Fairview cuts include Bethesda, St. Joseph’s hospitals; 900 jobs to be lost

Fairview Health announced a dramatic downsizing of hospital and clinic operations on Monday to stem financial losses, including the shutdown of the 90-bed Bethesda Hospital in St. Paul that had been converted in March to treat COVID-19 patients.

St. Joseph’s Hospital will become Fairview’s new flagship for COVID-19 care, but will cease being a general hospital as its emergency room will close by year’s end and specialties such as neurology and bariatrics will be relocated. Inpatient mental health care will continue at the downtown St. Paul hospital at least through 2021.

Sixteen clinics in Minnesota and western Wisconsin will close and 900 jobs will be eliminated as Fairview Health braces for a $250 million operating loss this year that was exacerbated by the pandemic.

“The impacts of COVID have accelerated that but haven’t necessarily changed the ultimate direction of what we needed to do — only the timing,” said James Hereford, Fairview’s chief executive.

The closure of one of the nation’s only COVID-only hospitals comes at a time when hospitalizations for the infectious disease are rising in Minnesota and before a possible “twindemic” when seasonal influenza starts to circulate as well. The latest figures from the Minnesota Department of Health show 403 COVID-19 hospital admissions of Minnesotans in any state for the seven-day period ending Sept. 29, one of the highest totals since May.

Bethesda averaged a daily census of below 50 COVID-19 patients, and St. Joseph’s has adequate bed capacity to cover that need, said Laura Reed, Fairview’s chief operating officer and nursing executive.

The change disrupts Fairview’s backup plan of using St. Joseph’s and Southdale Hospital in Edina for any surge of COVID-19 cases, but Hereford said the hospital system has adequate space for such an emergency and that it probably isn’t necessary because of improved treatments and understanding of the infectious disease.

“I think we’re going to be in this chronic COVID phase for probably the next 12 to 18 months,” Hereford said. “I am just not convinced we’re going to have an effective vaccine or vaccines deployed to people and enough of the people have taken those vaccines to have gotten to herd immunity in that time. So we are going to continue to see these ebbs and peaks.”

The announcement formalizes plans for the closures of Bethesda and St. Joseph’s as hospitals that were privately proposed by Fairview executives last November in war room meetings to address financial shortfalls that were occurring even before the economically crippling pandemic. Revenue only worsened this spring with a statewide shutdown to reduce viral activity that included the suspension of nonurgent surgeries.

Fairview posted an operating loss of about $66 million in its second financial quarter from April through June this year, according to the most recent financial records, despite receiving more than $112 million in emergency federal and state grant support to maintain operations amid the pandemic. Fairview also received $321 million in federal Medicare loan funding in the second quarter to maintain operations, but is still projecting one of the largest annual operational losses in its history.

“A loss of a quarter-billion dollars is not something we can sustain,” Hereford said.

After closure plans were leaked publicly last winter, Fairview leaders held discussions with community leaders about ways to reuse the Bethesda and St. Joseph’s campuses to address community needs.

Fairview has negotiated a lease with Ramsey County to convert Bethesda into shelter housing for the growing homeless population in the Twin Cities and anticipates the County Board’s approval next week.

The fate of St. Joseph’s remains less clear, with Fairview executives talking with a variety of community leaders about plans to convert the campus into permanent housing solutions, outpatient care clinics and potentially a psychiatric hospital that will maintain inpatient capacity.

Hereford said it is difficult for Minnesota to lose its first hospital, which was converted from a school by the Sisters of St. Joseph of Carondelet in 1853 to address a cholera epidemic.

“That is what the community needed at that time,” Hereford said. “Frankly, an inpatient community hospital is not what that community needs now. One of the things that COVID has laid bare is the fact that we are not meeting the needs of that community.”

Infections and hospitalizations for COVID-19 have occurred at higher rates in minority populations, in part due to socioeconomic disparities that put them in more low-income service jobs that increase virus transmission risks. Minorities also have higher rates of chronic diseases such as diabetes that increase the risk of severe COVID-19 illness.

The state on Monday reported three new COVID-19 deaths and 982 infections with the novel coronavirus that causes the disease. The state has reached 2,083 COVID-19 deaths, with more than 80% involving people 70 and older. Minorities make up more than 60% of the COVID-19 deaths involving people 65 and younger.

Fairview is not alone in making cuts in response to COVID-19 — with HealthPartners and Children’s Minnesota announcing downsizing measures this year as well. Fairview had been planning these moves before the pandemic, though.

Fairview merged with HealthEast in 2017 to expand its service area into the East Metro, but took on the money-losing St. Joseph’s in the process as well as Bethesda, which until this spring served as a long-term acute care hospital (LTACH) for people rehabilitating from accidents, addictions and diseases. Losses at St. Joseph’s only deepened when Fairview consolidated mental health services at the hospital.

Fairview also took on ambitious financial obligations in 2019 through its M Health Fairview branding partnership with the University of Minnesota. The health system committed .15% of clinical revenue and a fixed payment of at least $45 million per year to the university and $31 million to the university’s academic physicians group practice, according to financial records.

Those payments remain in place, with Fairview seeking to build its patient base through its affiliation with the U and its medical expertise.

Fairview had downsized Bethesda to 50 rehab beds earlier this year before expanding it in response to the COVID-19 crisis. Its closure will leave the Twin Cities with one federally designated LTACH — Regency Hospital in Golden Valley — but Hereford said the system will look to provide that level of rehabilitative care at other locations.

Fairview’s plan includes the launch of a new Emergency Psychiatric Assessment, Treatment and Healing (EmPATH) model of mental health care, starting with a new unit at Southdale, designed to prevent mental health crises and reduce the costly overreliance on emergency departments and inpatient beds.

Primary care clinics are being closed in Columbia Heights, Farmington, Hugo, Lino Lakes, Milaca, Pine City, Roseville, Savage and Zimmerman in Minnesota, as well as select sites in Minneapolis, St. Paul and Bloomington. Clinics also will close in Ellsworth and Spring Valley in Wisconsin.

Hospital services are being relocated from St. Joseph’s to St. John’s Hospital in Maplewood, Woodwinds Health Campus and the university medical center.

The exact number of people losing jobs in this process is unclear, despite the plan to cut 900 positions — or nearly 3% of its workforce of 34,000 people. Fairview has 1,200 job vacancies, including 300 nursing positions, so one goal is to transfer as many people into these positions as possible.