Sanford, Fairview explore merger with goal of joining forces by end of 2023
Sanford Health and Minneapolis-based Fairview Health Services are pursuing a merger planned for completion by the end of 2023 that would combine the nation's largest rural health provider with a major Twin Cities health system.
FARGO — Sanford Health and Minneapolis-based Fairview Health Services are exploring a possible merger that would combine the country’s largest rural health provider with a health system with a major presence in the Twin Cities.
The two health systems — which once explored a possible merger in 2013 that sparked controversy in Minnesota — announced on Tuesday, Nov. 15, that they have signed a non-binding letter of intent to discuss combining to form a new health system.
The top executives of both health systems said combining the organizations, which have service areas that complement one another geographically, would create a strengthened organization with a greater breadth and depth of services benefiting patients and providers.
“Our organizations are united by a shared commitment to advance the health and well-being of our communities,” said Bill Gassen, Sanford’s president and CEO. “As a combined system, we can do more to expand access to complex and highly specialized care, utilize innovative technology and provide a broader range of virtual services, unlock greater research capabilities and transform the care delivery experience to ensure every patient receives the best care no matter where they live.”
The operating revenues of the combined system would exceed $13 billion, based on year-end financial statements for Sanford and Fairview in 2021 — making the combined system a top-10 nonprofit health system, according to the organizations. Sanford’s operating revenue was $7.1 billion, Fairview's was $6.4 billion.
Fairview, established in 1906, has 11 hospitals, including M Health Fairview University Medical Center, a partnership between the University of Minnesota, University of Minnesota Physicians and Fairview Health Services.
Gassen and James Hereford, president and CEO of Fairview, said the two health systems have a shared vision and values that would mesh well in a combined organization.
“With Sanford Health, Fairview Health Services has found a partner that shares our midwestern values and our commitment to affordable, accessible and equitable care delivery,” Hereford said.
“Our complementary capabilities mean that together, we are uniquely positioned to improve clinical outcomes, develop new care delivery models, expand opportunities for employees and clinicians across our broader operational footprint, and apply our combined resources to positively impact the wellbeing of our patients and communities today and for decades to come,” he added.
Based in Sioux Falls with a significant presence in Fargo, Sanford has 47 medical centers, 224 clinics and 200 senior care facilities as well as 47,757 employees, including 2,800 physicians and advanced practice providers. Fairview has 31,000 employees, including more than 3,300 providers, and more than 80 primary care and specialty clinics.
Patients at Sanford, which last year announced a $300 million initiative to improve rural access to health care through virtual visits, would gain access to Fairview’s specialists, Gassen said, citing it as one of the benefits patients would see from a merger.
Having access to specialists’ expertise, he said, “creates an incredible opportunity to better serve all patients.”
The merger talks started in late May, when Gassen and Hereford had dinner after appearing together in a panel discussion — a purely social meeting that turned into a business discussion of the strengths that would come from combining.
“We have more in common than we have differences,” Gassen said. “What was very evident was we’re stronger together than apart.”
Hereford said, “It was an energizing dinner to say the least,” with the discussion examining the future of health care and how joining forces would be beneficial.
Sometimes, top executives’ egos can get in the way of a merger that is mutually beneficial, Hereford said. Those considerations were put aside. If the merger is realized, Gassen would be the CEO of the combined organization, while Hereford would serve as co-CEO for one year.
“We’re really focused on what’s best for our patients and using that as the guide,” Hereford said.
Sanford and Fairview share a “Midwest sensibility” and vision, Gassen said. “That spirit carries us forward.”
Merging the two organizations will do more than provide greater economies of scale, Hereford said. “It is about an economy, but it’s an economy of innovation” that will be better for patients and providers.
Sanford has benefited from earlier mergers, including its merger with former MeritCare Health System, based in Fargo, and later mergers with health systems in Bismarck, North Dakota, and Bemidji, Minnesota, Gassen said.
The organizations intend to complete the transaction by the end of 2023, pending state and federal regulatory approvals, Gassen said.
An earlier exploration of a possible merger between Sanford and Fairview unraveled in 2013.
After the potential merger was disclosed in March 2013, officials in Minnesota expressed alarm, including then-Attorney General Lori Swanson, who had concerns about the possibility of assets leaving Minnesota and the future of the University of Minnesota Medical Center.
Swanson held a public hearing, and two Minnesota legislators introduced a bill to slow or halt the proposed 2013 merger, which Sanford abruptly called off in April, several weeks after the merger possibility first became public.
Asked whether the current merger proposal could encounter resistance, Gassen said the leadership of both Sanford and Fairview has changed in the past nine years.
“We both believe this is a much different situation,” Gassen said. “We have different leadership teams in both organizations. It’s a different environment.”
Last year, Fairview posted an operating loss of $132.5 million, and Sanford had net income of $205 million.
The Minnesota Nurses Association, which represents nurses working at Fairview facilities, criticized the proposed merger, saying executives of the two health systems are more focused on their financial bottom lines than on patient care.
"Nurses have one concern: to ensure quality care for our patients," the nurses union said in a statement. "That starts at the bedside and extends to our communities. Corporate mergers and healthcare monopolies threaten to increase costs for patients and often result in hospital and clinic closures."
The Minnesota Nurses Association said it opposes the merger and demands a "seat at the table in merger talks to ensure that the best interests of the community and nurses are included in decisions that will affect care access and quality of care."