ST. PAUL -- Struggling under the weight of pandemic-era financial losses and other industry challenges long in the making, one of the state’s largest healthcare networks will dramatically upend services in St. Paul and beyond, effective almost immediately.

M Health Fairview on Monday announced a shake-up that will permanently change the face of Bethesda Rehabilitation Hospital and St. Joseph’s Hospital in St. Paul, shutter 16 of its 56 medical clinics in Minnesota and Wisconsin and reduce its workforce by 900 positions.

James Hereford, M Health Fairview President and CEO, informed the health network’s 34,000 employees at noon on Monday that it will lease Bethesda to Ramsey County, likely for homeless services, and move core hospital services from St. Joe’s to suburban locations.

That does not mean either facility will close. M Health Fairview is in talks with Open Cities, St. Mary’s Clinic and other federally-qualified health centers that serve the poor and underinsured to combine services at St. Joe’s alongside potential new social services and transitional housing there, a dramatic re-imagining of its community programming.

Tumultuous time

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Both moves follow a tumultuous time in the healthcare industry, though intense financial pressures were apparent even before the pandemic. M Health Fairview had held some 300 community discussions about the future of St. Joe’s since last year, when its financial distress caught media attention.

“We knew we had to transform,” said Hereford, in an interview Monday. “Healthcare in general has to transform. … What we’re doing is simply not sustainable.”

The health network, which has been buffeted by costs and revenue losses related to COVID-19, lost $163 million in the first half of the year, and expects to lose $225 million to $250 million by year’s end.

St. Joseph’s Hospital, which serves a high number of Medicaid and Medicare patients, has lost some $50 million per year since at least 2014.

A new homeless shelter?

The board that oversees M Health Fairview has already approved decisive action. Bethesda Rehab Hospital, which was converted this year to serve high-risk COVID patients, will likely become a center targeted to some form of homeless services run by Ramsey County.

The county board of commissioners will vote Oct. 13 on whether to lease the space at $7 per square foot, but the types of services have yet to be finalized or made public.

Over the next month, and culminating by the end of November, Bethesda’s 90 COVID beds will be transferred through at least 2021 to St. Joseph’s Hospital, which will undergo a top-to-bottom evolution of its own.

While holding onto inpatient mental health services through at least 2021, St. Joe’s will shed oncology, cardiology, and other core services, including its emergency department, most of which will be transferred by the end of the year to Woodwinds Hospital in Woodbury or St. John’s Hospital in Maplewood.

“We don’t take the step of closing the ED (emergency department) lightly,” Hereford said. “But the majority of patients treated at that ED don’t come from that area. They come from the east metro and beyond.”

Reviews showed that some 72 percent of emergency room visits at St. Joe’s were potentially preventable, and many involved homeless residents unable to access shelter services at nearby Catholic Charities facilities seeking respite from the cold, Hereford said.

“They were people who could and should have been treated in other ways, and they ended up in an ED,” Hereford said. “Some of them aren’t care related.”

A few medical services will land at the University of Minnesota Medical Center and Southdale Hospital in Edina, or elsewhere.

St. Joe’s reimagined

Instead of traditional hospital care, the board of M Health Fairview foresees St. Joe’s reimagined as a hub of community health and wellness. How that plays out is likely a few months away from being decided, but it will likely offer integrated, holistic primary care, supportive housing and social services, including workforce counseling.

The target client could be the working poor, the underinsured, the homeless or another group, or some combination thereof. Officials said that, too, will be determined with input from community conversations.

M Health Fairview currently provides 42 percent of the total inpatient mental health beds available through the metro’s six largest health systems, a disproportionate share it has signaled it can no longer do alone.

In March, on the cusp of the pandemic, M Health Fairview initiated a request for proposals seeking a medical, governmental or non-governmental partner to help absorb some of the cost of running mental health services at St. Joseph’s Hospital, which serves a large homeless population.

Among potential partners, M Health Fairview is in talks with St. Mary’s Health Clinic, a Sisters of St. Joseph of Carondelet health clinic based on Randolph Avenue in St. Paul, which “has really done an amazing job of tending to the health needs of the undocumented … and Hispanics” in general, Hereford said.

In February, the Fairview Foundation committed itself to making some $1.5 million in grants to Open Cities, a health center in St. Paul’s Midway that works with a large East African population. They, too, could somehow be incorporated into the future of St. Joe’s.

New ‘Hub and Spoke’ model

M Health Fairview currently maintains 56 primary care and specialty clinics. Following consolidations, 16 of those locations would close, including 14 in Minnesota and two in Wisconsin.

Officials said they would close the downtown St. Paul and Grand Avenue clinics, but keep several clinics open on the city’s East Side, and invest in new resources in other areas of high need, including St. Paul’s Midway.

Other sites to shutter include Farmington, Roseville, Hugo, Lino Lakes, Savage and Ellsworth, Wis.

The goal, said Hereford, is a “hub and spokes” model, where diagnostic and treatment services are concentrated next to each other in key health hubs so patients don’t have to travel for miles after a diagnosis to see a specialist.

The remaining clinics would serve as primary care “spokes” throughout the state. M Health Fairview’s geographic footprint would stay largely the same, continuing to extend from Lakeville to Rush City.

The hub model means more targeted services at the St. Paul Midway campus and the Cedar-Riverside Health Commons in Minneapolis, which now has a Somali nurse.

By bringing multiple specialties together, the goal is to “get people into treatment almost immediately, decreasing the stress and anxiety on those patients,” Hereford said.

Clinic sites

As a result of the pandemic, 11 clinic sites had already been at least temporarily shuttered, and company officials said some locations had become redundant as a result of a merger between Fairview and the HealthEast system in 2017.

In Hugo, for instance, an M Health Fairview clinic and a HealthEast clinic are separated by a parking lot and effectively compete against each other.

Six Fairview pharmacies outside of the east metro will close, and the Institute for Athletic Medicine — a joint venture with North Memorial Health — will end in December.

900 positions cut, 1,200 openings remain

In response to rising costs, including labor and supplies, M Health Fairview will cut 900 positions across the health system, equivalent to 3 percent of its workforce of 34,000.

That said, it currently has 1,200 openings, mostly as a result of the pandemic putting services on hold for months and reducing foot traffic in hospitals and clinics. In theory, every person laid off could still find work at M Health Fairview, albeit with retraining.

There’s little likelihood, however, that an X-ray technician laid off in western Wisconsin can apply for an opening as a doctor in Itasca, so geography, skill sets and worker retraining will play a role in rehiring, Hereford said.

Of the current openings, 800 are in clinical positions and 400 are in non-clinical positions. The health network is offering educational retraining at no cost to employees for high-need positions such as surgical technologists, perioperative nurses and nursing assistants.

M Health Fairview recently sold off its home and hospice care unit, and found new jobs internally for many workers who did not make external transfers with the move.

More changes are likely. In light of the pandemic, M Health Fairview this year made a goal of permanently moving half its primary care visits into tele-health, or remote and online services. Officials said the change was recommended by patients.

Also in 2021, M Health Fairview will expand “emPATH” emergency psychiatric assessment, treatment and healing units across its health system. Single-occupancy patient treatment rooms are being added throughout the system, including two new floors with 52 rooms at Southdale Hospital.