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Minnesota Attorney General Scares Away Image-Sensitive Sanford Health

You know why I keep Larry Kurtz around? Because he provides useful information, like this update that Minnesota Attorney General Lori Swanson has scared Sanford Health out of its merger talks with Fairview Health:

Sanford Health is withdrawing from merger discussions with Fairview, according to a statement released by the company.

The announcement comes three days after Minnesota Attorney General Lori Swanson held a public hearing to question whether the merger was in the best interest of Fairview Health Services. The merger talks had been underway for weeks, but just last week the University of Minnesota made public that it was also courting Fairview.

Swanson had been wary of the potential merger between Sanford and Fairview for a number of reasons, especially because Fairview is a charitable institution whose net worth of $1.2 billion in assets was created by Minnesotans through tax breaks, donations, and land for the benefit of Minnesotans [Melanie Sommer, "Sanford Withdraws from Fairview Merger Talks," Minnesota Public Radio, 2013.04.10].

Sanford had said that this merger was all about improving quality of care and reducing costs. If that was the case, Sanford CEO Kelby K. Krabbenhoft now appears more concerned about Sanford's reputation:

I am now concerned that the good reputation of Sanford may be injured by a process that only intended the highest of ideals and integrity for what we believed to be a compelling solution to the challenges facing health care delivery today and in the future. As such, I think it's time for Sanford to withdraw from this process... [Krabbenhoft, quoted by Sommer, 2013.04.10].

If you take corporate baloney literally, Krabbenhoft is saying, "We had a really good plan that would have helped a lot of people... but our image is more important, so we're not going to bother." With that kind of self-interested focus, Minnesota's attorney general was probably right to cast scrutiny on the now-defunct merger. Well done, AG Swanson!


  1. DB 2013.04.11

    Let Fairview continue to be bailed out by taxpayers. There is a reason Mayo doesn't want to touch that with a 100 ft pole. I wouldn't be surprised if the UofM starts talks with Mayo at some point. It amazes me how people dog Sanford so much. I don't think people realize how lucky we are here in SD to have such access to such great care. The problems are near non-existent as compared to other geographical locations.

  2. Jerry 2013.04.11

    Very good DB, now go get your check from Sanford for this lobby. Lucky to have Sioux Valley and Avera and Rapid City Regional, you bet, we have some good things here. What we also are getting is a monopoly on healthcare services, not so lucky.

  3. Owen Reitzel 2013.04.11

    Great care DB if you have insurance. otherwise not so much.

  4. Anne 2013.04.11

    Now a resident of Minnesota (I am in S.D. twice a month), I note that only one account of this proposed merger makes clear that all the doctors in the U. college of medicine opposed it. For one thing, the arrangement with Fairview has not worked out very well. A business executive I am close to says that both Sanford and Fairview follow a business model that is incompatible with a teaching hospital and tends to dismiss research and patient care. He also says that the proposed savings could be realized in other ways, but that the administrative approach being used in healthcare is in large part responsible for making U.S. healthcare the most expensive in the world, while providing a level of care that consistently ranks at the bottom of all developed countries. Those points have not made it into most press reports, but they have been a major focus at the U.

  5. DB 2013.04.11

    "What we also are getting is a monopoly on healthcare services, not so lucky."

    You guys should be happy. Potentially makes an easier argument for single payer. Single Payer, single provider.....isn't that what everyone wants? Don't worry Jerry, I get enough from Avera that I don't need to be on Sanfords payroll. I'm just smart enough to see all the good that comes from this.

  6. larry kurtz 2013.04.11

    "Bishop Swain instructed two diocesan employees who had served on the advisory board of Avera Health Plans to resign, 'to ensure that their continued presence could not be interpreted as diocesan acquiescence and therefore cause an intensification of the scandal.'"

  7. Richard Schriever 2013.04.11

    Thanks for your perspective Anne. An intelligent anti-corporatism statement. Beats the heck out of the usual approach ("Sanford Falls", etc. ) that could easily be interpreted as a twisted form of simple jealousy rather than a reasoned conclusion.

