Planned Minnesota health system merger unravels

For months, the University of Minnesota has touted the potential benefits of a Minnesota health system formed by a merger of Essentia Health and Fairview Health Services.

The University of Minnesota has proposed a merger of Essentia Health and Fairview Health Services, but Essentia has dropped out of talks. Pictured: University of Minnesota Medical Center.

The university and Essentia also proposed an investment of $1 billion over five years to create the system.

Now, that vision apparently may not be coming to fruition.

Essentia has pulled out of talks with the University of Minnesota about a merged system, but remains in discussions about a partnership with the university regarding the medical school, MPR News reports.

The university continues to talk with Fairview, which has operated the University of Minnesota hospitals for years.

However, Fairview’s partnership with the University of Minnesota is slated to end in 2026. Fairview had previously opposed the university’s pitch to merge with Essentia, saying it wished to remain independent.

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The University of Minnesota is engaged in direct talks with Fairview, said Heather Carlson Kehren, a university spokeswoman. The university is also engaged in broader talks with Essentia Health and other partners "on an academic health system to meet the needs of all Minnesotans," she said in an email.

"The University remains committed to achieving a solution that includes a relationship with Fairview, but it will be different than the status quo. We believe there is room for continued conversation with Essentia Health, and we invite other providers to help us build solutions to meet the urgent healthcare challenges facing the state today and in the future," she wrote.

The Minnesota attorney general’s office has been leading talks with the three organizations to try and orchestrate an agreement. The attorney general’s office reviews hospital mergers and acquisitions.

Lois Quam, the state-appointed mediator, said in a statement that negotiations for a new agreement are continuing.

“It’s normal and to be expected that in working to reach an agreement on an issue as complex as this one, negotiations would take some time. The parties are to be commended for the great staying power they’ve shown and for staying at the table,” Quam said in a statement released by the attorney general’s office.

‘All understand the importance to the people of Minnesota of stability and continuity in patient care, research and training Minnesota’s future doctors,” Quam said. “We are making meaningful progress and I expect we will reach a fruitful agreement.”

Rebecca Cunningham, president of the University of Minnesota, said in a statement on the university’s website last week, “Thus far, our good-faith efforts to reach an agreement with Fairview have not been successful, but we remain committed to discussions with Fairview, Essentia and other Twin Cities and Minnesota providers.”

“We still have a path forward,” Cunningham said.

In a proposal sent to Fairview earlier this year, Essentia and the university said they are looking to form a new, singular non-profit system, instead of an alliance of separate facilities. The university and Essentia said at the time that they hoped to close on a transaction by the end of 2025.

However, Fairview had balked at merging with Essentia.

The university has said that any deal in a partnership must ensure the sustainability of the University of Minnesota Medical School.

Cunningham also said in the statement that a potential agreement “must fairly compensate our faculty physicians and maintain our on-campus hospitals.” She also said an agreement must guarantee an “appropriate governance role” for the university and its board.

Fairview had planned to merge with Sanford Health, but the systems met opposition from some elected officials and they announced in 2023 that they were dropping their consolidation plans. Sanford eventually merged with the Marshfield Clinic Health System, completing that deal earlier this year.

An integrated health system, Essentia operates 14 hospitals and serves patients in Minnesota, North Dakota, and Wisconsin.

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