DFL bill could doom Sanford-Fairview deal with ban on anti-competitive health care mergers
The AG would be able to sue in state court to kill health care mergers that aren’t in the public interest.
University of Minnesota Medical Center. Courtesy photo.
Democratic lawmakers are weighing a ban on anti-competitive health care mergers that could spell the end for the proposed merger between Minneapolis-based Fairview Health Services and Sioux Falls-based Sanford Health.
The deal has sparked fierce resistance from Democratic lawmakers, rural residents and health care unions, who say it would create a health care monopoly in greater Minnesota and likely lead to clinic closures and higher costs. Lawmakers and the University of Minnesota have also expressed concern that the university’s teaching hospital could wind up in the hands of an out-of-state entity.
Since announcing the merger in November, leaders from the two health care giants have buckled to public pressure and pushed back the merger date twice, saying on Monday it would be delayed until at least the end of August.
The bill (HF402/SF1681) put forward by Democrats could lead the deal to be taken off life support and laid to rest for good.
The legislation would prohibit health care transactions that “substantially lessen competition” or “tend to create a monopoly,” which opponents of the deal say it would. Attorney General Keith Ellison is already investigating the deal for potentially running afoul of antitrust and charity laws, but an explicit state prohibition regarding the public’s interest would give him greater latitude in bringing a case in state court.
In a statement, the Office of the Attorney General said it supports the provisions of the bill that bolster its oversight.
“This bill would build upon the attorney general’s existing authority to represent the interests of the public by adding tools to its toolbox that 29 states already have,” said John Stiles, a spokesperson for the Attorney General’s Office.
The legislation seems tailored to the Sanford-Fairview deal, but it would apply to all mergers and acquisitions of health care organizations that have an annual average revenue of at least $40 million.
“There’s a lot of money to be made in health care,” said Rep. Robert Bierman, DFL-Apple Valley. “This helps policymakers going forward to prevent some of the onerous mergers that can take place — even the ones we don’t even know are coming.”
The bill would also require health care organizations to notify state officials 90 days before a merger or acquisition is completed. Sanford and Fairview originally planned to complete their merger less than five months after announcing it.
As part of the notice to state officials, the health care entities would have to disclose the acquisition price, plans to close facilities or eliminate services and any information the attorney general or health commissioner requests.
Ellison has repeatedly said Fairview and Sanford have not fully complied with his requests for significant information and told lawmakers last month that his office had not received information his office should have received months ago.
The proposed legislation would make it harder for control of the University of Minnesota Medical Center, which Fairview purchased in 1997, to go to an out-of-state entity.
The prospect of a South Dakota-based company owning the university’s main teaching hospital has outraged politicians and health care advocates. That was also one of the reasons then-Attorney General Lori Swanson was critical of the merger back in 2013. Sanford pulled out of the deal shortly after Swanson held a public hearing during which she grilled company executives.
Former Minnesota Govs. Mark Dayton, a Democrat, and Tim Pawlenty, a Republican, testified last month before lawmakers about their concerns that an out-of-state company could profit off a teaching hospital that receives significant support from Minnesota taxpayers.
The bill says if an out-of-state organization purchases a health system that is organized as a charitable organization — including the university’s medical center — that health system must pay back to the state any charitable assets it received from the state.
Whether Fairview would have to pay the state for the cost of the medical center is contested, however. According to the bill’s fiscal note, the University of Minnesota says Fairview received the medical center from the university, not the state.
For good measure, Bierman has also authored a second bill (HF3108/SF3124) which would outright ban out-of-state entities from owning, either directly or indirectly, University of Minnesota health care facilities.
“We need to do whatever we need to do to keep the University of Minnesota under the auspices of Minnesotans,” Bierman said.
In a statement, a spokesperson for Fairview and Sanford said the companies have been cooperating with the attorney general and have agreed to his request for a 90 days’ notice prior to closing the merger at a future date.
“Since December of last year, our priority has been continued cooperation to support the existing and robust review that is already in place by the attorney general,” the statement says. “We remain confident in the benefits of the merger for our people, patients and communities and our shared vision to advance world-class health care for all we serve.”
The Minnesota Hospital Association in a letter to lawmakers said it was concerned about the attorney general’s oversight in the bill, as health care companies often need to adapt and denying a merger “could result in essential health care services being eliminated from a community in our state.”
Hospital executives are unlikely to be able to dissuade a unified Democratic trifecta from voting against the bills. Republicans, however, appear skeptical of the law, noting that mergers can help rural communities by supporting local clinics and that health care companies don’t want to undergo more government regulation.
House members on Tuesday voted to send the bill to the House Ways and Means Committee, which is usually a bill’s last stop before it goes to the floor.
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