Merger would create one of Minnesota’s largest health systems

HealthPartners and Essentia Health are proposing a merger that would create one of Minnesota’s largest health systems amid a wave of industry consolidation in the state.

It’s the third major health care merger proposed in Minnesota this year.

The new nonprofit would take on HealthPartners’ name and headquarters in Bloomington, although hospitals and clinics near Essentia’s home base in Duluth would retain their branding for now.

The proposed deal would be the latest change in a tumultuous time for health care in Minnesota. HealthPartners and Essentia say a merger will help them withstand government funding cuts and rising costs while investing in better care. The merger will also test whether the consolidation can preserve access and control costs, or if it will lead to fewer choices and higher prices.

The combined entity would operate 22 hospitals and 135 clinics spanning the Twin Cities, northern Minnesota and stretches of North Dakota and Wisconsin, and would employ 45,000.

Health care providers in Minnesota and across the country are looking to get bigger as a way to offset financial challenges, including higher labor costs and lower funding from government insurers.

Like other recent proposals, the HealthPartners-Essentia tie-up would involve nonprofits merging with no money changing hands and the larger health system gaining control.

North Memorial Health merged into South Dakota-based Sanford Health on Sept. 1, and Minneapolis-based Allina Health has proposed becoming a division of California-based Sutter Health. That deal is still under review.

HealthPartners chief executive Andrea Walsh, who would become CEO of the combined nonprofit, said patients would see no near- or medium-term changes in the care they receive.

In the long run, the larger organization should have financial resources to invest in specialty services, technology and digital tools that improve patient access to affordable care, Walsh said in an interview.

The new organization also would be positioned to address workforce challenges hitting hard in greater Minnesota, said Dr. David Herman, the Essentia Health chief executive.

HealthPartners owns Regions Hospital in St. Paul and Methodist Hospital in St. Louis Park. It also operates Park Nicollet clinics in Hennepin County.

It is, however, unique among Minnesota’s large health care providers because it also runs a large health insurance business. That strategy will continue, Walsh said, even as its hospital and clinic side will get much bigger with the merger.

Essentia’s largest hospital is St. Mary’s Medical Center in Duluth, where it’s headquartered. The health system opened a $915 million replacement hospital there in 2023. Essentia’s medical facilities extend across northern Minnesota and could support regional growth plans for HealthPartners insurance, Walsh said.

Economists have long criticized consolidation in health care, saying deals drive up costs because larger organizations have more leverage to negotiate higher prices from health insurers.

Walsh stressed that extracting higher payment rates is not a goal with the combination.

She said HealthPartners and Essentia Health have both received high marks on cost and quality over the years from Minnesota Community Measurement, a nonprofit group in Minneapolis that regularly grades the performance of health care providers.

“We need to figure out a way to continue (providing) exceptional access to high quality care in more affordable ways,” Walsh said. “So a combination like ours will enable us to make some of those strategic long-term investments together, which we believe will be more efficient and effective.”

Health care providers are bracing for a surge in uninsured patients as more people lack coverage. That’s because Medicaid enrollment is expected to start declining soon under President Donald Trump’s One Big Beautiful Bill, passed by Congress in 2025.

Hospitals also argue Medicare reimbursements aren’t sufficient, including private Medicare Advantage insurers that can limit payments with prior authorization rules.

Herman, the Essentia Health chief executive, said the combined nonprofit will safeguard its finances against those changes.

He will serve as president of the combined clinical care group’s operations, including 6,000 clinicians caring for 2 million patients.

“We felt that together we could better lead into this dynamic, if not chaotic, health care environment,” Herman said.

Herman was at the center of an ambitious, but unsuccessful, plan last year to merge Essentia and Minneapolis-based Fairview Health Services into a new nonprofit that would support medical education at the University of Minnesota.

That proposal fell apart after Fairview said it wasn’t interested in an outright merger. Doctors at the U questioned how Essentia could be a viable partner, given its lack of hospitals and clinics in the Twin Cities.

If Essentia merged with HealthPartners, it might be a more viable option, but there’s no discussion of any such plan at the moment, Herman said.

The U of M and Fairview reached a new 10-year affiliation agreement earlier this year. The proposed merger of Essentia and HealthPartners would preserve both health systems’ current U partnerships for training physicians and other health professionals.

“I think as we work and bring [HealthPartners and Essentia] together, there will be other opportunities for us to work more closely with the U, but we don’t have anything to share at this particular point in time,” Herman said.

Training the next generation of health care professionals is a key part of the merger, Herman said.

Essentia’s research and education programs provide more than 500,000 hours of training each year. HealthPartners trains more than 600 medical residents and fellows each year.

The deal is expected to take effect Jan. 1, pending regulatory approval.

Contracts with union workers at both health systems will be preserved, the CEOs said, and no layoffs are expected as part of the combination.

“We think, for what we see coming down the road at a federal and state level, that together we’ll be better able to assure strong and stable places for people to spend their careers,” Walsh said.

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