Fairview Health Services Acquires Insurer PreferredOne

Jan. 18--Fairview Health Services has acquired sole ownership of PreferredOne, the Golden Valley-based health insurer that saw dramatic growth during the first year of the MNsure exchange only to retreat after financial losses.

Previously, Fairview had a 50 percent ownership stake in PreferredOne, while Robbinsdale-based North Memorial Health Care and a physicians group each had a 25 percent share.

In April, the Star Tribune reported that Fairview had obtained options to expand ownership of the health insurer as part of an $18.75 million loan from the health system to PreferredOne.

The loan followed big growth by PreferredOne in 2014, particularly through the state's MNsure health insurance exchange, followed by financial losses that prompted large premium increases. PreferredOne also dropped out of MNsure as a result, a move that prompted thousands to seek new coverage.

Financial terms of the acquisition, which was effective Friday, were not disclosed. In a news release being issued Monday, Fairview officials said the deal was in keeping with a national trend for health insurers and health care providers to become closer partners to provide more cost-effective care.

"PreferredOne brings expertise in care management, risk management and population health analytics, and it will be a key strategic asset within our health system as we continue our work to provide high quality care at a lower total cost," said David Murphy, the interim chief executive at Fairview, in a statement.

David Crosby, who became PreferredOne's new chief executive in August, will continue to lead PreferredOne as a wholly-owned subsidiary, according to the news release.

"It's this type of integration and alignment that will advance our ability to improve health care quality and cost effectiveness," Crosby said in a statement.

Crosby replaced Marcus Merz, the longtime chief executive at PreferredOne who retired at the end of 2014 following the MNsure retreat. PreferredOne gained attention nationally in 2014 for offering some of the lowest premiums in the country to shoppers on new government-run exchange marketplaces, which were launched by the federal Affordable Care Act.

Fairview's chief financial officer, Dan Fromm, will continue as board chair at PreferredOne. Fairview is one of the state's largest operators of hospitals and clinics, with more than 22,000 employees.

Twitter: @chrissnowbeck

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