Sanford Health to Merge with Fairview Health Services

Deal would create 58 hospital mega-system; merger date moved back from March to May 31

CEO SUMMARY: It’s the latest example of a merger involving two big integrated delivery networks (IDNs). Sanford Health in South Dakota inked an agreement to merge with Fairview Health Services in Minneapolis. This deal confirms the growing trend of consolidation among multi-hospital health systems. The question of greater interest for clinical lab managers and pathologists is this: Does consolidation among health systems mean more consolidation of those hospital labs involved in these IDN mergers? 

WHEN COMPLETED LATER THIS YEAR, THE MERGER of Sanford Health of Sioux Falls, South Dakota, and Fairview Health Services of Minneapolis will alter the competitive landscape in both metropolitan areas. The merger will result in a system with 58 hospitals and nearly 79,000 employees across Minnesota, North Dakota, South Dakota, Iowa, and Wisconsin. 

Clinical laboratory administrators and pathologists should recognize this deal as an important example of the growing trend of sizeable multi-hospital health systems merging to create what can be described as mega-IDNs (integrated delivery networks). 

These blockbuster deals are concentrating the ownership and control of the country’s healthcare and diagnostic services. Also, post-merger, what lies in the future for the clinical laboratories of these two organization is unknown.

Sanford is one of the largest rural health systems in the country. In an announcement of the merger, Sanford said the move would bring together its experience serving rural populations with the experience in serving urban areas that Fairview brings to the deal. 

The merger’s stated goals include providing more people better access to equitable healthcare services and accelerating value-based care. News of the pending merger was met with opposition by the University of Minnesota and Minnesota state officials. 

Sanford has its own partnership for medical student training with the University of South Dakota Sanford School of Medicine and the University of North Dakota School of Medicine and Health Sciences. Sanford also has a payer arm called Sanford Health Plan with 200,000 members.

Should the merger be finalized, Sanford and Fairview will remain nonprofit companies, each with their own regional presence, leadership, and board of directors. The name of the parent company will be Sanford Health. Sanford CEO Bill Gassen will serve as president and CEO of the combined system, while Fairview CEO James Hereford will serve as co-CEO for a period of one year following the completion of the deal.

Billions at Stake

System finances likely played a part in merger talks between Sanford and Fairview. Hospitals across the country are struggling with the triple whammy of exploding costs, rising labor expenses, and a surge in the rate of inflation. Clinical laboratories within those facilities face the same pressures. 

Sanford earned $5.2 billion in revenue in 2021, according to IRS documents provided by the company to KELO-TV in Sioux Falls. That amount was similar to its 2020 earnings.

Fairview’s earnings in 2021 were $6.5 billion, according to ProPublica. That was up from $6.1 billion in 2020. However, Fairview posted an operating loss of $164 million for the first half of 2022, more than double that year over year.

Financial Challenges

Healthcare management consulting firm Kaufman Hall in Chicago reported in February that hospitals entered 2023 with continuing financial challenges.

“Volumes, emergency department visits, discharges, and total revenues were down in January 2023 compared to December 2022,” according to a Kaufman Hall update. “Expenses—particularly related to labor—increased over the same time period, though not as fast as in previous months.”

Tyler Trask at Darwin Research Group
Tyler Trask

“Sanford in this deal is the more powerful system with the stronger finances,” said Tyler Trask, Director of New Product Development at Darwin Research, a healthcare consulting and research firm in Scottsdale, Arizona. “Fairview has had financial difficulties for the last several years. If you look at Fairview’s patient revenue growth and its margins, it is not nearly as strong as Sanford.”

Minnesota Attorney General

Cross-regional mergers of IDNs and health systems often include a level of outside scrutiny. That quickly became the case when Sanford announced its intent to merge with Fairview. 

Almost immediately following the November announcement, Minnesota Attorney General Keith Ellison announced a series of public hearings to gauge the community’s feelings about the merger. Sanford and Fairview planned to complete the merger on March 31, but Ellison asked the systems to delay that closing to provide more time for community input, Healthcare Dive reported on Jan. 30.

The systems agreed to extend the target completion date until May 31, according to a Feb. 10 report by Minnesota Public Radio.

Back in 2013, Sanford also attempted to merge with Fairview. That deal fell apart after the Attorney’s General Office raised concerns and Sanford backed out. Sanford had also announced plans in 2020 to merge with Intermountain Healthcare (as of 2023 known as Intermountain Health), but a CEO shuffle prompted Sanford to back away from the deal.

