On 26 March, Minnesota Attorney General Lori Swanson telegraphed her concerns about a merger currently under consideration between Fairview Health Services — the second largest healthcare system in the Twin Cities — and South Dakota-based Sanford Health — one of the US’s largest rural healthcare providers. That the University of Minnesota’s Medical Center — the region’s primary research and teaching hospital — would likely be part of any merger only served to make the situation more worrysome.
Fairview is a Minnesota charitable trust that has grown to prominence largely through its tax-exempt status. As such, it has significant obligations to taxpayers and donors that cannot be vaporized with a corporate merger. Charitable trusts in Minnesota are regulated by the state’s attorney general.
“I am troubled by the notion that a small group of people at Fairview and Sanford would conduct private discussions without the benefit of the public’s input regarding a matter of such sweeping consequences for Minnesota,” Swanson told Tony Kennedy and Jeremy Olson, writing for the Star Tribune, in disclosing the negotiations. Kennedy and Olson report that Fairview’s board is scheduled to meet 8 April, presumably on the issue. Swanson has announced a public hearing for 7 April.
In a follow-up article, Jackie Crosby reports for the Star Tribune that Sanford Health had been negotiating with Allina Health — the largest healthcare system in the Twin Cities — for more than a year until that deal fell apart last year. Her source was Sanford Health President and Chief Executive Kelby Krabbenhoft. Sanford Health’s negotiations with Fairview began last fall.
Kennedy and Olson report that while Swanson has not yet filed suit against the merger, she put Fairview on notice with a letter in which she wrote “the assets that Fairview has accumulated over the years with public and private support should not be allowed to benefit Sanford’s expansion or other private business plans.” Swanson also noted that “a significant portion of Fairview’s assets are ‘restricted to being utilized for health-related activities for the benefit of Minnesota patients.'”
University of Minnesota General Counsel Mark Rotenberg told Kennedy and Olson that the University’s concerns focused around support for research and clinical training. Also of concern were governance of University physicians and how they manage medical facilities on the campus. The University transferred operational control of its medical facilities to Fairview in 1997.
Krabbenhoft decried descriptions of “takeover” or “acquisition” by Twin Cities media outlets and Swanson as “unfortunate.” But then he goes on to say that “We hope to start that [“process to actually achieve a merger”] soon.” Krabbenhoft even chums the waters a little, implying that the new corporation might be chartered in Minnesota.
[scribd id=132518210]Interestingly, not one of the corporate media outlets in the Twin Cities noted that Fairview was Accretive’s named partner in last year’s patient pre-billing debacle in their initial reports. Crosby, in her Star Tribune follow-up report, notes:
“Fairview was rocked by scandal in the past year after hiring a company that used abusive billing tactics to collect payment from patients. The fallout led to the ouster of Fairview Chief Executive Mark Eustis, who had hired Accretive as a consultant. Mooty, with a background in business and not medicine, remains an interim chief executive.”
The Accretive debacle wasn’t limited to Fairview. I wrote about about my experience with pre-billing after my last hospital adventure:
“When I go to United Hospital on an emergency basis, I find them to be highly professional, stunningly knowledgeable, and incredibly efficient. And I’m glad I had my valve job there. But when I go to United for fairly routine procedures on an outpatient basis, it’s like going to the circus. I suppose that’s better than the reverse.
“To be clear: I’m overjoyed with the medical care that I receive at United Hospital (else, why would I go back); it’s just that the administrative staff clearly went to clown college instead of regular college. It seems like they see their jobs to make your experience within the hospital’s confines as needlessly frustrating as possible. In emergency situations, you never run up against them.
“And the clowns are already out in full regalia. Last week I had to call to ‘register’ for the procedure. ‘Can you coordinate with the dialysis center to have them draw the blood work you need for this procedure the day before? It would save me one out of the hundreds of needles I suffer.’ Of course not. ‘You’re going to owe US$75 as your co-pay for this procedure. Would you like to pay that now?’ No on two counts: I’ve already met my annual out-of-pocket cap and I never, ever pre-pay for medical procedures. I always wait to receive an explanation of benefits (EOB) from my insurer. Oh, and guess what: Last April I had this same procedure in this same hospital. My wife had what they thought was a heart attack just after the surgeon told her I was fine. We’re still waiting for you to straighten out the billing on that one, five months later.
“The more I thought about it, the more being asked to pre-pay angered me. I called back and asked about the business process. Getting nowhere with the registration clerk, I asked to speak to a manager. After being disconnected, twice, the manager returned my call and said that they were asking for pre-payment merely as a ‘service to our patients.’ Really? I asked if she had heard about the recent lawsuit that the Minnesota Attorney General filed against Fairview Health Services and Accretive Health, the former outsourced collection agency for Fairview. Of course she had. Everyone had. Accretive was accused of violating patient privacy and forcing patients — including emergency room patients — to pre-pay prior to being treated, in likely violation of federal law. In the end, Accretive agreed to pay a US$2.5 million fine and was banned from doing business in Minnesota for six years.
“The manager, Leah Zacher-Anderson, steadfastly maintained that there was no insistence that I pre-pay, that this was just a ‘service to our patients’ and it had been cleared with Allina Health System’s (United Hospital’s corporate parent) legal department. Queue the circus music. I have to clear their gauntlet before seeing the first medical professional.”
And there’s also history between Sanford Health and Swanson. Kennedy and Olson report that Sanford Health failed to file a copy of its 2011 tax return with Swanson’s office and in December 2011, that office revoked Sanford Health’s nonprofit registration in Minnesota.
Fairview generates more than US$2 billion in revenue, reported more than US$129 million in net income in 2012, enjoys a net worth of about US$1.2 billion, and employs about 22,000 people in Minnesota. Sanford Health reported US$63 million in operating income in 2011 and employs more than 26,000 people across eight states. It’s the largest employer in both North Dakota and South Dakota.
Update: Friday, 5 April 2013 12:43PM CDT: Tony Kennedy, Jenna Ross, and Jackie Crosby, writing for the Star Tribune, report that the University of Minnesota has proposed a takeover of Fairview Health Services, pre-empting any merger between Fairview and Sanford Health. Because Fairview is a Minnesota charitable trust, the University would not need to spend any cash for the acquisition.
In the deal proposed by University President Eric Kaler in a letter to Fairview’s chief executive, Chuck Mooty, the University would assume all of Fairview’s assets and liabilities. The University’s acquisition of Fairview would be the “best choice for our patients and communities, our state, and our physicians, staff, and students,” Kaler wrote. The Strib reports that Kaler has not received much of a response from Fairview but a meeting with the Fairview board is scheduled for next week. The Strib report also indicates that the University’s Board of Regents is supportive of Kaler’s plan.
Update: Thursday, 11 April 2013 10:36AM CDT: On 10 April, Sanford Health announced it was withdrawing from its merger negotiations with Fairview Health Services. The announcement comes three days after Minnesota Attorney General Lori Swanson held a public hearing to ascertain if the proposed merger was in the best interest of Fairview and the state.
Here are the first two grafs of Sanford chief executive Kelby Krabbenhoft’s media release:
“While it was always assumed that this merger of equals would create something uniquely special and important, it was never suggested that either party was ‘acquiring or controlling’ the other. Those terms were never contemplated because they would be rejected on their face as unacceptable to each of these historic, charitable, and successful organizations. Nonetheless, this misperception has been created to serve an agenda that undermines the good faith and emerging trust that is essential in any contemplated merger of this sort.
“Sanford Health has a philosophical policy of ‘only going where we are invited,’ and it seems as though the incredibly positive beginnings to discussions of the merger of Fairview Health and Sanford Health, has turned into a situation that finds us being unwelcome by some interested parties and key stakeholders of our proposed merger partner. It is inconceivable and unacceptable to me that we would ever propose a merger without the affirmation of these parties.”
Jackie Crosby and Tony Kennedy, writing for the Star Tribune, report that shortly after Sanford released Krabbenhoft’s statement, University of Minnesota President Eric Kaler “said Fairview’s board won’t consider a proposal he made in January for the University to take over the hospital system. Instead, the two sides will talk about strengthening the existing arrangement in which Fairview has run the University’s medical center since 1997.”
We’ll almost certainly never know what really happened in this set of negotiations, and good on Swanson for shining a strong light where it was desperately needed. Somehow, I just know the state of Minnesota and its citizens managed to dodge a very large bullet.
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Fairview and Sanford sitting in a tree was originally published by ARTS & FARCES internet on Thursday, 4 April 2013 at 8:18 AM CDT. Copyright © ARTS & FARCES LLC. All rights reserved. | ISSN: 1535-8119 | OCLC: 48219498 | Digital fingerprint: 974a89ee1284e6e92dd256bbfbef3751 (64.237.45.114)