University of Minnesota, Essentia Health Propose $1 Billion Health System Overhaul

MINNEAPOLIS, Minn. — The University of Minnesota and Essentia Health announced a $1 billion plan on Friday to create a new nonprofit health system aimed at improving patient care and supporting the university’s academic health training programs. The proposal, described as a “proposed framework,” seeks to address Minnesota’s pressing healthcare challenges, including rising costs, workforce shortages, and access disparities.

The partnership would establish a new entity to reinvest in medical facilities on the university’s Minneapolis campus while expanding healthcare access in rural and Tribal communities. However, the plan raises questions about its impact on the university’s existing partnership with Fairview Health Services, which operates the University of Minnesota Medical Center.

“We are at an inflection point in our relationship with Fairview Health Services that requires an urgent and innovative solution,” said University of Minnesota President Dr. Rebecca Cunningham in a statement. “We envision this model as a new path forward, one that builds on the momentum all those at M Health Fairview have built and continues to put patients first.”

Fairview officials, however, expressed surprise at the announcement, stating they had only learned of the discussions with Essentia within the last 24 hours. “Fairview is an independent, nonprofit organization, and decisions about our future will remain under the purview of our Board of Directors and leadership team,” the health system said in a statement.

The University of Minnesota and Fairview have been operating under an affiliation agreement since 1997, when Fairview acquired the university’s teaching hospital assets. The agreement, set to expire in 2026, provides tens of millions of dollars annually to support the university’s health training programs. Fairview has previously stated that this level of funding is unsustainable.

Essentia Health, based in Duluth, operates 14 hospitals, 78 clinics, and 24 retail pharmacies, primarily in northern Minnesota. The health system employs about 15,500 people and generated significant revenue in 2022, ranking as the state’s eighth-largest nonprofit. In contrast, Fairview, the state’s fourth-largest nonprofit, operates primarily in the Twin Cities metro area.

“This is the beginning of an exciting, ambitious — and critically needed — conversation about the future of care in our state,” said Essentia Health CEO Dr. David Herman. “With nearly 70% of all Minnesota physicians having been trained at the university, we know that continuing to deliver excellent patient outcomes while building a sustainable healthcare future rests on the foundation of a strong medical school.”

The proposed framework aims to create a new model for healthcare delivery, emphasizing comprehensive care closer to home, particularly in underserved rural and Tribal communities. It also seeks to preserve existing doctor-patient relationships while leveraging the university’s research capabilities to offer advanced treatments and clinical trials.

The $1 billion investment, to be spread over five years, would fund the initiative, though the university has not specified the source of the funds or detailed spending plans. The proposal also envisions new opportunities for healthcare professionals, including innovative care models like telehealth and home health services.

The announcement comes amid ongoing tensions between the University of Minnesota and Fairview, which have been renegotiating their affiliation agreement. Earlier discussions about a potential merger between Fairview and South Dakota-based Sanford Health further complicated the relationship, with the university opposing the deal.

“This bold vision creates a new day for healthcare in Minnesota, meeting the critical needs of today and anticipating the demands of the future,” Cunningham said. “We believe that a healthier and more vibrant Minnesota is not only possible — it’s our duty.”

This is a developing story. Check back for updates.