Adding to the mix, on Feb. 24, the University of Minnesota—which maintains a business relationship with Fairview—asked the state to purchase three hospitals and other clinics from Fairview and operate them.

The request would cost the state $950 million and was made in opposition to a merged Sanford/Fairview controlling Minnesota’s academic medical centers.

Sanford and Fairview indicated they were willing to work with the university regarding plans for the hospitals.

Hospital Ownership Change

Anytime a hospital is involved in a change of ownership, stakeholders in the community regularly rise up to oppose or criticize such transactions. This is par for the course and one of the risks of healthcare mergers and acquisitions that involve multiple hospitals across multiple communities, Trask said.

He noted that multi-state system mergers often run into regional cultural issues when an outside entity proposes to run local healthcare services, so it was not a surprise to see Sanford and Fairview attempt to get ahead of the concern.

“Sanford is trying to move into a new state and they’re saying, ‘We’re just like you. We’ve got the same small-town, hardworking, Midwestern values,’” Trask observed.

Pushback to Mergers

“Anytime these large IDNs merge, there’s going to be some pushback from legislatures, from clinicians, and from community members,” he noted. “If the health systems involved in the merger can get through all of that and maintain their brand images, then deals finalize and go forward. The economics—at least from the health systems’ perspective—generally support those mergers.”

One of the more interesting aspects of the merger is whether the Dakotas have the same culture as Minnesota, and in particular the metropolitan Twin Cities area. In announcing the merger, the two IDNs noted that the combined system would share their Midwest values.

Yet, University of Minnesota officials balked at a company in a different state controlling Minnesota academic medical centers.

“Control of Minnesota’s academic healthcare assets by a South Dakota-based entity is a non-starter,” said Jakub Tolar, MD, PhD, Dean of the University of Minnesota Medical School, in a news release.

“The charitable assets of the university’s academic health facilities and operations have been supported by Minnesotans and must be governed by the University of Minnesota,” Tolar added.

Contact Tyler Trask at


Sanford Health and Fairview Health Services Is the Latest Mega-Merger of Two Huge IDNs

THERE ARE TWO INTERESTING ASPECTS TO THE PENDING MERGER of Sanford Health and Fairview Health Services. For starters, the geographies covered by the two integrated delivery networks (IDNs) abut and somewhat overlap each other. There is also the potential for Sanford, proficient at serving rural communities, and Fairview, experienced at serving urban areas, to exchange best practices that benefit patients and physicians in their respective service areas.

map-of-states-served-by post-merger-IDNs

At-a-Glance: Two IDNs Poised to Merge


Sanford Health

CEO: Bill Gassen

Founded: 1894 (renamed in 2007)

Number of hospitals: 47

Number of employees: 47,757

Revenue: $5.2 billion in 2021

Market reach: One million patients across four states


Fairview Health Services

CEO: James Hereford

Founded: 1906

Number of hospitals: 11

Number of employees: 31,000

Revenue: $6.5 billion in 2021

Market reach: 2.1 million patients in two states

T. Denny Sanford Is Major Benefactor

ALTHOUGH ITS ROOTS STRETCH BACK TO 1984 and the establishment of Sioux Falls Hospital in South Dakota, the modern-day Sanford Health got its moniker from a philanthropist in 2007. That year, T. Denny Sanford bestowed a gift of $400 million to the former Sioux Valley Health System. 

Sanford grew up in a working-class neighborhood in St. Paul, Minnesota. He founded multiple companies, including Contech, Threshold Ventures, and First Premier Bank.

In total, Sanford has given $1.3 billion to the integrated delivery network, including $650 million in 2021 alone during the SARS-CoV-2 pandemic, according to Sanford Health Foundation. 

Sanford’s money has been earmarked for endeavors such as increasing healthcare access to rural residents, expanding opportunities for graduate medical education, and launching an initiative to include genomic medicine in primary care for adults.

“[Our effort] aims to bridge the separation between laboratory research and clinical practice,” Sanford told Philanthropy Roundtable in a 2016 interview.

“Denny Sanford is part of a group of a select few individuals who are trying to make an impact on American healthcare through philanthropy,” said Tyler Trask, Director of New Product Development at consulting firm Darwin Research.



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