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Minnesota Attorney General Challenges Sanford Health on Sports, Fairview Merger

My wife and I sigh in disgust every time we see Sanford Health spending more of their patients' money on giant sports complexes and self-promotion instead of health care.

Minnesota Attorney General Lori Swanson doesn't sound too pleased, either. She grilled Sanford execs yesterday about their plans to take over Fairview Health Services and the University of Minnesota Medical Center.

Like Fairview, Sanford is a nonprofit health care company, and Swanson questioned why a tax-exempt organization like Sanford Health is spending millions of dollars on naming rights and other support for a civic center in Sioux Falls and university sports programs in North and South Dakota.

Link and Nelson said the sports-related gifts were in conjunction with Sanford’s mission to support sports medicine and fitness.

But after listening to Link describe various spending by Sanford Health to boost ­university athletic programs and local athletic facilities, Swanson asked him: “Can you see how the focus here [in Minnesota] should be on patients, not sports and athletics?” [Tony Kennedy, "Swanson Grills Sanford Executives on Proposed Fairview Merger," Minneapolis Star Tribune, 2013.04.07]

But Sanford Health wants the University to think very much about athletics and the money Sanford Health could offer them for it, if they'll just play ball on the hospital merger:

E-mails obtained by the Star Tribune show that [University of Minnesota president Eric] Kaler was also scheduled to initiate preliminary talks this past week in Sioux Falls with Krabbenhoft. Kaler canceled the meeting in part because of Swanson’s sudden inquiry, but he intends to reschedule even though he has proposed the university’s own takeover of Fairview — a move that would exclude Sanford.

In a March 25 e-mail to Kaler, Krabbenhoft didn’t mince words about his own enthusiasm for U of M athletics and possible funding. The e-mail provided a “discussion agenda” for the scheduled April 1 meeting at Sanford headquarters, including an item called “Denny Sanford and the U of M.” Another item of discussion was: “President Kaler-Sanford Health Trustee (post-Merger).”

Krabbenhoft offered to fly Kaler to and from Sioux Falls in a private plane for the meeting, and he summed up his e-mail with accolades for the U’s decision to fire basketball coach Tubby Smith. In the email, Krabbenhoft called himself a “Gopher forever” and said he also intended to write to “Norwood” about the basketball situation.

The CEO closed the e-mail with this personal “hope”: “that Sanford and Fairview come to a reality and I can get as deeply invested and supportive as I/we should be in the Athletic future of the University of Minnesota” [Tony Kennedy, "It's a Delicate Dance as Kaler Courts Wealthy Alum Sanford," Minneapolis Star Tribune, 2013.04.08]

According to testimony at yesterday's hearing, President Kaler "has promised not to ­consider any charitable gift from Sanford while Fairview remained in merger talks with the South Dakota firm." And no one will think about that elephant in the room.

Sanford Health claims they can save the Fairview system $40 million to $60 million with a merger. But more than a few people in the room don't see a need to give up their health care system to outside ownership:

“This is very, very, very serious business for all of Minnesota,” said David Finewachs, a former Minnesota Hospital Association lawyer, who was called by Swanson to testify that Fairview is stable, successful and not facing a financial crisis that would call for a merger.

The crowd applauded when he said any merger that would give Sanford Health control of the U of M Medical Center and Fairview would be like “selling the public library to Wal-Mart.”

He added: “We don’t need to export our most precious resources” [Kennedy, 2013.04.07].

Denny Sanford mostly gets a free pass from his beholden South Dakota beneficiaries. It's nice to see Minnesotans willing to tell South Dakota's big money man no.


  1. Jerry 2013.04.08

    Poor Lori Swanson, she does not realize that Obama Care is ruining the bottom line of hospitals and insurance companies. All she needs do is forget about facts and listen to the new republicans speak of how this will bankrupt America and that hospitals and insurance companies will cease to exist.

    That is why the good folks in South and North Dakota and Minnesota and what the heh, China too, need to come together and take that money from Sanford so they will not loose it to the black dude. Why should the good folks in all of these areas be deprived of knowing that we can go to a game and walk under the banner of a company that just wants to show that they care for sports. Forget about what that money could do for the uninsured or the schools that could turn out more doctors and more research. We want our sports so we can watch people get all broken and need, gulp, medical treatment. By granting them the right to spend policy holder money for this kind of stuff, you should also be demanding that they buy the naming rights to some regional brewer as well. That way you could have a Sanford Beer while you are watching the Sanford sports team using the Sanford Medical system to take care of broken bones and contusions and yes, hangovers. Lori, you need to listen to these New Republicans as they know what is best for all of us in their view of a nanny state.

