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Patrick Springer, Published August 05 2009

MeritCare-Sanford merger may be put on fast track

Administrators want the proposed Sanford-MeritCare merger to happen sooner than originally envisioned.

The quicker consummation of the deal, if approved, would allow the new health system to offer its health insurance plan at the start of the new year, when many employer groups renew coverage, executives said Tuesday.

Assuming the boards of the two health systems decide to go ahead with the merger, the original timetable called for approval by Dec. 31, allowing the resulting Sanford-MeritCare Health System to begin operations Jan. 1.

But that would be too late to offer coverage to some employer groups, many of which start their coverage year on Jan. 1, Kelby Krabbenhoft, chief executive of Sanford Health, told The Forum on Tuesday.

“We’d miss a whole year,” he said.

The boards of trustees for MeritCare, based in Fargo, and Sanford, based in Sioux Falls, S.D., each gave unanimous approval July 16 to a letter of intent for a “merger of equals.”

Krabbenhoft and Dr. Roger Gilbertson, MeritCare’s chief executive, said a review of the possible merger by both parties has not hit any snags that would derail the transaction.

Asked what could thwart the merger, Gilbertson said, “If we disagree about something serious we don’t know about.”

The timetable for the merger already contemplated completion of each health systems’ “due diligence” by Oct. 1. Due diligence is a legal term for the review of information, legal and financial, that takes place before a major transaction.

The time between approval of the final merger agreement and the date the merger takes effect would leave the two health systems in a state of unproductive limbo, said MeritCare and Sanford executives.

“If the (due diligence) work is done, we’re just in strategic paralysis until we’re done with the merger,” said Lisa Carlson, MeritCare’s chief financial officer.

Before the letter of intent was signed in July, a group calling itself Citizens for MeritCare asked the health system to take a slow path in pursuing any merger to assure that the public’s interest is being met.

Former Fargo Mayor Bruce Furness, spokesman for the group, wasn’t available for comment Tuesday afternoon.

Administrators of both health systems say they’ve been taking a deliberative approach, and efforts to complete the merger earlier than first planned would not mean taking shortcuts.

“We’re just going to move the closing up if possible, if all the steps have been made,” said Becky Nelson, Sanford’s chief operating officer.

Those steps include approving a final “definitive agreement” by each board of trustees, as well as a sign-off by the North Dakota attorney general, who must approve mergers and acquisitions involving nonprofit corporations in the state.

Paperwork for the proposed merger was submitted in a filing dated July 31 and received Tuesday by Parrell Grossman, who heads the consumer protection and antitrust division of the North Dakota Attorney General’s Office.

Attorney General Wayne Stenehjem and his staff have not had time to review the filing, Grossman said. The attorney general has up to 90 days, or can request more information.

“It’s a fairly thick packet,” he said. The submission includes financial statements and a financial analysis by a consultant, Deloitte Financial Advisory Services, documents MeritCare contends are privileged and not public.

The packet also includes a letter from a lawyer who specializes in nonprofit legal affairs concluding MeritCare’s board of trustees, in its review so far, has met its “fiduciary” obligations to the organization. MeritCare deems the letter privileged and not public.

If the merger goes through, the service area for Sanford-MeritCare Health System would cover most of eastern North Dakota, South Dakota, much of western Minnesota, as well as parts of Iowa and Nebraska.

Its service area in the five states would cover 100,000 square miles with a population of 2 million.


Readers can reach Forum reporter Patrick Springer at (701) 241-5522