University of Minnesota considers new Fairview agreement

After years of wrangling and 18 months of negotiations, Fairview Health Services and its medical partners at the University of Minnesota say they've landed on an agreement that would bring millions of dollars more into the medical school and streamline the management structure to better respond to the changing health care landscape.

The university's Board of Regents is scheduled to vote Friday on a proposal in which Fairview would contribute $90 million over the next decade to invest in more clinical research and on-site training, and help raise the academic hospital's national standing.

The deal has already been approved by the boards at Fairview and the University of Minnesota Physicians, and the regents' endorsement is the final step.

"We think we're well positioned for the future," said Dr. Bobbi Daniels, CEO of University of Minnesota Physicians and vice dean of the medical school, who described the agreement as a "natural evolution" of the 16-year relationship with Fairview.

The agreement came together even as Fairview was in merger discussions with Sanford Health of Sioux Falls, S.D. Those talks fell apart a month ago after Attorney General Lori Swanson held a public hearing to raise flags about a nonstate organization acquiring a taxpayer-supported medical hospital.

The agreement wouldn't preclude Fairview from entering into merger talks down the road, but any such deal would require agreement from the university and its physicians' group, Fairview Health Services CEO Chuck Mooty said.

The deal keeps intact the 99-year affiliation agreement Fairview struck with the school and its doctors when it purchased the financially strapped teaching hospital in 1998.

It's unclear how much support Fairview has given the university's academic medical center in the past, but Mooty called the new agreement a "significant boost" from current contributions.

Fairview gave $5 million in undesignated academic support in 2012, but officials said the organization has not made regular contributions of that amount.

Fairview would contribute $7 million to the medical school in the first two years, $8 million in the next two years and $10 million for the remaining six years. Additionally, the parties set net income targets for the combined operations that, when exceeded, would be divided among the three entities.

"This vehicle creates a better comfort zone and a better understanding of all of our worlds as we continue to look at the way in which we deliver care," Mooty said. "Hopefully it creates a better sense of connection and a greater sense of common purpose as we move forward."

Friedman said the deal is not solely about academic support. A more integrated operation between the U and Fairview ultimately aims to provide better coordination of care for patients seen at the various university hospitals and clinics and provide a better education for medical students. The university trains about 70 percent of the state's doctors.

The creation of a new management structure and governing board aims to make the organization less management-heavy and more nimble. University officials said that the separate teams, management structures, goals and processes of the three organizations have made it difficult to act quickly in the past.

Under the new management structure, Daniels and Carolyn Wilson, president of the University of Minnesota Medical Center, Fairview, will be "co-leaders."

A new 12-member governing board will be formed and led by the dean of the medical school, because that position oversees clinical care, education and research.

The deal lays the groundwork for a management and revenue-sharing agreement for the $182 million on-campus health center operated by the university and Fairview that is expected to open in 2016. The new surgery center and specialty clinic, on hold since 2008, is expected to provide more clinic space than the outdated Phillips Wangensteen Building.