By Christopher Snowbeck

Copyright startribune

An attempt to create a new statewide nonprofit health system with the University of Minnesota and two other health systems has ended, casting more uncertainty around the future of the state’s primary medical teaching hospital.

People close to the negotiations who were not authorized to speak on the record cited an impasse over the proposed structure as the reason Duluth’s Essentia Health exited the talks.

The end of talks involving Essentia leaves the U with limited time to forge a new agreement with its current partner, Fairview Health Services, which currently uses the M Health Fairview brand and provides $100 million per year to support medical training, research, and patient care.

“Despite our good faith efforts, thus far we have not reached an agreement with Fairview that secures the long-term future of the medical school — one of the state’s most vital and essential assets,” the U said in a statement.

The university operates the state’s largest and only public training program for physicians. About 70% of all physicians across Minnesota were trained at the U’s medical school or residency programs. The medical school uses University of Minnesota Medical Center as its primary teaching hospital.

The Essentia Health proposal, which the U announced in January 2025, followed a tumultuous sequence over more than two years in which Fairview proposed a merger with South Dakota-based Sanford Health, only to have the deal fall apart following opposition from the U.

The U of M and Essentia had called for creating an “all-Minnesota health system solution” that would include a $1 billion joint investment over five years.

The current partnership between the U and Fairview is set to expire a the end of 2026. A letter from the attorney general’s office last week asked Fairview and the U for detailed reports on consequences of an “unwind” scenario that would take place by the time the existing agreement expires, according to people close to the talks.