Sunday, March 31, 2013


Sanford Health has had eye on Twin Cities for years
"... after Attorney General Lori Swanson essentially outed the talks this week before they’d been internally vetted ..."

While it was news to many that Dakotas-based Sanford Health was in merger talks with homegrown Fairview Health System, the rural powerhouse has been looking for a toehold in the Twin Cities for years.

Before looking to Fairview, Sanford was in talks with Allina Health for more than a year before parting ways last year, said Sanford CEO Kelby Krabbenhoft.

“The Twin Cities is the economic engine for the entire Upper Midwest,” he said Friday. “Eventually, Sanford’s evolution, Sanford’s growth, was going to engage somebody from the Twin Cities.”
The courtship with Fairview began in the fall, and both sides now describe talks as “preliminary” and “early in the game.” No letter of intent has been signed.

But after Attorney General Lori Swanson essentially outed the talks this week before they’d been internally vetted, CEOs from the two organizations sought to explain the benefits of exploring a deal.

In a word it’s: competition.

“The next five to 10 years is going to be a time of great change and turbulence,” Fairview interim CEO and board chair Chuck Mooty said. “If Fairview is to be competitive in a highly competitive marketplace, what is it we need to do to position ourselves appropriately within that horizon?”

Fairview, which includes the University of Minnesota Medical Center and University of Minnesota Amplatz Children’s Hospital, is the metropolitan area’s second-largest health care system behind Allina Health. But as the nationwide trend toward mergers and alliances sweeps the state, Fairview is under pressure on several fronts.
A merger between HealthPartners and Park Nicollet became final in January, a deal that brings together a large insurance player with a hospital system and creates one of the state’s largest health care companies in terms of revenue. The Mayo Clinic continues to buy clinics and create exclusive affiliations for its Mayo Clinic Care Network, most recently adding Minneapolis’ Shriners Hospitals for Children this week.

Sanford Health, meanwhile, is the nation’s largest nonprofit rural health care system, operating mostly in the Midwest. With headquarters in Sioux Falls, S.D., and Fargo, N.D., it is fueled with more than $600 million in donations from St. Paul native T. Denny Sanford. The organization is sinking millions into biomedical research and pediatric care.

“If Sanford is going to come into this market, they need to do it at a certain scale,” said Allan Baumgarten, a Twin Cities analyst who studies health care markets. “You need a system the size of Fairview, and having the university as part of that makes it more attractive.”

Fairview and Sanford are about equal in size, with revenues of roughly $3 billion. But Sanford Health is on a $1.4 billion growth march, moving toward its goal of being one of a handful of prestigious national health care players, on par with the likes of the Cleveland Clinic, Johns Hopkins and Mayo.

In the past decade, Sanford Health has more than doubled its presence in Minnesota, with hospitals and clinics mostly on the western border. It’s largest move came when it purchased a regional hospital in Bemidji in 2011, which it considered a third hub to complement flagships in Sioux Falls and Fargo.

Mooty said there have been high-level discussions involving University of Minnesota President Eric Kaler, and that the board had seen a two-hour presentation early in the process. But much remains on the table.

“It’s unfortunate that the parties that are talking haven’t even gotten to a level of solidifying what we’re talking about to have open debate and dialogue around,” Mooty said.

Aaron Friedman, dean of the U’s medical school who also is a member of the Fairview board of directors, said the conversation with Sanford Health has raised concerns about “whether academic programming is an integral part of the thinking here.”

The University of Minnesota trains the lion’s share of the state’s doctors, with about 1,000 residents currently in training.

“It’s one thing to have two systems with $3 billion in revenue and they decide they might want to work together,” Friedman said. “It’s another to subsume and take on the missions that we have as a university. That’s not always the case in a significant merger."

“I don’t have any idea whether the scope of what we do, the size of what we do, the cost of what we do has been taken into account in a significant way in consideration of this purchase.”

Attorney General Swanson is calling for public hearings on a potential merger, concerned that a deal could transfer control of Fairview’s partner, the taxpayer-supported University of Minnesota Medical Center, to an outstate entity.

Krabbenhoft and Mooty sought to allay such concerns.

“I can tell you if it’s a takeover, it will not go forward,” Mooty said.
Both said Sanford’s network of rural hospitals could improve training opportunities for university med school students as well as sending patients who need transplants or other complex care to the Twin Cities. Sanford Health already operates medical schools in Sioux Falls and Fargo.

“This is not all about Sanford, quite the opposite,” Krabbenhoft said.

“What we’re bringing to the table is bringing back the luster and bright light of the University of Minnesota’s medical potential. ...The University of Minnesota would be the jewel in the crown.”

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 CEO Mark Eustis, who had hired Accretive as a consultant. Mooty, with a background in business and not medicine, remains an interim CEO.

Fairview is “not looking for a deep-pocketed partner.” Mooty said. “This is not a weak organization. This is an incredibly viable and economically capable organization with great talent of people and great capability. We want to make sure we continue to position ourselves in the most competitive way, recognizing the market is going to continue to be evolving.”

And while Sanders Health approaches from the West, our friends at the Mayo Clinic have also made a significant move in the field of children's health by formalizing an arrangement with the Minneapolis Shriner's Children's Hospital as announced this week.

From the Star-Tribune:

Shriners, Mayo join forces for pediatric care ...

More deals involving Minnesota hospitals! Tuesday the Minnesota Attorney General leaked that a possible takeover of the Fairview health system by the Sanford system was in discussions. Today, the Mayo Clinic announced that the Shriners Hospitals for Children -- Twin Cities would be the first pediatric hospital to join its national, collaborative Mayo Clinic Care Network.

The Shriners hospital in Minneapolis provides specialty orthopedic services to children from the upper Midwest and Canada regardless of their family's ability to pay. While it has already benefited from Mayo doctors who provide care or consultations to children at the hospital, Shriners and Mayo leaders said the new partnership would improve the level of care its children receive. Mayo specialists, for example, will now be available for remote "econsults" with Shriners doctors on their patients.

“Both Mayo Clinic and Shriners have a heart for kids, and we’re excited to know that this new collaborative step together will increasingly benefit our young patients,” said Dr. Christopher Moir, director of Mayo's Children's Center. “Combining the knowledge of Mayo Clinic and Shriners experts can only benefit outcomes for patients who are the most vulnerable among us."

Mayo's care network was formed in 2011 and now includes health care systems in 10 states and Puerto Rico. The affiliated hospitals receive Mayo consultation and expertise and Mayo broadens its national referral base for patients. Shriners is one of 22 Shriners hospitals in North America that provide care to children for advanced care for children with orthopedic conditions, burns, spinal cord injuries, and cleft lip and palate.

Saturday, March 30, 2013

"The nonprofit status of both Sanford and Fairview also raises questions about what a potential merger deal would look like. Would money be exchanged? If so, who is the beneficiary? Complex questions about the ownership of nonprofits, and the value embedded in them, arise when they change hands."

Is Sanford deal in Minnesota's best interests? 

From the Star-Tribune:

South Dakota provider would control U’s teaching hospital.

The University of Minnesota Medical Center, Fairview, is not about to be renamed the University of Minnesota Medical Center, Sanford, any time soon.

But if a merger between South Dakota-based Sanford Health and Twin Cities-based Fairview Health Services, which owns and operates the U’s teaching hospital as well as other major metro hospitals, is a serious possibility, Minnesotans deserve to be informed and to weigh in.

While mergers are increasingly common in health care, this isn’t just another business transaction because of the public-policy questions it raises. Of particular concern: It could give control of the world-class university teaching hospital, which helps fund the medical school and provides a critical training ground for state doctors, to an out-of-state organization with no history of deep cooperation with a major academic health center.

Minnesota Attorney General Lori Swanson was on target this week when she called public hearings to air details and hear concerns about deepening merger talks between Sanford and Fairview. Gov. Mark Dayton’s longtime support for the U’s medical school and the priority he’s put on strengthening it also lend urgency to spotlighting the deal.

From its humble origins as a hospital for Norwegian immigrants, public support through philanthropy, volunteer time and the substantial tax breaks that nonprofits enjoy has helped Fairview become a leading medical institution in Minnesota, with a net worth of $1.2 billion.

Fairview’s hospitals and clinics are where generations of Minnesotans have sought care for their families, and also where about 22,000 people work. For decades, Minnesotans have made substantial investments in Fairview. They have a substantial stake in its future success, which is why assurance is needed that the potential deal is in the best interests of the state.

In an interview with an editorial writer on Friday, Fairview’s interim CEO, Charles Mooty, repeatedly emphasized the exploratory nature of the merger talks. But the hiring of an investment bank to evaluate a potential deal suggests that this is an appropriate time for Fairview officials to start making their case to Minnesotans.

We’d especially like to know more about why Sanford, which has little experience operating in a highly competitive metro area, is the best partner for Fairview.