  2. Sam Hurst 2013.04.08

    Your concerns are dramatically linked to Steven Brill's powerful and terrifying article in Time magazine Feb. 26, 2013, entitled "Bitter Pill: Why Medical Bills are Killing Us". Non-profit hospitals are financial juggernauts who pay Wall Street salaries to senior executives, charge patients/insurance companies exorbitant prices for x-rays, pill dispensing paper cups, unnecessary procedures, blood and lab tests whose true costs are a fraction of what they charge unsuspecting patients, and medicines that can be purchased for a tenth of the cost on Amazon. Brill's conclusion is that Medicare's ability to negotiate with hospitals on behalf of its patients is one reason it is the most cost effective and administratively efficient, program in the health economy. Just another efficient, low-overhead, effective government program. Go figure.

  3. Chuck 2013.04.08

    Interesting, Minnesota will probably end up in control of this Health System after a while, maybe SD AG should be concerned?

  4. Jim 2013.04.08

    I wonder if T. Denny has informed them they also need to rename the state East Dakota?

  5. SanDakota 2013.04.08

    No Jim, it is to be Sanesota.

  6. Douglas Wiken 2013.04.08

    Seems to me that US Gov't should be asking questions about Sanford Health dumping money into stadium banners, etc. that have nothing to do with health or medicine, but drive up costs for patients and their insurance providers. I doubt Medicare and Medicaid funding was intended to subsidize sports and sports arenas.

  7. Anthony D. Renli 2013.04.08

    Corey - You do realize that T. Denny has nothing to do with Sanford Health?

    He isn't on their board of trustees, isn't part of their executive structure, has no vote on anything Sanford Health does?

    He donated a bunch of money($400,000,000) to the hospital for medical research and children's health care and they renamed the hospital. After that, everything that Sanford Health has done is pretty much all on their own. As much fun as it is to jump all over a guy who made his money exploiting the poor, in this one case, he IS actually not guilty.

  8. Jerry 2013.04.08

    So what you are saying Mr. Renli is that instead of Sanford Health it should go back to Sioux Valley and then they would not be paying all the money to name a sports complex? If Sanford has nothing to do with anything anymore, then we are correct in that the hospital system is spending policy holder moolah for nothing to do with health care. Methinks ole T. Denny is up to his elbows in this deal.

  9. Wonder Wino 2013.04.08

    It is good to see that someone else has read what the Star Tribune has reported on this proposal. Their take on this is quite different that what is being reported in the Misleader. I like the public library being taken over by WalMart part. Why doesn't the Argus contact the StarTrib to get the emails where Kelb says that he is a Gopher for life? They have transplant patients testifying against this. The Argus is doing a terrible job in informing the public what is really going on here. I would be suprised if this went through.

  10. Winston 2013.04.08

    Once again, Minnesota sets things straight in the northern plains and plays the role of the parent in our governmental process. When I was younger and I would ride carnival rides, I would always wonder just how safe these rides really where. Then, when I learned that the state of South Dakota had no laws or state officials checking-out the maintenance records of these rides I became horrified, but then someone tried to reassure me that as long as the carnival had just been in Minnesota before arriving at its South Dakota destination, then everything should be all right. Because Minnesota regulates the carnival industry in their state and they do a good job at it.

    Well, once again we are relying upon good old Minnesota to save the day and stand-up to an industry that appears to being running a muck. So far they look like they are doing a good job at it and hopefully the benefits will prevail to the consumers' interests.

    This turf struggle between Fairview and Sanford is also reminiscent of the verbal battles that the late Minnesota Governor Rudy Perpich use to have with the late Governor Bill Janklow back in the 1980s over economic development, while the South Dakota fourth estate remained silent towards Janklow. So, Thank you Minnesota for being a parent when it comes to the issue of health care needs of our northern plains citizenry, rather than an absentee parent when it comes to health care.

    One final note, the growth and attempted continued growth of Sanford Health both regionally and nationally (if not internationally) falls on deaf ear when it comes to the conservatives for some reason. Should they not be more concerned than liberals? Are not the conservatives the ones who are always reminding us of the ominous perils of a single (payer) health care system, and does not the Sanford Health business plan appear to exemplify this great conservative health care fear? Or does the private nature of this business plan, absent a democratic element, somehow make it palatable for them? Should we not fear big business as much as big government? Why are the conservatives so silent on this one?

  11. Winston 2013.04.08

    "continued?" continual!

  12. Joan 2013.04.08

    I think Sanford is getting too big for their britches. They don't seem to realize that bigger isn't always better. I must have been mistaken, but when T. Denny gave Sioux Valley that money, I thought it was to be used in SD. But that must not be the case, because I have heard of Sanford opening clinics in other countries, and states. The way I look at it is if SD isn't good enough for their "high hats" get the heck out.

