Wednesday, March 27, 2013

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.

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