It’s easy to see what Sanford would get from a merger. The South Dakota-based system — named for a key philanthropist — has long sought to enter the Twin Cities. Adding Fairview facilities to its lineup would establish Sanford as a major health care player. Sanford Health Plan also sells health insurance. Having Fairview hospitals and clinics within the corporate fold could enhance its plans’ attractiveness.

But much more detail is needed on how Minnesota might benefit. Swanson has raised good questions about whether Sanford would leverage Fairview assets built through years of public support to enhance care here. Or, would those assets help fuel Sanford’s growth?

The nonprofit status of both Sanford and Fairview also raises questions about what a potential merger deal would look like. Would money be exchanged? If so, who is the beneficiary? Complex questions about the ownership of nonprofits, and the value embedded in them, arise when they change hands.

The most pressing questions, however, concern the future of the University of Minnesota’s academic health center. Nationally, top academic medical centers that sold their hospitals in the 1990s, as the U did, are moving to reacquire or take more control over them. A Fairview-Sanford merger would have the U moving in the opposite direction. Sanford’s commitment to providing financial and training support for an academic health center the size of the U’s is also unclear.

To his credit, Mooty acknowledged these concerns on Friday and said, “This endeavor with Sanford is not going anywhere if the university doesn’t believe it’s a positive.’’ That’s reassuring. The U should not be a junior partner in these merger talks.

There are numerous questions about the proposed deal. What’s not at issue is the need to safeguard priceless state assets — a world-class academic health center and its teaching hospital.


Friday, March 29, 2013

Athletic Accounting

(1)  Report to Faculty
At the November 2012 FCC meeting athletic director Norwood Teague responded to a question about the annual subsidy the athletic department receives from the general fund of the University:

[Teague] said he was unsure where the funding from the University would end up; there is very little such funding now, about $1.8 million in an $80 million budget.

See p. 2 of the November 15, 2012 FCC report (emphasis added).

Actually, the $1.8 million represents only the direct support the athletic department received from the general fund in fiscal year 2012.  The athletic director failed to mention the multi-million dollar indirect support that the department receives each year.

Let us look at the subsidy to the athletic department in fiscal year 2011 (the most recent year for which complete information is available).  Central administration made an allocation of $7.8 million to the athletic department from the general fund of the University.  See p. 76 of the June 20, 2011 report of the Board of Regents.  This included $2.3 million in direct support and $5.5 million in indirect support.  See line 7 and line 8 of the Revenue/Expense Summary in the 2011 U of M Annual Report to the NCAA.  

The athletic department returned the $5.5 million to central administration for its cost pool assessment.  But central administration then used a significant part of that assessment to pay expenses of the athletic department, including the following:

athletic facilities operations and maintenance $1,226,740
(portion of facilities management costs attributed to athletic department facilities)
athletic department share of utilities in buildings also used by other units $756,821
athletic department partial debt service $811,300 
Total $2,794,861

(2)  Annual Report to NCAA

The presentation to the FCC is not the only occasion when the administration has omitted the full amount of external revenues of the athletic department.  The NCAA requires each member institution to submit an annual report.  Line 2 of the Revenue/Expense Summary is for "student fees."  The definition instructs the institution to "include student fees assessed and restricted for support of intercollegiate athletics."  In fiscal year 2011 the administration collected $950,598 in student fees for payment on the football stadium debt.  Yet the administration reported a zero amount for student fees to the NCAA.

Line 6 of the Revenue/Expense Summary is for "direct state or other government support."  The definition instructs the institution to "include state, municipal, federal and other government appropriations made in support of the operations of intercollegiate athletics."  In fiscal year 2011 the administration received $10,249,950 in state appropriations to be applied to the stadium debt.  Yet the administration reported a zero amount for direct state support to the NCAA.

The administration explains that it reports zero amounts on line 2 and line 6 because the administration does not route these financial transactions through the athletic department--central administration collects the fees and state appropriations and applies the funds to the stadium debt.  But the NCAA definitions are not limited to only those transactions that are handled by the athletic department.  The definitions reach all student fees and state appropriations that support the athletic department.

The administration reports that in February 2013 it checked with the NCAA regarding the student fee and the state appropriations.  The "recommendation" of the NCAA was to continue to omit reporting those sources of funds to pay the stadium debt.  No reason was given for the recommendation.  The NCAA apparently accepts the rationale of the administration--a rationale that elevates form over substance.

In the wake of the Penn State scandal President Kaler pledged "transparency and accountability" on matters related to the athletic department.  See the July 24, 2012 Star Tribune report on U's Big Benefit from Penn State:  Lesson Learned.  Does the administration fulfill this pledge when it reports zero amounts for the student fee and state appropriations?

