Essentia Health permanently laying off 900 employees

DULUTH — Essentia Health is laying off 900 employees as a steep drop in business has cost the Duluth-based health system $100 million in the past several months with more losses expected.

"Despite our best efforts, the many cost-reduction measures we've taken over the last several weeks are not sufficient to preserve our mission and the health of the organization," Essentia Health CEO David Herman said in a statement Thursday. "This has prompted our leadership team to carefully consider the most difficult decision we've faced since I joined Essentia five years ago and move forward with permanent layoffs."

The cuts, which represent 6% of Essentia's workforce, are in addition to the 850 employees who have been placed on administrative leave and are expected to remain so until July 31. Those on leave may still be called back as needed, Essentia said. Some laid-off staff covered by collective bargaining agreements have right-of-recall and other job protections.

The health system is the largest employer in Duluth with more than 6,000 employees in the city and about 14,500 employees across all locations in Minnesota, North Dakota and Wisconsin.

More than 450 jobs will be lost in the Twin Ports, with the rest of the layoffs spread across Fargo, Detroit Lakes, Brainerd and other regional locations.

About 20% of the layoffs affect staff in direct patient care with the rest spread across support services.

"We looked at each and every employee ... you can't take care of patients without these people in the back offices, serving food, keeping things clean," said Dr. Jon Pryor, president of Essentia's eastern division. "This is a very sad day for all of us, but this is the right thing to do for our mission."

Minnesota hospitals expect to lose nearly $3 billion due to the decline in patient volumes while they prepare for an expected surge of COVID-19 patients. Routine visits have been postponed and elective surgeries were not allowed until recently.

"While surgeries and procedures are restarting at our facilities, we are approaching that process carefully and slowly to protect our communities, patients and staff, preserve personal protective equipment and ensure available hospital beds for COVID-19 patients," Essentia said in a news release.

Even as restrictions lift, Pryor said that patients have not been seeking out medical care, including for emergencies in some cases, for fear of catching the virus. He said the hospital is "a safe place to come."

The health system, which had $2.1 billion in revenue in its last fiscal year, has reduced executive compensation — 40% for the CEO, 30% for other top leaders and 20% for physicians — and consolidated some leadership roles.

United Steelworkers Local 9460, which represents health care staff at Essentia, said it is willing to extend employee leave "but we will not permanently sign away our jobs."

"We are very disappointed with how Essentia has chosen this uncertain time to reduce staff when our families and communities are most vulnerable," the union wrote on Facebook. "This is not a fight we wanted, nor one that we picked, but we will fight back rather than accept layoffs."

The Minnesota Nurses Association said none of its members are affected by the layoffs.

Duluth-based St. Luke's has also let go of staff as it absorbs COVID-19-related losses but did not provide updated numbers Thursday.

Before the pandemic, health care jobs were expected to keep rising in the region over the next decade and beyond. Until there's a vaccine for COVID-19, Pryor said the outlook is less rosy especially as more services move online and fewer support staff are needed.

"No one knows what the future looks like but clearly the way we care for patients moving forward is different from what it was before," he said. "I don't think we're ever returning to normal business."

Construction will continue on Essentia's $800 million Vision Northland campus upgrades in Duluth, which is financed by bonds. Pryor said lessons from the pandemic are informing what the new hospital tower will look like.

"This isn't going to be the last pandemic — how do we make changes in our building to be prepared for the next one?"

Brooks Johnson • 218-491-6496