Children's Minnesota looks at job cuts, structural moves as pandemic, other pressures build

Children's Minnesota is looking at "significant" layoffs over the next two years, moving some services in St. Paul to Minneapolis and taking other steps because of mounting financial pressure from COVID-19, demographic trends and policy changes.

Leaders at the state's largest pediatric medical center described the prospective moves to employees this week and stressed there aren't yet final numbers on how many will lose jobs.

The Minnesota Nurses Association said its members believe that more than 100 jobs could be lost with the potential move of some complex hospital services from the Children's campus in St. Paul to its Minneapolis hospital.

Changes in St. Paul are just one part of a broader plan that includes more virtual care, a better way of buying supplies and improved financial services, Dr. Marc Gorelick, the chief executive at Children's Minnesota, said in an interview.

"It's been a long time since we've had significant layoffs at Children's," Gorelick said.

The redesign is motivated by "not just COVID, but a lot of longer-term trends," he said. "One of them is declining birthrates. One of them is increased emphasis on value-based care" contracts that change reimbursements from health insurers.

"We're heavily dependent on Medicaid," Gorelick said, "and we are concerned that with state budget problems across the country and particularly in Minnesota that we will have pressure on our Medicaid reimbursements."

COVID-19 brought an economic shock to Minnesota health systems this spring as efforts to slow the spread and conserve resources prompted a shutdown of elective health services across the state.

At Children's, a revenue cut from the pandemic of $96.8 million through the first half of 2020 contributed to a $10 million operating loss during the time period, according to a financial statement with bondholders.

This summer, Bloomington-based HealthPartners announced the permanent closure of seven clinics in response to financial challenges as well as the shift of patients to virtual care from brick-and-mortar clinics due to the COVID-19 pandemic. Children's Minnesota also closed clinics temporarily and stepped up online care, Gorelick said, but there are no decisions about whether some closures will be permanent.

Children's hasn't decided whether to reopen a surgery center that has been closed in Minnetonka, he said, because there hasn't been a full return of pre-pandemic procedure volumes.

"I think that the pandemic has, in large part, accelerated some pre-existing trends," Gorelick said.

"Birthrates are declining and because of ... the economic downturn resulting from the pandemic, historically that has always resulted in lower birthrates, so that's a trend that we're following," he said. "A lot of pediatric illness that we take care of is infectious-related, either directly or indirectly, and all of the things that we're doing to prevent the spread of COVID-19 are also decreasing the incidence of a lot of those pediatric conditions."

For decades, Children's has operated inpatient hospitals in Minneapolis and St. Paul. The highest-complexity services currently in St. Paul are for patients with diabetes as well as neuroscience needs, such as epilepsy. Both services might be moved to Minneapolis, Gorelick said, although final decisions haven't been made.

There's also an interest, he said, in consolidating all pediatric intensive-care services into a single unit in Minneapolis. The hospital in St. Paul would still provide some inpatient care, Gorelick said, but more space would be dedicated to patients in "observation," a category of hospital care that brings lower payment rates.

The Minnesota Nurses Association, which represents unionized nurses at Children's, expects negotiations with the hospital on near-term job losses to begin in October, said spokesman Rick Fuentes.

Beyond the hospitals and surgery center, Children's Minnesota operates 12 primary-care clinics, six rehabilitation centers and nine specialty-care sites. A spokeswoman said the nonprofit health system employs 5,458 people.

"When we talked [at the employee meeting] about the need for layoffs and we indicated that they would be significant, that's across all the changes that we are contemplating across all of these work streams — and those are all works in progress," Gorelick said. "We've had such a long period of stability and growth, the idea that that's going to look different — we knew that that's going to be news for people."

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck