Monday, February 6, 2023

Hospital Mergers and Protests

Merger-and-acquisition-lawLast time I blogged here, I did a number of posts about sketchy conduct by nonprofit hospitals. The New York Times and the Wall Street Journal did some great investigative journalism about that.

Last week, on Twitter, I came across a thread about another hospital issue: the proposed merger of Minnesota's Fairview Health Services and South Dakota's Sanford Health.

Apparently the two tried to merge in 2013 to, let's say, less-than-stellar results. And how is this attempt going? Not much better. On Friday, medical professionals and med students at the University of Minnesota medical school rallied against the proposed merger. Protestors seem to have two objections. The first is, they don't want the University of Minnesota's health care system controlled by an out-of-state entity.

More importantly, they point to the fact that mergers in the nonprofit health care industry almost inevitably lead to consolidations, job loss, and loss of care for patients who use the health care system. And it's hard to argue that they're wrong: the Times's reporting shows precisely that happening as a result of the mergers and consolidations it looked at.

Will the merger happen? Well, it's failed before. It's deeply unpopular. But we'll have to wait and see.

Samuel D. Brunson

Merger and acquisition law by Nick Youngson CC BY-SA 3.0 Pix4free

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I wrote about the 2013 merger attempt for The Nonprofit Quarterly (NPQ). See: and These articles caused me to be invited to a two-hour lunch with the (now former) Sanford Health CEO and five of his senior leaders.

Sanford made a series of mistakes in its 2013 effort, and it has made many of the same mistakes this time around.

The 2022-2023 effort is suffering many of the same stresses, even if the impetus for the revived merger (really, it's an acquisition) is different this time. Fairview's financial position is very difficult, even when compared to other health systems in the relatively weak healthcare delivery market. Fairview needs *someone's* help, and Sanford makes more sense than most. One key reason is that Sanford already has a presence in Minnesota but does not represent a monopoly risk (especially in the Minneapolis-St. Paul market) in the same way that Minnesota-based Allina or Essentia might. Sanford isn't as strong as it was in 2013, but it's stronger than Fairview and *might* be able to build a sustainable combined health system.

I worry about Sanford's latest effort because it is still trying to assimilate the troubled nonprofit Good Samaritan Society after a "merger" a few years ago. Taking on a new financially expensive and culture-shifting event while another is still underway is very challenging.

The challenge for Minnesota AG Keith Ellison, the University of Minnesota, and the MN Legislature is to determine what happens to Fairview if the Sanford "merger" fails this time. It would be naive to assume that Fairview and the U of M Medical School and its physicians would continue as before, given the financial pressures that impelled Fairview to once again broach an approach to Sanford.

Posted by: Michael L. Wyland | Feb 6, 2023 9:19:57 AM

Michael, thank you for that context and additional information. I appreciate it!

Posted by: Samuel D. Brunson | Feb 9, 2023 5:39:05 AM

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