In the past year alone, three Twin Cities-based hospital systems have announced plans to merge with systems outside of the metro: HealthPartners with Duluth-based Essentia, North Memorial with South Dakota-based Sanford Health, and Allina with California-based Sutter Health.
Why are the mergers happening now? And what will be the impact on patients?
What seems like a sudden surge of healthcare mergers in the region is neither sudden nor unique to Minnesota, said Geoff Kaufmann, who teaches healthcare management at the University of Minnesota.
“It’s happening everywhere,” he said.
The biggest driver, said Kaufmann and other experts interviewed for this story, is financial pressures on hospitals’ bottom lines. Between 2019 and 2024, the cost of delivering care in the state rose 30%, according to a report released in October by the Minnesota Hospital Association. Overall, nearly a third of hospitals statewide are losing money.
“Hospitals’ margins are shrinking rapidly,” Kaufmann said. “A lot of them look at a merger as a way to say, ‘Where’s some bigger pockets?’”
And there are troubles on the horizon: When certain provisions of H.R. 1, also known as the “One Big Beautiful Bill Act,” go into effect on Jan. 1, 2027, Minnesota’s Department of Human Services estimates that it will lead to a loss of health insurance coverage for roughly 140,000 mostly low-income residents. With fewer people insured, many in the industry anticipate higher costs for what hospitals call “uncompensated care” – treatment unpaid by a patient or an insurer.
Hospitals in the metro, which carry the bulk of the state’s uncompensated care costs, are already under tremendous financial strain. Hennepin County Medical Center, the state’s largest safety-net hospital, expects to face $1.7 billion in losses over the next decade due in part to the impacts of H.R. 1.
While the mergers can’t stop the financial headwinds, experts said they are a way to bring more resources to the strained industry and take advantage of economies of scale.
“When we compare it to what would happen if they didn’t merge, that’s scary because if they’re continuing to lose money, eventually they’re going to have (to cut) services dramatically,” said Joe White, a professor at the University of St. Thomas Opus College of Business who specializes in health care.
Another factor driving the mergers has been the desire among hospital leaders to expand care and fill gaps in their treatment options, according to Zachary Levinson, who leads research on hospital costs for KFF, a health policy research organization. For example, Sanford, with a large presence in rural Minnesota and the Dakotas, would bridge its rural-urban gap by merging with North Memorial, which primarily operates in the Twin Cities metro.
In a statement to MinnPost, Sanford touted the merger as a way to “build a more connected health care system” across the state, something its leaders say will improve “access, quality and affordability.”
But while hospital executives and some experts express optimism about the mergers, Levinson and others aren’t so sure. On one hand, the mergers may lead to efficiencies around care and stave off hospital closures, Levinson said.
“But on the other hand, mergers often reduce competition, and they could allow hospitals to charge more for care,” he said.
Sayeh Nikpay, a health economist at the University of Minnesota, echoed Levinson’s concerns and added some.
“Oftentimes, when you have a merger or an acquisition, there will be new priorities for the new entity,” she said. “Or if you’re being acquired, there’ll be priorities that the acquiring hospital has that may not have been priorities for the hospital that is the target of the acquisition.”
That could mean, for example, changes to policies around “charity care” – cost reductions based on income and assets. Or it could change what services are available at certain hospitals, especially in rural areas.
Each of the three mergers is at a different stage. Sanford and North Memorial’s merger was approved in late August by Minnesota Attorney General Keith Ellison, whose office is tasked with ensuring mergers are in the public’s best interest. The parties have entered into a 10-year oversight agreement led by the attorney general’s office.
Leaders at HealthPartners and Essentia approved their combination in late September and, pending regulatory approval, expect the merger to be effective Jan. 1, 2027. Allina and Sutter have both signed a definitive agreement to merge and are moving through the regulatory review process. The health systems are hoping to close on the transaction by the end of 2026.
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