  13. Douglas Wiken 2013.04.08

    "The way I look at it is if SD isn't good enough for their "high hats" get the heck out." Unless this a bit of satire on the typical conservative response to criticism of anything remotely related to the problems in South Dakota, I don't much care for suggestions of the "If you don't like it here, move somewhere else" whether it comes from conservatives, middle of the road dead skunks, or left-wing tree hugging free-love, long-haired good people.

  14. caheidelberger Post author | 2013.04.08

    Winston: "fear big business as much as big government"—there's a profound idea!

  15. caheidelberger Post author | 2013.04.08

    Anthony: you put your name and your larger-than-life bronze likeness on something, you take the consequences. Sanford puts his name on the hospital because he wants us all to associate his name with the humanitarian actions of the organization. He cannot then expect us not to associate his name with less agreeable actions taken by the organization.

  16. David Newquist 2013.04.08

    Gov. Mark Dayton also is skeptical about this proposed merger:

    When Sanford came to Aberdeen, it took over a clinic in which my physician was a member. He suffered an injury and eventually retired, and I was switched to one of Sanford's hires. Suddenly a number of problems were pointed out with this aging body and my medications were changed. I began to sense that the Sanford rule was that of law firms which instruct their new hires to generate billings. Whether or not Sanford himself is involved--knowing the powers of generative capital, it is hard to dismiss his influence--the business is just that: a business. Healthcare is a product that will be manipulated to generate business.

    Healthcare can be self-sustaining, but when a provider becomes involved in promoting sports arenas, one must question whether healthcare is its reason for being.

  17. caheidelberger Post author | 2013.04.09

    You're right, David: with Sanford, it's hard to tell which is the means to the end: healthcare, sports, or dollars. I have a hard time swallowing the idea that a hospital needs to promote itself so heavily. Treat people well, save lives, and people will come, right?

    How does expanding across state lines and controlling multiple facilities in distant cities improve a hospital's ability to deliver healthcare to a community?

  18. Bill Dithmer 2013.04.09

    Sam Hurst great article in Time. Unfortunately I read it while I was waiting at the Heart Doctors in Rapid. Then it was off to Regional for some body work. Talk about an eye opener.

    The Blindman

  19. Troy Jones 2013.04.09

    Three comments:

    1) Profit or non-profit, hospitals have a fiduciary obligation to make a profit. Sanford has roughly $800 million of debt. They only accessed this money because their lenders expect them to make a profit. If they can't access this debt, they can't have made all the capital expenditures over the past few years. Capital Expenditures that directly relate to patient care.

    2) Hospitals are highly fixed cost intensive. For instance, let's imagine a hospital plans 5,000 admissions a year. They might lose money (alot) if admissions are only 4,500 while making a lot of money if admissions are over 5,500. Fixed cost intensive businesses must have minimal admissions or they will lose alot of money. The sickness business can have ups and downs.

    3) Profitability depends on patients selecting their hospital for care, especially with a fixed cost intensive business. This makes advertising a critical expenditure. Agree or not, Sanford has chosen a brand strategy that is criticized above as "waste" or otherwise hurting patient care. If they miss their admissions by 5% because they don't market themselves, the "savings" by not marketing will be dwarfed by several multiples by the losses of not getting patients.

    4) None of us have the information about whether this merger is good (increases profitability which is critical if they to be able to borrow money at cheap rates or have their interest costs go up which will decrease funds for care improvement) or bad (decreases profitibility or ability to provide care)

    For the record, despite having alot of respect for Sanford Health, I am an Avera guy. My purpose for posting is to set the record straight. Much of the above innuendo is based on no information. This merger will be analyzed by interested parties in great detail. Commentary should be reserved until more information is available and based on facts.

  20. Anne 2013.04.09

    It is a bit stunning to see sickness defined as a business.

  21. Winston 2013.04.09

    Troy, It is truly refreshing to have a conservative, like yourself, commenting on health care policy beyond the usual conservative health care talking points of greater tort reform and more health savings accounts (HSA) for all.

    That said, I do not think I nor any other bloggers' comments on this piece and our concern over the "Sanfordization" of our regional and potentially national health institutions are unfounded. Rather, they typify the churning of political thought and discourse which makes our Republic tick at its best.

    If I and others are truly the promoters of innuendo when it comes to Sanford, then how does one justify the current Minnesota's AG concerns without including her into our group - especially, when your own thesis admits the verdict is still out. Are her initial concerns without merit? Or do they rather fall within the range of common sense concern which most of the aforementioned comments represent? I would suggest the latter.

    But a course, you are use to a blog site which claims the "Hotness" of a South Dakota AG is some how news and or a legitimate political concern, while I prefer a blog site which prefers to discuss the concerns of a neighboring state's AG hunches about the encroachment of Sanford Health into their state and its health care system.

