Swanson grills Sanford executives on proposed Fairview merger

  • Article by: TONY KENNEDY , Star Tribune
  • Updated: April 8, 2013 - 11:20 AM

SanfordHealth officials pointed to potential savings of as much as $60 million, while AG Lori Swanson focused on who would benefit.

Minnesota Attorney General Lori Swanson took top executives of ­Sanford Health to task Sunday, complaining the firm had been less than forthcoming about its merger plans with Fairview Health Services and questioning the South Dakota nonprofit’s ties to the business interests of billionaire ­philanthropist T. Denny Sanford.

In a packed hearing room at the State Capitol, Swanson drew attention to Sanford Health’s status as a customer of the private banking businesses of Sanford, including a debt-collection company called Rushmore Service Center. “It sounds like Mr. Sanford is benefiting from his companies doing business with your hospital,” Swanson said.

The merger proposal that could give Sanford Health control of the University of Minnesota Medical Center also has focused attention on the U’s relationship with Denny Sanford, an alum who is a major benefactor of U athletics.

In a key moment during Sunday’s hearing, Swanson was told that U President Eric Kaler has promised not to ­consider any charitable gift from Sanford while Fairview remained in merger talks with the South Dakota firm.

Sanford Health executives said Sunday that an internal analysis has found that a Sanford-Fairview merger would save $40 million to $60 million annually and that it would be irresponsible of the two nonprofits not to explore the ­benefits of a combined operation.

But Swanson said she was just beginning to scratch the surface in her investigation of the proposed merger and that she will hold a second hearing in two weeks. Swanson said her job is to protect against any inappropriate siphoning of assets belonging to the U and Fairview.

“This is very, very, very serious business for all of Minnesota,” said David Finewachs, a former Minnesota Hospital Association lawyer, who was called by Swanson to testify that Fairview is stable, successful and not facing a financial crisis that would call for a merger.

The crowd applauded when he said any merger that would give Sanford Health control of the U of M Medical Center and Fairview would be like “selling the public library to Wal-Mart.”

He added: “We don’t need to export our most precious resources.”

Swanson said her office has been getting mixed signals from Sanford Health about a number of issues. Despite Sanford’s repeated public statements that talks with Fairview are in early stages, Swanson established through her questioning of the company’s executives that an antitrust evaluation has already been completed and that Fairview and Sanford are deep into the process of creating a detailed list of economic and patient-care efficiencies.

‘Artificially restrained’ talks

Becky Nelson, Sanford senior vice president and chief operating officer, defended those efforts, saying her firm and Fairview have completed 10 or 15 drafts of a “synergy book.” She said the progress of the potential merger would be “artificially restrained” if the firms aren’t allowed to pursue their talks.

“We bring a track record of promises made, promises kept,” added David Link, senior executive vice president.

But Swanson said Sanford’s verbal assurances of cooperation with regulators has been at odds with the company’s refusal to answer questions from her office. Sanford is currently in violation of Minnesota’s nonprofit registration status for operations it has in western and northern Minnesota. Even after the attorney general’s staff sent a letter asking for reams of information, Swanson said, the company produced only one document.

Like Fairview, Sanford is a nonprofit health care company, and Swanson questioned why a tax-exempt organization like Sanford Health is spending millions of dollars on naming rights and other support for a civic center in Sioux Falls and university sports programs in North and South Dakota.

Link and Nelson said the sports-related gifts were in conjunction with Sanford’s mission to support sports medicine and fitness.

But after listening to Link describe various spending by Sanford Health to boost ­university athletic programs and local athletic facilities, Swanson asked him: “Can you see how the focus here [in Minnesota] should be on patients, not sports and athletics?”

Swanson also told the hearing that her investigators “have been hard-pressed to find anyone at the university who wants” to go into business with Sanford Health.

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