(3)  Greater Revenue, Even Greater Expenses

Why does the athletic department continue to receive multi-million dollar subsidies each year?

In 2006 the U of M received $10.7 million from the Big Ten conference.  By 2011 the Big Ten allocation to the U of M had more than doubled to $22.9 million. See the January 19, 2013 Star Tribune report on An Expanding Pipeline.  This additional revenue was more than sufficient to replace both the direct and indirect annual subsidy from the general fund as well as the student fee for the football stadium.

But the athletic arms race simply continues at an accelerated pace.  The more money the athletic department receives, the more it spends.  In 2004 the athletic department budget was just under $50 million.  By 2012 the budget had exploded to more than $80 million.  The fuel for this explosion was the television revenue from the Big Ten Network.  See the January 20, 2013 Star Tribune report on Big Ten Bringing In Big Money As TV Star.

Yet the NCAA reports "a widening gap between schools with self-sufficient athletics programs and schools [such as the U of M] that rely on institutional subsidy to balance their athletic budgets."  See the June 2011 NCAA report  (emphasis added).

(4)  Athletic Debt on Steroids

The U of M administration has incurred a staggering debt for athletics.  The "athletically-related facilities annual debt service" is $19,585,000.  The total "athletically-related outstanding debt balance" is $236,606,000.  See line 6 and line 7 of the Capital Expenditure Survey on p. 27 of the 2011 U of M Annual Report to the NCAA.

Part of the debt is for the $137 million in special purpose bonds (Series 2006) issued by the University to pay a portion of the cost of construction of TCF Bank Stadium.  The principal and interest on those bonds will be paid by the citizens of Minnesota to the tune of $10,250,000 per year for more than 20 years.  See pp. 52, 54 of the 2012 U of M annual financial report.   Most of those citizens will never attend a single game, and most could think of far better uses for their hard earned tax dollars than providing entertainment (for six games per year).

Now the athletic department will pay $2.5 million (that it does not have) to the fired basketball coach to do nothing next year.

The athletic director assures us that:

[the budget is] in good shape, and if we did not feel good about that from our own budget, we would not have been haphazard about a decision like this.

But the actual fiscal record undermines the credibility of the U of M administration (again). 

Several myths are used to persuade us to keep running this fool's errand.  The reality is that it is a losing proposition from any perspective (athletic or economic or academic).  See The Gopher "Brand."

(5)  A Solution

There is a solution that would enable the University to disentangle itself from the big business of the major revenue sports while allowing the games to continue.  The football and basketball teams should be organized as separate corporations.  The University would grant a license to those corporations to use the University name for the teams.  The license fee would be a percentage of the revenues generated from ticket sales, broadcasting rights, advertising, etc.  The license fee income would be used to support the non-revenue sports that the University decides to retain, such as track and swimming. 

This is a solution that would enable the sports fans to continue to enjoy the games and would enable the University to focus on education, research, and public service--the reasons for its existence.

Michael W. McNabb

University of Minnesota B.A. 1971; J.D. 1974
University of Minnesota Alumni Association life member

Thursday, March 28, 2013

Email from Medical School Administration

Concerning Sanford-Fairview Talks

Thu, Mar 28, 2013 at 9:06 AM

Dear Colleagues,

This week's media coverage about talks of a potential merger between Fairview Health Services and Sioux Falls-based Sanford Health offers us an opportunity to update you on our current discussions and to share some of the key issues we are exploring.

As you know, the University of Minnesota and University of Minnesota Physicians have had an affiliation with Fairview that has envisioned an important and long-term partnership for research, education, and clinical care. This is a relationship that has deepened and evolved over time. For the past 18 months, we have been engaged in discussions with Fairview to strengthen this alignment. These negotiations are complex and ongoing, but we are hopeful about coming to an agreement this spring.

A merger of Fairview with another health care system would have a direct impact on the University and our affiliation agreement. The University intends to carefully evaluate any merger of Fairview with another health care system in the context of our academic, clinical, and research mission. Our priority in reviewing any specific concept or proposal will be to place the shared interests of the University and the citizens of the State of Minnesota as our top consideration. While most of UMP's activity with Fairview is at the University of Minnesota Medical Center and Amplatz Children's Hospital, the University and UMP also have significant clinical and educational programs in other parts of the Fairview system.

We are encouraged by Fairview leadership's statements that a combination with Sanford Health will not move forward if the University objects.

The U is engaged in a due diligence process to better understand the implications of a possible Sanford-Fairview merger and, generally, the continued evolution of the health care landscape. This process will include a financial and legal analysis, but must also seriously and critically evaluate the commitment of any new entity to our academic mission, including medical education, clinical research, and cutting-edge, quality patient care. Without that commitment, we will be unable to meet our obligations to the citizens of Minnesota. We will also assess philanthropic alignment and questions of brand and reputation.

Finally, we are cooperating fully with the Attorney General, the Governor, and other policymakers as they consider this critical issue, and we appreciate their concern and interest in the University.

We must ensure that in this changing health care landscape our partnership with Fairview continues a strong commitment to our mission and enables the University to attract thousands of world-class physicians, medical residents, and other health care providers for Minnesota, as well as conduct research that leads to breakthroughs and helps millions of people lead healthier lives.

It remains a central priority of ours and President Kaler that the health sciences enterprise across all mission areas is positioned to succeed. We will continue to keep you updated on these and other related issues.


Aaron Friedman, dean, University of Minnesota Medical School and vice president, Academic Health Center

Bobbi Daniels, vice dean, clinical affairs, University of Minnesota Medical School and CEO, University of Minnesota Physicians

This email was sent by Dean Aaron Friedman and Vice Dean Bobbi Daniels, University of Minnesota Medical School, to all AHC faculty and staff.

Wednesday, March 27, 2013

Post on Fairview Sanford wedding by the Minnesota Daily:

Fairview Health Services, which controls the University of Minnesota Medical Center and clinics, could be acquired by Dakotas-based Sanford Health.

The possible merger hasn’t been formally announced, but according to a statement released by Fairview on Tuesday, the talks are in “very early stages” and would not move forward without the approval of the University.

Minnesota Attorney General Lori Swanson told the Star Tribune that the negotiations are more advanced and getting “pretty hot and heavy.

Swanson said she will host several public hearings at the state Capitol starting April 7 concerning the proposed acquisition.
In a press release Tuesday, Swanson said she was “troubled” that discussions of “a matter of such sweeping consequences” have so far been private.

“There was over one year of public debate before Fairview … took control of the University of Minnesota Medical Center in 1997,” she said. “There should be robust public discussion and input now too.”
Swanson said she was concerned about the possibility of the University’s teaching and research hospital being put under the control of an out-of-state organization.

That’s an “unfortunate characterization,” Kelby Krabbenhoft, president and CEO of Sanford Health, said in a statement Tuesday since Sanford has more than 6,000 Minnesotan employees.

Krabbenhoft also said Fairview and Sanford are in the early stages of a merger not an acquisition. The timing of the discussion is “incredibly appropriate,” he said, considering Fairview’s search for a new CEO, which will be complete within a year.

The two organizations are also similarly sized, with approximately $3 billion in net revenues and 25,000 employees each, he said, making a merger fitting.

The University has been aware of “ongoing discussions” with Sanford because of its presence on the Fairview Board of Directors, University General Counsel Mark Rotenberg said in a conference call Tuesday.

 [The U members include Dr. Bobbi Daniels and Dr. Aaron Friedman]

“I don’t think that Fairview has been hiding the ball from the University here,” he said.

 [Maybe Fairview is not the one hiding the ball, Mr. Rotenberg.]

He said the University was not sure how its medical center — which educates 70 percent of the state’s physicians — would be affected by the merger but said it would be discussed.

Maintaining the standards and management structure of the University’s facilities is a major concern, Rotenberg said.
“We need to understand how … a new organization like that [would] support our clinical research,” he said.

The April hearings, he said, will help the University and Fairview understand the possible implications of the merger.

“Health care in Minnesota is a very competitive business,” he said. “The University has no intention of being left behind and disadvantaged in terms of its capacity to fulfill its public mission with Minnesotans.”

Fairview said in a press release Tuesday that the hospital isn’t alone in considering a merger in order to stay afloat in the health care market.

“Mergers and other types of partnerships between healthcare organizations are occurring at the local and national level,” it said. “Fairview’s Board of Directors is exploring whether [this] makes sense.”

Because the hospital has a state status as a charitable trust, it’s exempt from income, sales and property taxes, which means the hospital has an obligation to serve the state and people of Minnesota, Swanson said in a letter to Fairview Health Services.

“We’re a state constitutional corporation,” Rotenberg said, “and our single focus is the welfare of the University as a state of Minnesota institution.”
I am shocked, shocked...

