Fairview Health Services said it expects to name a new CEO by year's end, and won't complete a proposed acquisition of the UCare health plan before the executive is in place.
Interim Chief Executive David Murphy, who has held the top job at Fairview since March 2015, told bondholders during a conference call last week that Fairview has "a number of candidates" who are being vetted by a CEO search committee.
Committee members are confident that "we will, by the end of the year, have identified and placed a new CEO," said Murphy, who is the board chairman at Minneapolis-based Fairview.
The timing has implications for Fairview's pending acquisition of Minneapolis-based UCare, which was announced in April. Last month, the Star Tribune reported that the parties pushed back a midsummer deadline for completing the deal because a proposed merger fell apart between Fairview and the University of Minnesota Physicians.
"When the CEO's in place, then we would expect that we would consider whether that fit [with UCare] is still a solid one for us, next year," said Murphy, who previously served as president and chief executive of the Red Wing Shoe Co. "But until then, we're pausing on that — again through mutual agreement."
Fairview is one of the state's largest operators of hospitals and clinics, with operating income last year of $140 million on about $3.9 billion in revenue.
With about 24,000 employees overall, the health system owns five community hospitals plus the University of Minnesota Medical Center. Fairview includes dozens of clinics, a pharmacy business and senior housing that includes long-term care facilities.
In statements Monday, both Fairview and UCare said they are "continuing work to complete due diligence and to fully evaluate the transaction."
In July, Fairview and officials with University of Minnesota Physicians, which manages the practices of U doctors, said they were halting a planned merger due to disagreements about governance for the new entity.
The U has said it's now looking for partnerships with other organizations, with a possible focus on outpatient care.
During the call with investors, Murphy said that Fairview and the U still have a very close working relationship under an existing affiliation agreement.
"We collectively decided not to move forward with a complete marriage, but we are still — I like to frame it as significant others," he said. "We felt that the merger as it had been envisioned some time ago was probably best put on hold [to] just focus on the relationship that we have now, and just build on that."
UCare is an HMO that sells individual health insurance policies, plus coverage that's part of the Medicare, Medicaid and MinnesotaCare public health insurance programs.
Last year, UCare eliminated more than 200 jobs after losing the bulk of its business in the Medicaid and MinnesotaCare programs through a statewide competitive bid.
When the Fairview-UCare deal was announced in April, the parties said that UCare would join Fairview's health plan division, which includes the Golden Valley-based insurer PreferredOne.
In January, Fairview increased from 50 percent to 100 percent its ownership of PreferredOne. The health system took over after providing a loan of $18.75 million following the insurer's large financial losses on policies sold to individuals in 2014, including those buying through the state's MNsure health insurance exchange.