    In conclusion, for the sake of fundamental fairness, I actually prefer Sanford Health over Avera .... I am a "Sanford Guy." I once breathed my first breaths at Sanford Health, back in the day when we knew it as... Sioux Valley Hospital....

  22. Charlie Johnson 2013.04.09

    When you continue to build brick and mortar, use debt to do so, and expand rapidly without a conservative approach, you will run into financial distress---just ask a farmer.

  23. Les 2013.04.09

    The Mn AG will sit on Sanford's board at some later date. This is all about the cost of doing biz on her turf.

  24. Troy Jones 2013.04.10


    If I read the SUBSTANCE of the above comments, they are essentially:

    1) Swanson (Minnesota AG) asked about why Sanford spends so much money on sports. Fair question. But, Swanson's comment it detracts from patients is ignorant. She obviously didn't listen to the answer to her question. It is the marketing/branding positioning strategy of Sanford Health. She might disagree with the strategy but it does not distract from their core business of providing patient care.

    2) People want to keep local ownership of Fairview for jingoistic reasons (ironic since Minnesota hasn't been shy about having significant corporate positions in SD). Two comments they must remember: Fairview only made $15 million last year on $3 Billion of revenue. This is one half of one percent. Their bond rating has been reduced and they a "sneeze" from losing money (even though they are in a pretty good market). Fairview as currently managed/owned is not a long proposition. In Sanford claims it can save them money ($40-50 million) which would get them in line of what well-run hospitals need to make to properly service $800 million of debt. If they don't have a turn-around soon, their bond rating will continue to drop, interest costs will go up, and free cash flow (if any) will go to pay more interest and less investment in care. It is wholly concievable Fairview could be in bankruptcy in 5 years without a turnaround.

    3) A naive idea that hospitals should be run like a charity and not a business. When you provide $3billion of care a year, you better have good strong business controls or costs and care will spiral down a rat hole.

    On the surface, Fairview needs Sanford more than Sanford needs Fairview.

  25. Les 2013.04.10

    """""Fairview Health and Sanford Health, has turned into a situation that finds us being unwelcome by some interested parties and key stakeholders of our proposed merger partner. """""""". Obviously IP has been creepin the halls of St Paul.

  26. Charlie Johnson 2013.04.10

    When Sanford Health is renamed after the merger, Fairview West has a good ring to it!

  27. Jerry 2013.04.10

    Good find Larry, so what will Sanford do now? There was a whole lot of moolah that Fairview had control over, one could call it a cash cow. Maybe a merger with Avera?? Rapid City Regional?? They could own South Dakota even further. That is one of the cool things about Capitalism, remove your competitors.

  28. Troy Jones 2013.04.11


    In MPLS, the "Fairview" brand is at best second tier and probably third tier. In SD, the Avera and Sanford brands are clearly first tier. We don't realize how good we have it. Whether you like T. Denny or not, Sanford means something of quality. Fairview would be well-served to be under the Sanford (or Avera) brand.

    Jerry, Fairview is not a cash cow. It is a turn-around situation. Its infrastructure is clearly the most archaic in the region and will require significant investment and its current cash flow is substandard (without change bordering on insolvency). Regarding a merger w/ RC Regional or Avera, I don't see it possible on anti-trust grounds. Non-starter.

  29. Mark 2013.04.11

    Troy - Would it be more appropriate to call this attempt an acquisition rather than a merger?

  30. Troy Jones 2013.04.11


    I think it is a distinction without a difference. Anytime you combine two of anything, there can't help but be melding of qualities. Even if Sanford (or vice versa) management ended up filling all of the top positions, Kelby & company will be different because of what they learn from Fairview. Maybe they will evolve so much the combined company retains more "feel" of Fairview or vice versa.

    That said, people in the industry usually say if neither company is more than a certain percentage (say 60-70% of the combined company) it is a merger. Otherwise it is an acquisition. Here I think the distinction is used because of the heavy odds the larger company will change the other company more than the smaller company. If they are closer in size, the odds are less strong.

    And, that said, because Sanford is the stronger company (financially and by performance) the combined company would likely be more successful of they ultimately looked more like Sanford.

    But who knows. Only time sorts this out.

  31. Sharon Schmidt 2014.02.19

    I agree with David Feinwachs and Sam Hurst. Many so called non profits in Minnesota itself are not what they appear to be. If there is a profit, it should be put to good use, like good follow-up after surgery, pharmacist on hand to make sure the patient isn't being over drugged and on drugs for too long and supporting health care for the less fortunate. Take a look at what the counties that use County Based Purchasing have done with the same amount of money received for their medicaid patients as an HMO would receive. CBP actually go out looking for these patients and take care of them before the get costly sick. That to me is what medicine should be about, helping, not seeing the patient as a $ sign.

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