The University of Minnesota's proposal for a new hospital on the East Bank and Fairview's economic uncertainty raise a central question: Do taxpayers, and other players across the health sector, need to provide more funding for the university's health care training programs?
Gov. Tim Walz's new task force on academic health at the U, which begins meeting this week, is being asked to wrestle with that question.
The U continues to float ambitious plans for taking ownership of, and upgrading, its teaching hospital complex while its business partner Fairview remains insistent that the current fiscal arrangement with the institution isn't sustainable.
And yet the group is being asked to find a way to bolster training programs amid a health care environment of intense competition and economic instability.
By mid-January, the 15-member group must generate recommendations on how to support research, care delivery and health professions training at the U that's world-class. Undergirding the process is the all-important question of financial support.
"The hypothesis is: There's a case for more public funding," said Jan Malcolm, the former state health commissioner whom Walz tapped to lead the task force. "We need to test that."
The group has been charged with ensuring state residents continue receiving the highest-quality care in a financially sustainable way.
Key to this is financial support for a strong academic health program — because the U trains the majority of doctors practicing across the state while also running schools for nursing, public health, dentistry, pharmacy and veterinary medicine.
If there is an argument for more funding, Malcolm said she wants to know if the expenditures could be linked to the U improving access to health care.
Members of the group include Dr. Penny Wheeler, a regent at the U who is the former chief executive at Minneapolis-based Allina Health System, and Dr. David Herman, the CEO at Duluth-based Essentia Health.
The task force likely will consider whether there's a public interest in making sure an out-of-state entity doesn't control the University of Minnesota Medical Center in Minneapolis, Malcolm said.
The threat of out-of-state ownership of the U hospital drove significant controversy this year when Fairview Health Services — the Minneapolis-based nonprofit that owns three large facilities within the teaching hospital complex — proposed a merger with South Dakota-based Sanford Health.
Walz's executive order does not explicitly raise this issue. It does, however, state that governance of publicly funded health education should be addressed by the group.
Malcolm's first objective is to look at examples in other states for public funding of academic health. This includes an examination of different models for financial and clinical partnerships with outside health systems.
Since 1997, Fairview has been the university's clinical partner. The health system has provided money for medical education and a training ground for students and resident physicians within its network of hospitals and clinics.
Fairview and the U are negotiating whether they'll continue their affiliation after current agreements expire at the end of 2026. The health system, which has posted several years of operating losses, says the contracts aren't financially sustainable. The task force won't wade in.
"Talking about partnership models absolutely is on point. Is Fairview the right partner — [that's] a different story and outside of our scope," Malcolm said. The task force is "trying to separate the policy questions from the private — the contractual, business-relationship questions."
This limitation might make sense given a tight timeline and the importance of addressing problems with workforce training and access to care, said Allan Baumgarten, an independent health care analyst in St. Louis Park.
But it's a difficult distinction, because the public policy goals for the U's training and research programs depend on a strong supply of patients and revenue — things that come through business agreements.
"It seems to me that you can't separate talking about the research and professional training missions ... without talking about the financial foundation of the medical center," Baumgarten said.
The U needs access to patients in order to satisfy its three-part mission of cutting-edge care, groundbreaking research and top-notch training, said Dr. Timothy Sielaff, an executive fellow at the Opus College of Business at the University of St. Thomas.
But competition is threatening the statewide supply of patients to the U hospital, Sielaff said.
In Duluth, Essentia Health is bolstering services inside a gleaming new $915 million hospital while merging with a prominent health system in Wisconsin, said Sielaff, who was a physician executive for many years at Allina Health System.
Just 3 miles from the U Twin Cities campus, Allina is spending $1.2 billion to upgrade facilities at Abbott Northwestern, a hospital that provides many of the same high-end services. And then there's Mayo Clinic in Rochester, which for decades has been a global destination for specialty care.
"The question that hasn't been answered in a really clear way to me is: What is the unique value proposition of the University of Minnesota Medical Center?" he asked. "I think 25-30 years ago, when I trained there, we could have said that we are serving the entire state, we are a resource to all the different health systems. I'm not positive that's true anymore."
Malcolm expects the task force to hear from the U about its plans for a new hospital, including obtaining from Fairview complete ownership of University of Minnesota Medical Center.
Currently, the U owns a large clinic building on the East Bank that's one of the four primary components of University of Minnesota Medical Center. The university also wants to own the primary inpatient hospital on the East Bank, and a mental health facility and a pediatric hospital adjacent to the West Bank campus.
Fairview has said it's open to selling assets at fair market value. The U disagrees with a business valuation, saying the hospital complex has received significant investments from the public academic health system.
"The question of control of the assets is a very relevant policy question," Malcolm said, "but to me that's different than what's the price for that and what's the funding source."
The origin of the task force, she said, stems from the U's request earlier this year for $950 million in state money to support the university obtaining and operating the hospitals. That particular funding request is no longer on the table.
While the lawmakers will probably be asked again for funding, the task force will consider whether money also should come from private sector entities that benefit from the U's training programs — such as health systems, health insurers and medical device companies.
"Our focus is really on ... the need for public funding for the academic health mission, and how does that serve the public's interest," she said. "What we don't have any clarity on right now is: What does it cost to do this training across these six schools? How do the funds flow? What's the gap? What are other states doing that we can learn from?"