we would once again be in the same potential situation where the University of Minnesota Medical Center would be not under Minnesota control. The bottom line is that the University of Minnesota Hospitals ought to always be controlled by folks based right here in Minnesota."

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