Mayo Clinic cutting pay for more than 20,000 workers

Mayo Clinic is cutting pay for about one-third of its workers — more than 20,000 people — as the financial fallout of COVID-19 spreads to the state's largest employer and one of the nation's marquee medical centers.

Hospitals and clinics across the state have implemented furloughs and diminished clinic hours in recent weeks as they have halted elective surgeries and procedures to conserve supplies for an expected surge of COVID-19 patients. At Mayo Clinic, officials said the actions have slashed revenue by more than 50%.

Last month, the Rochester-based health system trimmed costs by reducing contract employees and pausing construction projects, but found it was still facing a projected loss of $3 billion by year-end. Despite the economic pain, Mayo Clinic's chief executive said he supports steps being taken by the state to control the spread including the extension this week of a stay-at-home order.

"Our ability to flatten the curve of impact allows our health systems to be better prepared with emerging treatment protocols and ensures that we have the equipment and facilities available to treat patients when they need it," Gianrico Farrugia, Mayo Clinic's chief executive, said in a statement to the Star Tribune.

Mayo Clinic is Minnesota's largest nonprofit group with hospitals and clinics across five states. Its systemwide workforce of nearly 70,000 includes more than 40,000 in Minnesota.

In March, an order from Gov. Tim Walz indefinitely postponed all nonessential or elective surgeries and procedures as a means of conserving needed medical supplies such as masks and gowns for health care workers.

At that point, Mayo anticipated delays in those surgeries for four to six weeks, thinking the peak in COVID-19 patients might come in late April or early May, said Jeff Bolton, the chief administrative officer at Mayo.

Now, models suggest the peak might not come until June or July, Bolton said, although he added, "Once you get beyond two weeks, there's a huge variance in the predictability."

Some procedures and surgeries that have been delayed are getting to the point where doctors must treat patients, Bolton said. So, the clinic faces a timing challenge of trying to get some of those cases done before the surge arrives.

"What we're seeing now, and this is particularly true with cancer patients, what you could delay a couple of weeks now comes in as an urgent, emergent type surgery," Bolton said. "The key will be to do them in this period of time when we have a lot of capacity, frankly."

Mayo's cost-cutting fits with an odd trend where many health care providers are trimming work hours just as the need for pandemic-related health care is acute.

Minneapolis-based Fairview Health Services has said sharp revenue declines have prompted reduced hours for about 15% of all workers, including a request for some physicians to take furloughs.

Duluth-based Essentia Health said in a filing with bondholders this week that it expects a 20% to 40% drop in short-term revenue due to reductions in elective procedures and surgeries. Some private medical groups have furloughed more than half their workers.

Mayo said it's seeing a revenue decline this month of about $150 million per week. The clinic previously announced that allied health staff would continue to be paid their current rate of pay through April 28, but mounting financial trouble forced the pay cuts announced Friday.

"It's about a third of overall staff — and that's physicians, administrative and allied health staff — that will have salary reductions," said Bolton, the chief administrative officer. Moves announced Friday include some furloughs, but "we're working through the details on that," he said.

"The health care crisis is turning into a financial crisis outside Mayo Clinic, but we're not immune to that," Bolton said. Changes should be temporary, he said, with models suggesting a great deal of pent-up demand for medical care at the clinic during the fourth quarter.

"The executives will take a higher pay cut, pay reduction, and take it earlier," Bolton said. "We are protecting hourly wage employees. ... They tend to be our lower-earning individuals, and the hardship would be much more significant."

The public health emergency with COVID-19 means different things for different hospitals, Bolton said.

In New York City, there are so many patients sickened with the novel coronavirus that health care workers are contracting the disease, hospitals are short-staffed and they face severe shortages in supplies.

Those hospitals will face a financial crisis, too, Bolton predicted, because "the cost of treating a COVID patient and revenue associated with it is not going to be what you'd realize with a traditional surgical practice."

In Minnesota, there's a relatively low number of COVID-19 patients now, he said, but health care systems are struggling to obtain enough ventilators and personal protective equipment.

Near-term budget challenges won't negatively affect the clinic's push for new treatments and testing related to COVID-19, Bolton said. In terms of hospital operations, Mayo is trying to develop new ways to stretch the limited supply of protective equipment for health care workers, he said, with 3-D printing of masks and experiments to sterilize single-use items so they can be reused.

In his statement, Farrugia said the clinic "is focusing on rapidly developing the testing we need to get people back to work and customers back to stores safely. While the time to resume normal routines and patient care has not yet come, we are hopeful that our work and the global collaboration we see each day will allow us to do so soon."