Attorney General Swanson on Courtship

of Fairview by Sanford Health  

Possible Fairview Health takeover raises alarms

ST. PAUL, Minn. — University of Minnesota officials are raising concerns over a possible merger between Fairview Health Services and South Dakota-based Sanford Health.
Sanford, which has facilities in eight states, has expanded into parts of Minnesota in recent years. Fairview controls the University of Minnesota's hospital.
"The university educates and trains about 70 percent of the medical doctors in Minnesota, We are the only school in Minnesota that has schools of dentistry and pharmacy," said Mark Rotenberg general counsel for the university. In a conference call with reporters, he said officials are concerned about how a merger could impact the school's academic and research missions.
"How would the acquisition by Sanford of our partner here -- that we have had for many years -- how would it affect the people of Minnesota," Rotenberg said. "And how would it affect the University of Minnesota, and our teaching and our research and our public function as a state institution?"

State Attorney General Lori Swanson has also raised concerns and is planning at least one public hearing next month. She's particularly concerned about the possible takeover of Fairview's University of Minnesota research and teaching hospital. Swanson said Fairview needs to repay the generosity of Minnesotans to its organization.
"People have donated land for them to build hospitals; they have donated property and money and they have been allowed to have these various tax exemptions that are very lucrative for any organization," Swanson said. "Part of the giving back for that special tax treatment is for them to honor the commitments of the people of Minnesota."

Fairview generates more than $2 billion in revenue and employs 22,000 people in Minnesota. Swanson says Fairview controls about 20 percent of the state's health care market and has a net worth of roughly $1.2 billion. The company was founded in Minnesota a century ago.

A statement from Fairview Health Services said the company is exploring its options and talks with Sanford are in the very early stages.

[But from General Counsel Rotenberg's reaction it would appear that he was apparently not involved in these discussions, nor consulted prior to them]

No agreements or formal commitments have been made. "Nothing will move forward unless we and our partners at the University of Minnesota believe there is merit to a merger," the statement reads, in part.

 [And when will this important jub-jub take place?]

Sioux Falls-based Sanford health runs 35 hospitals and more than 140 clinics in eight states, including Iowa and North and South Dakota. The company has expanded into parts of Minnesota in recent years.

In a statement, Sanford President and CEO Kelby Krabbenhoft said media descriptions of a takeover or acquisition were "unfortunate."
"Sanford and Fairview have only agreed to discussions and exploratory review of each organization," Krabbenhoft said.
The statement goes on to say these efforts could complement the University of Minnesota's mission.

Rotenberg said he is looking forward to learning how exactly the university could fit into a Sanford-Fairview partnership.

 [Mr. Rotenberg exhibits his usual double standard in this matter - he has questions - and the people he is dealing with have not been transparent about their activities.  Ironic in the face of his behavior in the Markingson case.]

"Another critical issue is what kind of support would this new merged hospital organization be prepared to provide for a leading academic medical center like the University of Minnesota," he said.

[Perhaps this possibility should have been considered more carefully when Mr. Rotenberg apparently acquiesced in the original sell-off of the hospital to Fairview. This effectively ceded control of the hospital and its direction no matter the happy face that was put on matters at the time. As the old saying goes: Big fish eat little fish.]

Swanson's investigation into the negotiations between Fairview and Sanford is ongoing. Public hearings are planned beginning April 7 at the State Capitol.

And  for the record, from the Star-Tribune:

Fairview Health Services, the Twin Cities’ second-largest hospital and clinic group, is weighing a merger with South Dakota-based Sanford Health in negotiations that have triggered concerns on the part of Minnesota Attorney General Lori Swanson.

A merger could transfer control of the University of Minnesota Medical Center, a major research and teaching hospital, to a company with no history in Twin Cities health care, Swanson said. In addition, she said, Fairview is a Minnesota charitable trust with obligations to taxpayers and private donors who helped the business grow over the course of a century.

“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,’’ said Swanson, who disclosed that the negotiations are underway.

She said her office has learned that Fairview’s board is scheduled to meet April 8 for a business retreat, presumably to discuss the Sanford matter. She has scheduled a hearing at the State Capitol on April 7 to give the issue a public airing.

A Fairview spokesman said talks with Sanford are in “very early stages’’ and won’t move forward unless “we and our partners at the University of Minnesota believe there is merit to a merger.’’ But the company also noted that the Fairview board has a responsibility to ensure the organization’s long-term sustainability. Several university officials sit on the Fairview board.

Sanford CEO Kelby Krabbenhoft confirmed that the two organizations are engaged in an “exploratory review of each organization’’ and that Sanford has agreed to hold discussions with officials at the U “for the purpose of learning more about each organization.’’

