CentraCare's strong bottom line propels St. Cloud medical school forward

University of Minnesota regents have unanimously approved the final step necessary to move forward on creating the state's first new medical school campus in 50 years.

Earlier this fall, the regents approved the academic affiliation agreement with St. Cloud-based CentraCare but a deeper dive into the health care system's financial stability was needed to finalize the arrangement. The regents approved the plan with no discussion on Dec. 7 following an extensive conversation in November in which U leaders shared resounding confidence in CentraCare.

"They are close to a $2 billion organization and they had positive net income in 2022 and 2023 when most peers and other organizations in this industry had negative results," said William Sibert, associate dean and chief financial officer for the U's medical school.

The financial review revealed CentraCare had net income of $114 million in 2023 and has 238 days of cash on hand, which Sibert called "pretty admirable."

Michael Volna, associate vice president and assistant chief financial officer, said U leaders have no reservations about the financial plan for the new program, which is slated to start in August 2025 and grow to 96 students by 2028.

CentraCare plans to open rotations to third- and fourth-year medical students from the Twin Cities campus in January, and expects to get a response on its accreditation application in February. The U expects the program initially will have about five faculty members and grow from there. The campus will have a focus on rural health and is meant to help address the growing shortage of medical professionals.

"One of the things that mitigates some of our risk is that the medical school has done this before — here in the Twin Cities and also in Duluth," Sibert said at the November meeting.

Projections show $6 million in operating expenses for the new campus with an estimated $1.5 million annual deficit, which CentraCare has agreed to cover. Sibert called the deficit "immaterial" when considering CentraCare's finances and the medical school's annual budget of $800 million.

Sibert said he's confident enrollment projections will be met because 3,500 students apply to the U's medical school each year and only 230 are accepted.

"The idea of adding another 24 per year does not seem like a high risk," he said.

In the 2023 legislative session, the U and CentraCare requested $72 million to help secure scholarships, residency programming and a rural health research program. This year's infrastructure package allocated $5 million to help design the medical campus, and the higher education bill included $10 million for the accreditation process.

CentraCare is asking the Legislature for about $13 million next session. The bonding dollars, if allocated, would go toward an estimated $18 million project to repurpose a 60,000-square-foot administrative building to house the medical school.

"We are fully committed. If we do not get the [state] funding, we will fund it," Mike Blair, chief financial officer of CentraCare, told the regents in November. "The money is already set aside."

Regent Robyn Gulley said she's grateful for the commitment to rural health care: "We hear over and over and over again how much communities are struggling with not having enough health care providers and the [U] is one of the biggest educators of our health care workforce. So this is a great opportunity."

Star Tribune staff writer Liz Navratil contributed to this report.