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University of Minnesota to buy back teaching hospital from Fairview over 25 years after selling it

por John R. Fischer, Senior Reporter | February 15, 2024
Business Affairs
University of Minnesota Medical Center (Photo courtesy of M Health Fairview)
The University of Minnesota in Minneapolis has announced that in the next few years, it will buy back the teaching hospital, the University of Minnesota Medical Center, which it sold to Fairview Health Services more than 25 years ago.

The U of M and Fairview signed a nonbinding letter of agreement for the transaction to be completed before the end of 2027.

The academic institution did not reveal what the cost will be for the four facilities that make up the teaching hospital but did request around $950 million last year from the Minnesota Legislature to repurchase it as well as cover associated workforce costs and continue funding operations, reported Twin Cities Business.

The decision comes months after the planned $14 billion megamerger between Fairview and Sanford Health in Wisconsin collapsed in July, partially due to concerns about an out-of-state health system running the hospital, which trains 70% of Minnesota's doctors, and the effect on patient referrals. Fairview previously offered to sell the property back to the university so it could move ahead with the Sanford merger.

Following the deal falling through, Fairview notified the university in late January that it would not be renewing operating agreements between the two.

“This [letter of intent], and the discussions ahead of us, are critical steps toward more fully integrating education, research, and patient care to better serve Minnesotans statewide,” said U of M interim president Jeffrey Ettinger in a statement.

Fairview purchased the East Bank hospital from the university in 1997 for $87.5 million and merged it with the Riverside hospital on the West Bank. At the time, the university was struggling financially because of its restrictive network and an increase in managed healthcare plans, but now says it is in a better position to run the hospital, due to having more faculty clinicians to refer patients and compensation from the state to train doctors.

In recent years, Fairview has faced its own financial challenges, recording a net operating loss of $315.4 million in 2022. Its operating agreements with the university currently run through December 31, 2026, and both will continue, along with the University of Minnesota Physicians to form new definitive agreements through Sept. 30, 2024, with an option to extend the negotiating period.

The agreement to sell back the teaching hospital will not include layoffs or changes in day-to-date patient care.

Accounting for necessary regulatory processes, the transition of ownership will begin early next year when Fairview and the university share management of the facilities and phase out Fairview’s involvement.

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