University General Counsel Mark Rotenberg acknowledged the talks but said the university has many questions and welcomes the attorney general’s call for a public hearing. He said the U also has “very strong support’’ from Gov. Mark Dayton. “Our concern about having an out-of-state owner come in and take over the management and financial affairs of our longtime Fairview partner raises a number of very important questions,’’ Rotenberg said.
The university’s chief concerns, Rotenberg said, center on how Sanford would support the school’s medical research and clinical training missions, a franchise he said is worth hundreds of millions of dollars a year to Minnesota. Rotenberg said another question is how a takeover by Sanford might affect the current governance system under which university physicians manage campus medical facilities.

Hospital mergers and acquisitions have been accelerating nationally in recent years in reaction to state budget cuts and federal health reforms, which hospital leaders expect will drive down reimbursement rates. About 95 hospital deals were announced nationwide in 2012 — the most in nearly a decade — according to Irving Levin Associates Inc.

Just two months ago, Bloomington-based HealthPartners and Park Nicollet joined forces, and on Wednesday, Mayo Clinic and the Shriner’s children’s hospital in St. Paul are scheduled to announce a “unique relationship.”

A Fairview-Sanford deal would marry the Twin Cities’ second-largest hospital and clinic provider with a South Dakota organization that bills itself as the nation’s largest nonprofit rural health care provider. Sanford has doubled in size since 2007 with acquisitions of health care facilities in North Dakota and non-metro parts of Minnesota. Sanford is similar in size to Fairview, with net revenues of nearly $3 billion and roughly 25,000 employees.

On Tuesday, Fairview noted the consolidation trend when it responded to the merger talks. “Given the rapid pace of change in our current health care market, it is prudent for our board to be having these kinds of discussions,’’ Fairview spokesman Ryan Davenport said.

Fairview was formed more than 100 years ago as a Minnesota charitable trust. Swanson said it has grown into a major health care player in part because it is tax-exempt and has received private gifts of land and money. In exchange, she said, Fairview has community obligations that should be honored and protected.

In a letter to Fairview on Tuesday, she said 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 has not filed suit to block the proposed takeover, but said she will weigh all options to protect Minnesota’s interests.

Swanson noted that the regulation of charitable institutions is one of the oldest and most important duties of the state’s attorney general and that a significant portion of Fairview’s assets are “restricted to being utilized for health-related activities for the benefit of Minnesota patients.’’

Krabbenhoft’s statement alluded to the possibility of a merged Sanford-Fairview organization being chartered in Minnesota instead of South Dakota. He said the timing of the proposed consolidation makes sense in part because Fairview is in the midst of a leadership transition and has not yet replaced CEO Mark Eustis, who was dismissed about 10 months ago.

Fairview is one of Minnesota’s largest employers and in its partnership with the U has a role in training about 70 percent of the state’s physicians.

Public review of any deal between Sanford and Fairview would be likely to include a close look at Sanford, which fell into noncompliance with the attorney general’s office last fall. According to state records, Sanford was notified in September that it failed to file a copy of it 2011 tax return and other financial records with the attorney general’s office, which regulates nonprofits. In December, Swanson’s office notified the company that its nonprofit registration in Minnesota was no longer in effect.

The Sioux Falls-based organization was known as Sioux Valley Health Care before receiving a series of gifts from T. Denny Sanford, a St. Paul native who earned a fortune in the credit card business in South Dakota. His donations included a $400 million gift in 2007 that was considered the largest ever to a health care organization in America.

Tuesday, March 26, 2013

How to Win Friends and Influence People

 From University Diaries:

Good thing Minnesota is such a rich state.

"There’s no indication that the citizens of Minnesota care that big stretches of their university are run by stupid people."

Not Gene Pelowski!

From MPR News:

Key DFLer: Tubby's buyout was 'obscene'

by Alex Friedrich, Minnesota Public Radio
March 26, 2013

ST. PAUL, Minn. — The House Higher Education Committee chairman is calling the $2.5 million contract buyout for fired University of Minnesota basketball coach Tubby Smith "obscene."

Rep. Gene Pelowski, DFL-Winona, said it could hurt the university's chances of receiving the state funding it wants for future sports facilities.

He said the buyout shows that the university can afford to pay more of the cost of construction.

"When we have the bonding hearings, if there is anything relating to athletics, this will be a topic of conversation," Pelowski said. "Because you're now talking millions of dollars that are apparently available that could just as well go into buildings as paying someone not to do anything — or paying someone to do an incredibly mediocre job."

The university wants to build a basketball practice facility as part of a master building plan that could cost as much as $125 million. Athletic Director Norwood Teague told reporters in February the university has considered asking the state to help pay for the project.

Dave Durenberger writes:


UMN President Eric Kaler has been pressed all session by the Minnesota legislature to get rid of as much educational overhead as possible.

He is fighting back with consultant studies. And promises. Last session the university asked the legislature to permit it to sell beer and wine in tents set up at its new TCF Stadium. This year they reported selling $900,000 worth of beer at $7.25 a paper cup and LOSING MONEY!

Probably too much overhead. . .

Alonzo “Tubby” Smith completed his fourth season as men’s basketball coach and as the highest paid employee at the U. Then he lucked out. His team was chosen to play in the NCAA tournament which earned him a $100,000 salary bonus plus another bonus of $150,000 when the Gophers beat UCLA. His luck ran out with Sunday’s loss to Florida and by Monday he was out the door with a check for $2.5 million.


We've been assured not to worry about his because the $2.5 million (actually a lot more than that before this is over) will be paid out of "athletic department funds."

That's a comfort, right?


Saturday, March 23, 2013

Trust me, I've got a lot of experience in this area.

As yet another example why the Office of the General Counsel is not worthy of the public trust over matters it would prefer to keep hidden, I reprint an earlier post that illustrates the steps they will take in order to avoid disclosure.

Again, with a track record like this, why the University of Minnesota General Counsel's office be trusted in the investigation of the Markingson matter?

Clearly this matter should be subjected to external investigation as requested of the Governor in the Markingson petition. Please consider signing it if you have not done so already.

More information and an opportunity to sign the petition may be found here. 

Wednesday, December 31, 2008

Openness and Transparency At the University of Minnesota?

As someone who was stonewalled in his efforts to learn about the exact nature of the relationship between Leo Furcht, the University, and MCL, it is good to know that there are professionals at the Star-Tribune who are more dogged and stubborn than I am.

From the Strib's Whistleblower Blog comes the answer to the question:  

How did the Star-Tribune get the disciplinary report for Leo Furcht out of the University?

U kept quiet about doctor’s disciplinary action, but public records spoke

Posted on December 23rd, 2008 – 11:33 AM
By James Shiffer

The story Sunday about the past ethics problems of the co-chair of a University of Minnesota ethics panel was an example of first-rate watchdog reporting by my colleagues Maura Lerner, Josephine Marcotty and Janet Moore.

The story also reflected the dogged effort by Lerner to extract public records from the University of Minnesota, after Marcotty got a tip that questions had been raised about a corporate grant for stem cell research at the university. University officials found several ways to avoid handing over a public record until Lerner wore them down.

Here’s the timeline:

Nov. 7: Lerner makes her first formal request to the U for audits involving Dr. Catherine Verfaillie, who had done research under the contract. She knew from her experience that audits are usually public records.

Nov. 14: The university responds: “The entire file is apparently attorney-client privileged information.”

Nov. 17: The university: “The University’s department of audits conducted a review under the direction of the Office of General Counsel, subject to the attorney-client privilege. It was not a regular audit. The report to the General Counsel’s Office is nonpublic under Minn. Stat. sec. 13.393.”

Nov. 17: Lerner responds to the university: “What is the difference between a review done by the department of audits, and an audit? What difference does it make who requests it?”

Nov. 21: The university: “Per your inquiry, the general counsel’s office is retrieving all of the old files to review whether there are public items that would not be considered attorney-client privileged materials. On second thought, they are thinking that not everything in the file is considered protected information. This was not a formal audit, but a request by the general counsel’s office for a review. There were no disciplinary actions as a result of it.”

Dec. 18: The university: “As far as what is public data, there has been no change to our position that the information you requested is considered attorney-client privileged data. Here is the statement I’ve been cleared to provide: The University’s Department of Audits, under the direction of the Office of the General Counsel, conducted a review of the Baxter contract. This was a legal review and not a formal administrative proceeding. Following that review, the Academic Health Center’s Conflict Review and Management Committee also did a review which resulted in disciplinary action against one employee, who was not Dr. Catherine Verfaillie.”

Dec. 18: New request from Lerner: “Any disciplinary action that resulted from the Academic Health Center’s Conflict Review and Management Committee review of the Baxter contract awarded to (or under the supervision of) Dr. Catherine Verfaillie.”

Finally, just before 5 p.m. Dec. 18, the university sent the report by email. The subject was Dr. Leo Furcht, who was investigated and disciplined in 2004 based following a complaint by Verfaillie. Read the report here

Lerner, Marcotty and Moore finished reporting and wrote the story the following day. Four years after Furcht’s disciplinary action, the public finally found out about it. A Star Tribune editorial on the situation was published today.