  8. Jerry 2013.04.11

    Geez Larry, you did it again with the one about the Bishop and Avera, thanks. I hope DB can figure out how to access the site and read it as well. In my view now, it seems that Sanford and Avera are both governed by a bishop of some sorts.

  9. Douglas Wiken 2013.04.11

    Disclaimer: My wife has answered the phone at local Sanford Associate (now) for about 30 years. My daughter did her dietary internship at Fairview if my memory is correct.

    It is hard not to guess that Kelby K. is more interested in increasing his own overpay and idiotic sports than in any actual improvements in health care.

    While we have had no experience with service at either a Sanford facility or Fairview, or Avera, experience of our friends strongly suggests that both Avera and Sanford need to do more to control hospital-borne antibiotic-resistant infections. Scandinavian simple protocols help a lot and checklists also help. Recent studies suggest that janitors need a regular training program on sanitizing the things that actually spread disease.

    Here are a few things that might help locally, but are called "too expensive". Give patients their own ball point pen instead of leaving one with fine-quality infections on a counter or desk. Install sliding entrance doors so everybody coming and going isn't dragging infection in and out on their hands--- would also reduce heat loss. Providing local executives with information on recent research is like pissing in the wind.

    These are probably not the kind of things that interest executives getting over a $Million per year either. Piddling stuff is more important than making sure Sanford has a banner in every sports arena or can afford lobbyists like John Thune who got $500,000 or so for the equivalent of a summer job between elections.

  10. joeboo 2013.04.11

    The argument I make about non-profit hospitals is how much their execs make and how there are just as many people hired in collections as there is in the medical sides of things at these hospitals. The overhead is ridiculous and yet we are suppose to see this "non-profit" and say everything is fine.

  11. John 2013.04.11

    DW's spot on. The profit motive has no place in health care. Mayo is a non-profit. Doctors are on salary, which goes a long way to reducing unnecessary tests, procedures, and surgeries.

  12. Troy Jones 2013.04.12

    Five comments:

    1) A merger where stakeholders are hostile threatens the potential success of the merger, the reputation of the participants, and the odds of the merger occurring. Sanford's response is rational. Why pee into the wind?

    2) If there is an alternative to a merger for Fairview to become financially healthy, they best be moving that way. Their current financial performance is beginning of a death spiral.

    3) Mayo, like Avera and Sanford, is a non-profit hospital as per the IRS tax code. But, that doesn't mean they don't and shouldn't make a profit. Profits are necessary for them to make the capital investments necessary to provide quality care. Mayo in 2011 had revenues of $8.5 billion and profits of $610 million. This is 40x the profits of Fairview and 10x the profits of Sanford.

    4) Over the last two years, Mayo has contributed 90% of its profits (just short of $1 billion) to "pension and other post-retirement adjustments."

    5) While I can't assess the wisdom of the merger from Sanford's perspective (requires information I don't have), the reality remains Fairview needs Sanford or another partner badly and soon. The Minnesota AG's "action" may possibly have pushed a huge financial liability to the taxpayers of Minnesota. The adage "be careful what you pray for as you might get it" may be appropriate here.

  13. Mike Quinlivan 2013.04.12


    Don't really disagree with anything you typed. Did my master's thesis on the positive and negative effects of a hospital (rural in this case) joining a larger network of care givers. Consolidation is simply going to happen; as the market within healthcare does not operate at all like the typical free market we associate with other goods. And that is not necessarily a bad thing.
    Lastly, Mayo is HUGE!!!, with hospitals and clinics all over the nation (Minnesota, Arizona, Wisconsin, and I am sure other places). Not surprised they made ten times Sanford; they offer amazing care however. I suspect what we are seeing here is a proxy battle over what these systems want to be in the future. Mayo is the best name in care; Sanford is good but has a way to go to make it to Mayo's level. They are scrambling against each other for market positions for the inevitable showdown.

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