Fairview, UCare miss deadline on merger

Fairview and UCare won't hit a midsummer deadline for completing a merger announced in April that would link the state's fourth and fifth largest health insurers.

The nonprofits issued a joint statement Tuesday to the Star Tribune saying that merger talks continue, but the pace of negotiations has slowed due to the simultaneous merger talks between Fairview and physicians at the University of Minnesota.

Last year, Fairview and the U physicians announced plans for their own merger, but the deal fell apart this summer with Fairview saying the university wanted too much control.

"Our plans to merge provider and payor expertise are continuing beyond the anticipated date, which was originally midsummer," the nonprofits said Tuesday in a statement. "Additional time is needed to complete financial analyses and to assess structure in light of changes in merger plans between Fairview and UMPhysicians."

They added: "Fairview and UCare are continuing work to complete due diligence and to fully evaluate the transaction."

Minneapolis-based Fairview Health Services is one of the state's largest operators of hospitals and clinics. In January, the health system increased from 50 percent to 100 percent its ownership of PreferredOne, a health insurer based in Golden Valley.

Fairview took over after providing a loan of $18.75 million to PreferredOne following the insurer's large financial losses on policies sold in 2014 through the state's MNsure health insurance exchange.

When the merger deal was announced in April, the parties said that PreferredOne and UCare would work together within Fairview's health plan division. Jim Eppel was expected to remain as UCare's president and chief executive.

The statement issued Tuesday didn't offer an updated timeline for completing the merger. In a recent financial statement, Minneapolis-based Fairview said an "affiliation" rather than a merger could be on the table, without offering details.

Neither Fairview nor UCare granted an interview request. A Fairview spokeswoman did not answer questions.

When the Fairview-UCare merger was announced in April, it was seen as a deal to shore up two struggling insurers with complementary product lines. Whereas UCare has focused on government programs, PreferredOne's focus has been providing employer-sponsored health plans.

The deal also fits with a trend where more hospitals and insurers are merging, or forming closer partnerships, to provide more cost-effective care to large groups of patients.

Christopher Snowbeck • 612-673-4744