COVID-19 plans weaken Minnesota hospitals' revenue

Minnesota health systems are feeling financial pain from the shutdown in elective health care procedures, with revenue cuts prompting unpaid leaves and reduced hours for workers not directly involved with the response to COVID-19.

M Health Fairview, which is one of the state's largest health care providers, said Tuesday it expects to reduce some staff work hours beginning Monday. The Mayo Clinic is reducing or temporarily suspending hours or projects for supplemental or contract workers. Duluth-based Essentia Health has placed 500 nonmedical employees on unpaid leave.

Hospitals supported an order in March from Gov. Tim Walz to indefinitely postponed all elective surgeries and procedures in Minnesota to conserve resources for COVID-19 patients, but it's causing revenue hits in the near-term.

"This is an important substory behind the COVID-19 crisis," said Dr. Rahul Koranne, president of the Minnesota Hospital Association.

"The first story, and the most important story, is that these health care systems are caregivers, and so the focus is to prepare," Koranne said. But he added: "Some of our health care systems are calling it a significant bleeding that's happening right now."

Minneapolis-based M Health Fairview says it will provide affected employees a minimum of 50% pay and continuing benefits. The changes don't apply to unionized workers, nor do they impact staff caring for patients sickened by the widening coronavirus pandemic.

It's not yet clear how many will see reduced hours, but reductions are expected starting Monday through May 3. Employees could be called back or reassigned to address expected surges in COVID-19 patients, the health system says.

M Health Fairview is the brand for clinical health care at Fairview Health Services, which includes the University of Minnesota Medical Center in Minneapolis. Last year, Fairview employed more than 33,000 people across a health system that includes 10 acute care hospitals, more than 100 clinics, a large pharmacy business and long-term care facilities.

"These changes were driven by a decreased patient census, a result of the indefinite postponement of non-critical procedures and a broad transition to virtual care," Fairview said in a statement. "Decreased patient census coincides with the need to increase spending significantly on new equipment and supplies related to COVID-19."

Mayo Clinic pledged on March 23 that allied health staff — a group of 65,000 people that includes everyone but physicians and scientists — would continue to be paid their current rate of pay for normally scheduled hours through April 28. That's significant because the deferment of elective care has meant some staff don't have any work right now, the clinic says, adding that Mayo needs those workers ready for redeployment.

Even so, the Rochester-based health system said Tuesday it was putting a hold on the projects that employ supplemental or contract workers due to short-term financial realities.

"The temporary elimination of elective surgeries, procedures and outpatient visits in order to protect our patients and health care providers from COVID-19 and conserve essential personal protective equipment will cause significant declines in revenue," the clinic said in a statement. "Mayo Clinic leaders have adopted several strategies to manage expenses that will allow us to continue our focus on the needs of our patients."

Essentia Health said on Monday it was placing nonmedical employees on unpaid leave in the face of an expected revenue decline of 20% to 40%.

With the cut in elective procedures, the Star Tribune reported last week that more than 10,000 Minnesota health care workers had applied for unemployment assistance over a 10-day period, more than quadruple the number who applied for the financial assistance in all of last year.

Large health systems that run hospitals and clinics say they are stopping short of outright layoffs, but two private medical practices tell the Star Tribune they've had to furlough a significant share of their workers due to the shutdown of elective procedures.

Moves by governors across the country to halt elective procedures are likely to drive revenue declines for many hospitals, according to Moody's Investors Service, which follows the nonprofit health care sector.

Federal legislation passed last week is providing more than $100 billion to hospitals to offset the suspension of elective and noncritical services, "which should provide liquidity support," Moody's said in a statement last week. Even so, the rating agency said it expected "coronavirus to have a significant negative impact on hospital cash flow this year."

Allan Baumgarten, an independent health care analyst in St. Louis Park, said via e-mail: "I think losing most elective surgeries is potentially a huge blow to hospitals and their doctors. Those surgeries are significant revenue (and profit) producers."

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck