U of M blasts new Fairview deal with U doctors as ‘hostile takeover’

The University of Minnesota is battling in public with its own physician group and Fairview Health Services, the nonprofit group that owns the U’s teaching hospital in Minneapolis, over a deal to fund the state’s largest medical school that was struck without involving top university leaders.

Minneapolis-based Fairview Health Services and doctors at the U disclosed to the Minnesota Star Tribune this week the creation of a 10-year deal to support physician training and the university’s academic health program while continuing to provide care to more than 1 million Minnesotans.

Hours before the news was to become public Wednesday, university officials blasted the deal as a “hostile takeover” and demanded the parties immediately stop negotiating.

Fairview shot back that the U’s description was wrong because it “implies motive and legality not supported by facts.” Minnesota Attorney General Keith Ellison, who helped broker the deal, insisted it was crucial for ensuring U doctors continue to practice medicine, conduct research and train the next generation of physicians.

The proposal comes after years of stalled negotiations by university administrators to extend the existing partnership between the U and Fairview, known by the brand name M Health Fairview, which will cease to exist at the end of 2026 if no new agreement is reached.

U President Dr. Rebecca Cunningham’s administrative team expressed shock and outrage, saying terms of the agreement were reached without the university even seeing the proposal. The U was kept “on the sidelines and in the dark,” according to a letter from three regents to Ellison’s office obtained by the Star Tribune.

The AG’s office responded Wednesday by releasing two letters sent in September to Cunningham and Board of Regents Chair Doug Huebsch, in which Ellison said he was instructing Fairview and the U physicians to meet.

University regents say the “secret” deal would make UMP, in effect, a “captive entity” of Fairview. It also would fracture a link between the U and its doctors that’s driven success at the medical school, which has trained about 70% of all doctors practicing across Minnesota, the regents say.

“This agreement strongly oversteps Fairview and UMP’s authority — and represents a hostile takeover of the University of Minnesota Medical School," the U said in a statement. “It puts the interests of a single regional provider and physician group above Minnesotans, and handcuffs the University’s ability to provide medical education and conduct life-saving research.”

The public fight marks a new level of discord between the U and Fairview, two groups that have been fractious partners for decades in funding and operating an academic health program. Their partnership is seen as a critical source of advanced health care for Minnesotans, and as responsible for training the state’s next generation of doctors.

Fairview and UMP officials say their agreement doesn’t require university approval. And they maintain that it preserves significant funding for the U’s academic health program, even as more of the money is contingent on Fairview and UMP hitting certain targets for efficient operations.

Fairview has been the U’s academic medicine partner since 1997, when the health system acquired the University of Minnesota Medical Center on the U’s East Bank campus in Minneapolis in a financial bailout. Fairview also owns Masonic Children’s Hospital on the U’s West Bank campus.

The new agreement would provide $50 million in guaranteed funding per year from Fairview to UMP plus additional dollars depending on financial performance. Total annual funding, as a result, could meet, exceed or fall short of current levels, said James Hereford, the Fairview chief executive.

Doctors have been anxious for some sort of renewed pact with Fairview, said Dr. Greg Beilman, interim chief executive of University of Minnesota Physicians. The group, whose members teach at the medical school while treating U patients, has the legal authority to negotiate contracts independently from the U, Beilman said.

“I’m very excited about the fact that we are at the point of identifying a way to work together for the next decade, provide stability for our faculty and ultimately for the 1.5 million patients that we serve in the state of Minnesota together,” he said in an interview.

The three U regents argued in their letter this week to Ellison that the physician’s group is sacrificing its charter mission to serve the university as the U’s designated physician practice plan. This status is required, they said, for UMP to maintain its position as a tax-exempt nonprofit group.

“We are frankly shocked. ... Agreements reached in secret with actions taken by boards of two private corporations does not engender public confidence that care has been taken with the public’s assets and its best interests in mind,” says the letter from Huebsch and board members Ruth Johnson and Penny Wheeler.

Beilman said Ellison encouraged negotiations between Fairview and UMP.

Ellison issued a statement Wednesday saying he welcomed the new agreement and called it an important step toward “a reimagined and revitalized partnership between Fairview, UMP, and the University, who continues to be essential to and a central player in this process.”

In a letter responding to the regents that was obtained by the Star Tribune, Ellison called on the U to return to negotiations immediately “to conclude the outstanding issues.” The current affiliation agreement between Fairview and the U includes UMP.

“I have placed a high priority in this process on preventing an unwind of the agreements between the three parties because of the impact an unwind would have on patients statewide, physician recruitment and retention and the research and teaching mission of the University,” he wrote.

Wednesday’s announcement comes about two months after the Star Tribune reported that the U’s proposal to create a new statewide nonprofit health system with Fairview and Duluth-based Essentia Health had fallen apart. It also comes more than two years after another failed proposal to create a health system with the U, Fairview and South Dakota-based Sanford Health.

Fairview and UMP say patients across M Health Fairview would see no change to where or how they receive care.

It’s unclear what would become of the M Health Fairview brand, which incorporates the university’s distinctive M logo and has a prominent network of hospitals and clinics in the Twin Cities region and northern Minnesota.

The agreement calls for all funding from Fairview to flow to UMP, whereas about two-thirds of the health system’s current financial support goes directly to the U. No pact yet exists specifying how UMP would transfer Fairview funding to the university.