Duluth hospitals recovering, but not back to normal yet

DULUTH – In the middle of 2020, the city's two largest employers and the region's biggest health care providers — Essentia Health and St. Luke's — were suffering financially. Essentia announced hundreds of layoffs and said it had lost more than $100 million due to pandemic restrictions; St. Luke's told providers it would be scaling back hours and cutting wages.

By the end of the year, both health systems were back to profitability. Wage cuts were eased and furloughed staff were hired back as the largest sector of Duluth's economy showed signs of a rebound.

Still, Essentia ended 2020 with an 8% drop in full-time-equivalent workers compared to the year before, and surgeries at St. Luke's were down by nearly a third in 2020.

If local hospitals are to return to "normal," patient volumes will need to start returning to pre-pandemic levels.

Essentia and St. Luke's leaders have been pleading with patients to come get the care they need after seeing a rise in heart attacks, strokes and late-stage infections that routine care could have prevented or made less serious. Even after state restrictions were lifted and a majority of health care workers have now been vaccinated, many patients are still avoiding routine and often necessary appointments to keep on top of underlying conditions like diabetes. That increases risks for individual health and puts continued pressure on hospitals' bottom lines.

"Please come in for your health care," Dr. Jon Pryor, east market president for Essentia Health, said at a news conference last week. "As long as you wear a mask, you're probably going to one of the safest places you can go, and you're getting your health taken care of."

Essentia ended its fiscal year in June 2020 with operating income dropping nearly in half from 2019 and a net loss of $15.9 million.

The second half of 2020 saw an improvement in patient revenue over the year before, according to recent financial disclosures, and Essentia said it had rehired some of its furloughed and laid-off employees. The health system has a total head count of about 13,800 employees at locations across Minnesota and in North Dakota and Wisconsin.

Even as capacity was pushed to the brink with a surge in coronavirus cases last fall, Essentia saw nearly 13,000 fewer emergency room visits in the second half of 2020 compared to the last six months of 2019 — a 15% decline.

"We are worried that Minnesotans' health is getting worse because they have not been coming in," said Dr. Rahul Koranne, president and CEO of the Minnesota Hospital Association.

St. Luke's saw patient volumes drop in 2020 compared to the year before at its largest facilities, including a 31% drop in inpatient surgeries and 22% decline in emergency/urgent care visits, according to recent financial disclosures for bond investors.

St. Luke's countered those declines with cost savings and wrote in a memo to employees in April: "We need to achieve a reduction in staffing and associated costs of at least 20%," according to court documents. "Given significant declines in patient volumes we cannot staff or pay our physicians and (clinicians) as we have prior to the pandemic."

By the end of the year the health system was just 7.5% behind 2019 patient revenue and was able to loosen its cost-saving measures.

"During 2020, like most other health care organizations, St. Luke's had to make the unfortunate adjustments to staffing and wages that were necessary to deal with this unprecedented challenge. But through incredible work, we finished 2020 with a positive bottom line," Co-CEO Dr. Nick Van Deelen said in a statement this week. "Fortunately, we were able to restore the wage concessions and return many employees back to work in summer/early fall as we experienced increased patient volumes."

Koranne said Minnesota hospitals saw a nearly $1 billion drop in revenue between March and June last year, but initial surveys show revenue started picking up again late in the summer and into the fall.

"Patients did start feeling a little safer, and we started doing those deferred surgeries," he said. "Communities and patients need to be assured and need to be confident that their local hospital and health care system is there to serve them 24/7."

Brooks Johnson • 218-491-6496