Questions remain about Sanford-Fairview deal

  • Article by: STAR TRIBUNE EDITORIAL
  • Updated: April 10, 2013 - 10:29 AM

Sanford CEO and University of Minnesota President Eric Kaler need to show up at Minnesota Attorney General's next hearing.

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Attorney general Lori Swanson asked questions during testimony from Sanford Health representatives on the proposed takeover of the University of Minnesota Medical Center and Fairview Health Systems by South Dakota's Sanford Health during a hearing at the Minnesota State Capitol on Sunday, April 7, 2013, in St. Paul, Minn.

Photo: Renee Jones, Star Tribune

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Sunday’s hearing on the proposed Sanford Health/Fairview Health Services merger lasted more than two hours, right up to the point where state Capitol staffers were likely getting anxious about closing the historic building on time.

The tense hearing covered a lot of ground. But Minnesota Attorney General Lori Swanson summed our sentiments perfectly when she said at the hearing’s close that we’ve “barely scratched the surface” when it comes to evaluating the merits of a proposed merger between the South Dakota-based Sanford and the metro’s Fairview hospitals and clinics, which includes the University of Minnesota’s teaching hospital.

News of merger talks surfaced publicly about two weeks ago, when Swanson called for public hearings to weigh the proposed deal. Since then, a Jan. 28 counteroffer made by the U to acquire the Fairview system has also been made public.

The U sold its medical center to Fairview in 1997 — an era when some academic medical centers sold or spun off weak-performing hospitals. Many academic medical centers have since reacquired these facilities.

Swanson deserves credit for putting a spotlight on the under-the-radar talks. One question deserving of a high-profile answer at the next hearing, slated for April 21: When did any of the three key players — Sanford, Fairview, the U — intend to publicly disclose that control of the Twin Cities’ second-largest hospital system was up for grabs?

Fairview’s nonprofit status — its $1.2 billion net worth was nurtured for decades with tax exemptions, charitable donations and volunteerism — means the public is a stakeholder in the proposed transaction.

On Monday, two Minnesota lawmakers introduced legislation that would block control of the U’s teaching hospital by an out-of-state organization. While we share their concern about control of this world-class medical center, it’s unclear whether such a bill is needed.

The U sold the medical center to Fairview in 1997, and some farsighted language in the 16-year-old affiliation agreement appears to require the university’s consent in the event of a sale, disposition or transfer of hospital assets.

The U’s veto power over a deal with Sanford, and its willingness to exercise that authority, deserves scrutiny at the next hearing. So does the U’s counteroffer. Was it just a pre-emptive strike to keep out Sanford, or does the U have a serious strategic plan for running the Fairview system at a time of unprecedented health care upheaval?

On Sunday, Sanford executives’ sometimes testy testimony only heightened concerns about the South Dakota organization. They failed to adequately address concerns raised by Swanson’s staff about Sanford’s business ties to its namesake donor’s banking/subprime credit card empire.

Sanford also was not served well by the executives’ evasive answers about their involvement with Sanford subsidiaries and their responses to queries about Minnesotans’ presence on a merged organization’s board.

In addition, Sanford’s paltry one-page response to a previous Swanson request for information about its operations suggested an unflattering disregard for Minnesota authority.

A newly published interview with Sanford CEO Kelby K. Krabbenhoft, which appeared in the Sioux Falls, S.D., Argus Leader, raised further concerns about the loss of Minnesota control over homegrown institution.

Krabbenhoft said it was “likely” he’d be the CEO if the merger went through. He also said he had an obligation to discuss the possible merger with the governors of North and South Dakota, but he neglected to mention Minnesota Gov. Mark Dayton.

Neither Krabbenhoft nor U President Eric Kaler appeared at Sunday’s hearings. They need to be front and center at the next one. Fairview interim CEO Charles Mooty also needs to put in another appearance.

It’s still unclear why Fairview has been without a permanent CEO for almost a year at such a turbulent time in health care. Had one been in place, would this Minnesota institution be a takeover target or would it instead be calling the shots?

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An editorial of the Star Tribune (Minneapolis). Follow the editorial board: on Twitter  |  on Facebook   |  on Instagram | on Google+

 

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