Lawmakers question timeline, cost of U of M's nearly billion dollar plan to acquire Fairview facilities
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The University of Minnesota’s plan for a medical campus had its first hearing before legislators, some skeptical of the cost and timing involved in the purchase several buildings on its campus from Fairview Health Services.
South Dakota-based Sanford Health and Fairview announced that they intended to merge in November. A few months later, in January, the University announced its plan for the future of its campus. That plan, which was accelerated by the merger proposal, involves sole control over the medical facilities on campus, including several buildings currently owned by Fairview.
Taking possession of those buildings — including the medical center — depends on financial support from taxpayers. Two weeks ago, the University revealed the estimated cost of the plan, $950 million. That includes $300 million to acquire the buildings, as well as funding for staff and other expenses.
In the Tuesday hearing, some legislators focused on the U’s timeline to control facilities since the U and Fairview are currently in an agreement set to last until 2026.
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“I do not know that the state of Minnesota needs to commit a billion dollars to this, at this point, when we have so little information about the valuation of the properties, whether charitable or fair market value, where we really don't have clarity on so many aspects of this agreement,” said Rep. Kristin Robbins, R-Maple Grove. “I personally hope that we allow ourselves the time of the contract to figure this out, and what's in the best interest of the state.”
The hearing comes just a day after two letters were sent between the University of Minnesota and the two CEOs of Sanford and Fairview. The letters, which were provided to MPR News by a representative close to the proposed merger, provide some insight into where things stand inside the negotiations.
The first letter, signed by Sanford CEO Bill Gassen and Fairview CEO James Hereford, said the two organizations “support and formally endorse the University’s five-point plan” and suggest they get started on the process to have the University purchase the buildings.
“Given the University’s stated date of March 1, 2024 for a complete transfer of operations, we hope this work, together, can begin immediately,” the letter read. “To facilitate this process, we propose Fairview and the University enter into a Memorandum of Understanding which defines the process and structure of the University’s acquisition of the assets, including identification of a mutually agreed upon process using third party financial advisors to determine the value of the assets.”
But University officials said in their response letter that while they consider the organizations’ support of their five-step plan to be “a good step forward,” the MOU is not enough.
“Our position is that we need to analyze the academic health practice and those assets that have been contributed to that enterprise, and how do those assets get to continue on, to make sure that they continue to support the University of Minnesota’s academic health mission,” said Frans, who cosigned the letter along with the U’s medical school Dean Jakub Tolar, to lawmakers during the hearing. “The idea of a sale doesn't give credence to the charitable nature of these assets and how they need to be treated under law.”
Frans also raised concerns to lawmakers about who would ultimately be making decisions if the merger went forward before they were able to sort out the University’s future.
“Our concern is that once the merger happens, it'll be much more difficult for the university or the state of Minnesota to make sure that those charitable assets are used in the way that they should be to support the mission of the university,” he said.
The University has asked the two organizations to “pause” the proposed merger until an agreement is reached.
During the hearing, lawmakers said they’d need more information about the U’s business plan for the facilities before they support the budget request.
“You're going to be in many committees. [We] would like to see that in numbers, and demonstrate it out,” said Rep. Marion O'Neill, R-Maple Lake. “Because just like if you're gonna go to a banker, and you had to take out a loan for whatever it is, you're gonna have to show them your business plan.”
Some also advocated for financial information to come from Fairview, so lawmakers can see how money has been allocated.
“I think we need to be able to also see the balance sheets, and the profit/loss statements of M [Health] Fairview,” said Rep. Ginny Klevorn, DFL-Plymouth. “What is the rush here? Let us see what's happening.”