Bill that could doom Sanford merger heads to Gov. Tim Walz’s desk

May 23, 2023

ST. PAUL, Minn.–The Minnesota Legislature on Sunday passed a bill that bans anti-competitive health care mergers, which could kill the proposed marriage of Minneapolis-based Fairview Health Services and Sioux Falls-based Sanford Health.

Michelle Griffith with South Dakota Searchlight reports the bill also prohibits out-of-state entities from owning in whole or part University of Minnesota health care entities, as would be the case were Sanford to complete its merger with Fairview, which owns the university’s teaching hospital.

But Fairview and Sanford said they intend to continue with the merger — which has already been delayed — despite the legislation.

The legislation prohibits health care transactions that “substantially lessen competition or tend to create a monopoly.” Attorney General Keith Ellison is already investigating the proposed Fairview-Sanford merger for potentially running afoul of antitrust and charity laws, but this bill gives the Attorney General’s Office greater latitude in bringing a case in state court to ask a judge to prohibit the merger.

The legislation expands the attorney general’s oversight of health care mergers by allowing the Attorney General’s Office to sue in state court to kill mergers that aren’t in the public interest.

The proposed Fairview-Sanford merger has received criticism from legislative Democrats, who say that it would create a health care monopoly in greater Minnesota and likely lead to clinic closures and higher costs for patients.

In a statement Sunday night, Fairview said the legislation will not deter the health care nonprofit company from merging with Sanford, and the proposed merger meets the legislation’s requirements.

“This new law does not change our desire to combine with Sanford Health, and while it creates new regulatory processes, we strongly believe that the merger is in the public interest and that we can comply with the new requirements,” Fairview said.

Fairview in the statement said it has agreed to notify Ellison 90 days before the merger’s closing date, which will be sometime after May 31.

Sanford said in a statement it also believes the merger is in the public’s interest.

“We remain confident in the significant benefits of our merger for the patients and communities we serve across greater Minnesota,” Sanford said. “Together with Fairview, we will make historic investments to strengthen high-quality care delivery in Minnesota, address critical workforce challenges and expand access to care for the underserved in both rural and urban areas.”

Gov. Tim Walz previously said he was open to the Fairview-Sanford merger, though DFL-aligned interest groups and legislators have turned sharply against the merger since then. A Walz spokesperson told the Reformer that he is “expected to sign” the bill.

The Senate passed the bill by a 35-32 vote with one Republican — Sen. Jim Abeler of Anoka — in support. It passed the House by a 70-58 vote on Sunday evening.

The legislation seems tailored to the Sanford-Fairview deal, but it would apply to all mergers and acquisitions of health care organizations that have an annual average revenue of at least $80 million. The floor was previously $40 million, but the Senate increased the threshold and added a provision stating the Department of Health would collect data on all transactions in which the health care entity has an average annual revenue between $10 million and $80 million.

Ellison, in a statement to the Reformer, said the bill gives his office additional oversight to ensure mergers are beneficial to the public.

“Minnesotans understand why fair markets and competition matter. Many people also recognize the impacts of health care mergers on patients, prices, medical personnel and communities are too often negative,” Ellison said in a statement. “This bill gives the Attorney General tools to protect consumers, workers, and all Minnesotans facing health care mergers and to determine whether mergers are in the public interest. This is what Minnesotans are expecting us to do.”

The bill was amended Sunday to specify the University of Minnesota’s facilities under the bill’s purview: M Health Fairview University (West Bank), the Masonic Children’s Hospital and the University of Minnesota Medical Center (East Bank).

The prospect of a South Dakota-based company owning the university’s main teaching hospital has outraged politicians and health care advocates. Earlier this session, former Minnesota Govs. Mark Dayton and Tim Pawlenty, the last Republican elected to statewide office, told lawmakers the University’s Medical Center shouldn’t be controlled by a South Dakota company.

That was also one of the reasons then-Attorney General Lori Swanson was critical of the merger back in 2013. Sanford pulled out of the deal shortly after Swanson held a public hearing during which she grilled company executives.