The proposed merger of Sanford Health and Minneapolis-based Fairview Health Services has sparked widespread reaction, including an investigation by Minnesota Attorney General Keith Ellison’s office, which regulates charities and reviews antitrust issues.
Combined, the two hospital networks will be one of the largest health systems in the nation. Sanford, based in Sioux Falls, SD, is already the nation’s largest rural health care provider, and the health care giants said joining forces could improve patient outcomes and the patient experience while providing affordable care.
Critics have filled the attorney general’s office with concern. The proposed merger has raised questions about reducing choice and competition, as well as moving Minnesota assets, including control of the state’s two teaching hospitals on the University of Minnesota campus, out of state.
Industry analysts say those fears are unfounded.
“It’s difficult for a program that didn’t have experience with a large teaching hospital on how to handle it,” said Vivian Ho, a health economist at Rice University in Texas.
“He offers completely different services,” Ho said. “He helps critically ill patients with the most complex care. A completely different level of technology and expertise. Rural hospitals are not competitive. They are often the only hospital in the market.”
Teaching hospitals, financial challenges
University of Minnesota officials issued a public statement in November noting that teaching hospitals train most of Minnesota’s doctors, and questioned whether the Fairview-Sanford merger would respect “faculty independence,” and patient care, and how it would address Fairview’s financial challenges. .
Fairview Health Services’ net operating loss last year reached $132 million, although it recently ended core services at St. Joseph’s Hospital and the former Bethesda Hospital in St.
When merger talks emerged between Sanford and Fairview in 2013, then-Gov. Mark Dayton suggested removing teaching hospitals from the discussion and bringing them back to the US.
“The university health program is probably one of the biggest attractions for Fairview to Sanford,” said Allan Baumgarten, a health care market analyst based in St. Louis. Louis Park. “Whether Fairview would be attractive to Sanford if the academic health center was separated from the deal is an open question. My mind is not there. I don’t give this (combination) better than a 50-50 chance of making it to the finals.”
And if Sanford acquired these two teaching hospitals?
“I think Sanford is attracted to the reputation of a teaching hospital,” Baumgarten said, “but I think they’re going to have a little patience with how much those costs are, and whether you should pursue getting that money elsewhere in your system, or reducing some of those important academic health center functions.”
Different cultures, from abortion to urban care
Then there are questions about the differences in corporate culture and the potential impact on consumers in terms of prices and services. For example, the Fairview system, which includes 11 hospitals and more than 80 specialty care clinics, is highly integrated, while Sanford’s 47 medical centers are not.
The two health networks both offer assisted living facilities for the elderly, but their services differ in some areas. Sanford, as a matter of policy, does not provide elective abortions, which are prohibited by state law in South Dakota except in limited circumstances.
Fairview does not publicly advertise abortion services beyond “Plan B” emergency contraception, but invites patient questions about abortion, and a spokeswoman issued a written statement Thursday supporting doctor-patient autonomy and “all aspects of reproductive health care.”
“No changes are contemplated in Fairview’s policies of care — including reproductive health and sexual care — as a result of this merger,” Fairview spokeswoman Aimee Jordan said in a statement.
Abortion rights in Minnesota expanded this summer when a Ramsey County Circuit Court judge struck down a series of restrictions, such as a mandatory 24-hour waiting period and a requirement that both parents be notified before a minor can have an abortion.
Some industry analysts have already begun calling the merger a buyout, since Sanford will be the new parent company, with about 45,000 employees compared to Fairview’s 31,000, and Sanford CEO Bill Gassen will oversee the entire combined company behind one. a year of joint leadership with Fairview president and CEO James Hereford.
“If you look at who the CEO is and where the headquarters is, Sanford is taking over Fairview,” Baumgarten said. “I don’t know that Fairview has a lot to learn about rural health care from consolidation, which is considered one of the benefits.”
This is one of the few attempts at integration in Sanford in the past decade. Merger talks between Fairview and Sanford were terminated in 2013 following a public hearing led by then-Attorney General Lori Swanson.
