MINNEAPOLIS — Fairview Health Services told the University of Minnesota Monday it won't renew its current agreement, saying its "level of financial support" to the university "threatens the sustainability" of its health care system.
The current partnership expires on Dec. 31, 2026. However, under the terms of the contract, the deal would be set to auto-renew if neither side took action by the end of the 2023 calendar year.
Fairview went on to say, "...this notice of intent to not renew serves simply to avoid automatically renewing the current agreement. We will continue to negotiate in good faith with the U of M to attempt to establish a new agreement."
Fairview officials said this notice of non-renewal will not change things for their patients or employees under the "M Health Fairview" brand, which was established in 2018.
"M Health Fairview is the same today and will be tomorrow," spokesperson Joe Campbell said. "All this is, is an opportunity for both Fairview and the University of Minnesota to step back and chart our new path forward."
Under a strain from COVID, Fairview has posted operating losses throughout the pandemic and reported losing $315 million in 2022. At the same time, Fairview has said its payments to University of Minnesota Physicians and specialists have increased exponentially, on top of Fairview's annual contributions to the medical school that totaled roughly $100 million this year.
"Our financial situation is such that we need to be very deliberate and careful about how we are spending money," Campbell said. "We want to find a path forward with the University of Minnesota, that ultimately leaves both organizations in a better place."
Following Fairview's announcement, the U of M released a statement, saying, "We have previously said, as has Fairview, that our current agreement would have to change for the future. Fairview's announcement today simply reaffirms those statements."
Monday's announcement from Fairview comes just a week after the Minnesota Hospital Association (MHA) painted a bleak financial picture of the state's health care industry, releasing a new report citing hundreds of millions of dollars in operating losses so far in 2023.
This past summer, the proposed mega-merger between Fairview and South Dakota-based Sanford Health also fell through. The companies announced the potential merger back in November 2022, which would have created one of the largest health care providers in the country. The two health systems explored a possible merger in 2013 but the deal fell apart after concerns from state leaders over the control of the University of Minnesota Medical Center, the state's largest academic training hospital, which is currently operated by Fairview. The University of Minnesota has proposed buying back the hospital from Fairview.
Fairview's spokesperson Joe Campbell said the health system remains open to selling the hospital back to the U of M and that those discussions will continue during contract negotiations.
Allan Baumgarten, an independent health care analyst based in Minneapolis, said he expects the two sides to eventually reach a new agreement beyond 2026.
"Each needs the kind of partnership that the other provides," Baumgarten said. "They're large organizations, and there are a lot of revenues flowing through each one. And the question is, are there ways they can work together well and make it financially viable for each side?"