Regents approve letter of intent to buy back U of M Medical Center from Fairview

Regents approve letter of intent to buy back U of M Medical Center from Fairview

Regents approve letter of intent to buy back U of M Medical Center from Fairview

The University of Minnesota took a big step forward Friday in its effort to reacquire its health care facilities on the Twin Cities campus.

The U of M Board of Regents approved a letter of intent (LOI) to advance discussions centered on the university buying back the University of Minnesota Medical Center and all of its assets. Fairview and University of Minnesota Physicians had already signed the agreement.

The medical center is the flagship location for M Health Fairview, featuring hospitals on the east and west banks as well as dozens of specialty clinics.

Fairview and the university have had an academic affiliation since 1997 but the sides agreed to not renew their current agreement — which runs through 2026 — back in November, although officials say they’re still discussing a potential new agreement to continue that affiliation.

The U of M first announced plans to regain ownership of the campus health care facilities early last year, two months after Fairview and Sanford Health announced a plan to merge. That led to concerns that an out-of-state organization could control the state’s academic hospital, thus jumpstarting plans for the university to buy the facilities back. However, Fairview and Sanford called off their merger back in July, perhaps reducing the urgency in reacquisition plans but not assuaging them entirely.

While the LOI approved by the regents on Friday isn’t binding, it signals a desire to advance talks to make the plan a reality.

“We are grateful for the collaboration and shared successes we have experienced with Fairview Health Services over the years — M Health Fairview patients and all Minnesotans are better off because of the work of our talented teams,” U of M Interim President Jeff Ettinger said. “We also agree we will need to step up in new and different ways for the future health of our state. This LOI, and the discussions ahead of us, are critical steps toward more fully integrating education, research, and patient care to better serve Minnesotans statewide.”

“This is a critical first step towards a new and reimagined relationship that will better meet the current and future needs of our patients and our community,” Fairview President and CEO James Hereford added. “Our patients and our employees, who contribute significantly to our success, will remain the heart of our organizations. Today’s announcement is designed to provide clarity on our collaborative path forward.”

A purchase price still hasn’t been determined, which will be a large piece of the equation. Last year, before the Fairview-Sanford merger was called off, the U of M said it would ask state lawmakers for nearly $1 billion for the first phase of its plan to buy back the medical facilities.

Still, if all goes according to plan, the first closing date on the reacquisition is set to happen by the end of 2024. At that time, the U of M will pay Fairview 51% of the agreed-upon purchase price, with the other 49% going into escrow until the second closing date, which is currently set for, at the latest, the end of 2027 — 30 years after the U of M and Fairview affiliation started. A new board with equally split membership would govern the medical center during the three-year transition period.

The U of M and Fairview say patient care and day-to-day operations won’t change during this time and no layoffs are planned. Additionally, the M Health Fairview brand will continue until a new agreement is reached. The sides set a deadline to strike a new agreement by Sept. 30, 2024, although they note that there is an option to extend their negotiation period.

Aside from reacquiring its medical facilities, part of the university’s five-point plan last year also included an idea for a new hospital, something the university called a five- to 10-year project that would cost more than $1 billion. The LOI notes that the university plans to still consider analysis and plans for creating a new flagship academic health center on the east bank.

The five-point plan was more broadly focused on creating a more robust academic health system. Gov. Tim Walz created a state task force to study the future of the U of M health system’s future in the wake of the Fairview and Sanford merger controversy, and the task force met seven times late last year before providing its report to the governor last month. That report notes that the U of M provided three recommendations to the task force, focused on programming, financial support for the academic health system and planning for new facilities.

“While the Task Force is generally supportive of these recommendations, members noted the need for additional financial details, transparency and accountability measures, as these proposals are further developed by UMN for consideration by the Legislature,” the report states. Several of the task force’s recommendations also note the “need for broader, forward-looking priorities and investments.”

With the new Minnesota legislative session set to start on Monday, the future of the U of M’s health system figures to be one of the more significant topics state lawmakers will have to face.