Ellison’s office created an online form for public feedback and opened telephone comment lines at 651-296-3353 in the metro and 800-657-3787 for outlying residents. A hearing is expected at the State Capitol, details to be announced later.
Here’s a roundup of industry analysts’ thoughts on the proposed merger:
MN is a professor
Bryan Dowd is a professor of health policy and management at the University of Minnesota’s School of Public Health.
“The literature on hospital consolidation is that it results in higher prices and no change in quality. Affordability and safety are the main issues in health care today and I don’t see how consolidation will improve either. I hope that Fairview and Sanford have some plans to improve efficiency, not just to increase the pricing power in the market, but the literature would suggest that is not the case.”
“Anything that reduces the number of independent choices available to consumers in a marketplace allows all suppliers of that product in the marketplace to raise their prices.”
Vivian Ho, a health economist at Rice University, who in 2010 abandoned efforts to found Baylor College of Medicine where Ho is also a faculty member, holds a doctorate in economics from Stanford University.
“Hospitals in the same market, if they unite, they can increase their prices. Economists are now talking about how companies hire workers across the country, or in many states, so they want specific health plans in their network that provide care in many different markets. When that health plan gets really big, it can do an ‘all or nothing’ deal with the insurance company and say, ‘If you want to do business with us, you have to include all our hospitals in our contract, and oh, by the way, these are the prices you’re going to have to pay.’ “
“I understand why the faculty is concerned. They have a mission to teach and teach. … Teaching hospitals are the ultimate safety net, and physician-educators want to teach residents and medical students how to treat low-income, chronically ill, and mental health problems. You want to take a closer look at what kind of community benefits Fairview offers. “
Professor of health policy
Stephen Davidson is an emeritus professor at Boston University’s Questrom School of Business, where he spent most of his career teaching and writing about health policy and management in the Department of Markets, Public Policy and Law.
“In general, I think it’s fair to say that consolidation doesn’t always work — at least not for years — when the cultures of the two institutions differ. … I would worry about the end of teaching in the combined hospitals because that takes resources that insurers don’t want to pay for.”
Healthcare market analyst
Baumgarten, a health care market analyst based in St. Louis Park, author of “Minnesota Health Market Review,” a round-up of health insurance and hospital operations.
“If (Sanford) says, ‘We’re going to reduce some of the important functions of the academic health center,’ I think you’d have a rebellion or an exodus within the core faculty, if they feel like the university health center is no longer a place to support their research. It’s not just a demotion, but a real downgrade of those the three missions of an academic health center, which are research, training and patient care.”
“There is a perception among hospital executives that their company must grow to $10 billion in annual revenue to be a strong competitor. I think both health systems looked at the Midwest map above and saw that several potential partners were already meeting: Essentia and Marshfield Clinic, Gundersen Health System and Bellin Health. So the list of possible partners will be short.”
“Sanford definitely wants to be big. This is Sanford’s fourth or fifth attempt at a major hospital deal in the past 10 years, and none have been completed. Just before the first proposed Fairview deal, Sanford sought a deal with Allina that wasn’t widely reported, but Allina doctors said, ‘Hell, no.’ “
‘Big Med’ author
Lawton Robert Burns is a professor of health care management at the University of Pennsylvania’s Wharton School, and co-author of “Big Med: Mega-Providers and the High Cost of Health Care in America.”
“This is one of those economists who include hospitals in the markets that they are investigating. When hospitals are in different regions, I think there is little concern about prices hiking and increasing costs. As hospitals are further apart, they are less likely to engage in anti-competitive behaviour.”
“I think the question that should be asked is, they tried this 10 years ago, why are they trying again?” What system administrators say is one thing, and what they try to do is another. A public reason is rarely a private reason.”
“(Access to Minnesota teaching hospitals) could be a route for Sanford to be able to hire more medical staff because they are now affiliated with the University of Minnesota Medical School. That could be the reason – the staff. Hospitals have a hard time finding nurses, so that can be an avenue to expand your nursing services. But how many nurses from Minneapolis-St. Paul wants to go to North Dakota?”