Minnesota's main safety net hospital seeks state rescue

Hennepin County Medical Center

The largest safety net hospital in Minnesota is at risk of closing, with administrators seeking rescue funding from the state to keep the facility's doors open. 

Hennepin County Medical Center in downtown Minneapolis, part of the public Hennepin Healthcare System, operates one of the state's busiest emergency departments and treats patients who are mostly uninsured or reliant on public insurance like Medicaid. 

Deteriorating financial conditions have led officials to warn the hospital could take steps to begin the closure process as early as June without financial assistance. Closing it — or even cutting major services — would severely damage the health infrastructure of the region, they say. 

State lawmakers are now racing to find even a temporary funding solution before the legislative session ends on May 18. Several bills have been introduced, and one that passed the state Senate last week would provide $150 million for the hospital. Lawmakers are also discussing a separate proposal that would repurpose and raise a county sales tax that originally funded the construction of Target Field, where the Minnesota Twins play. 

The issues that brought HCMC to this breaking point are playing out in safety net hospitals across the country. The medical facility has seen a spike in uncompensated care costs, and officials there predict the system will lose $1.7 billion in Medicaid revenue alone over the next decade as new federal cuts to the program take effect. 

"What's happening in Minnesota to HCMC and to all of our health systems is not unique," said Jan Malcolm, senior advisor on hospitals and health systems to the governor's office, speaking at a committee hearing in late April. "They literally are all moving in the same direction."

President Donald Trump's One Big Beautiful Bill Act passed last year cuts nearly $1 trillion over ten years to Medicaid. That means an estimated 11.8 million Americans could lose their health insurance by 2034, according to the Congressional Budget Office. 

As a safety net hospital, HCMC treats people who are less likely to be able to pay for their care through insurance or out of pocket. More than 75% of its patients are uninsured or publicly insured, and nearly a third come from outside the county. 

The facility has operated at a loss for most of the last decade, getting by with assistance from county property taxes. A more recent spike in the cost of uncompensated care costs, which are borne by the hospital for providing treatment that isn't paid for or reimbursed, has further eroded the hospital's finances. 

Hennepin was dealt a separate, unexpected blow last year by the collapse of UCare, a local nonprofit managed-care company that insured some of the hospital's patients. Hennepin Healthcare started the year with about $44 million in unpaid medical claims submitted to UCare, though the hospital has begun receiving payments through a court-approved rehabilitation plan, according to a spokesperson for the county.

In June, the CEO of the Hennepin Healthcare System told county officials the hospital was at risk of closing at the end of the year, and Hennepin County's board voted to take control of the system in August in an effort to stabilize its finances. In January, the county board cut about 100 positions and closed or reduced services including chiropractic, sleep services and weight management. 

Long-term questions

While rescue funds from the state would likely allow HCMC to remain open, there are lingering questions about longer-term solutions for the hospital's finances. 

The problems also raise a thornier political question: why county residents should shoulder the cost of a financially unsustainable facility that treats patients from all over the state. It's not unusual for a patient injured outside the county to be stabilized at a local hospital before being medevaced to Hennepin for treatment.  

"This isn't a new situation for the hospital," said state Representative Mike Wiener, a Republican, who said he hasn't decided whether he would support aid to the hospital. "My concern is we have to look at why the hospital is in this situation."

More than 30 hospitals across Minnesota are currently considered financially distressed, according to the Minnesota Hospital Association. And this year, the Trump administration has threatened to cut off millions in Medicaid payments in Minnesota as part of efforts to root out alleged fraud. Last month, a judge denied Minnesota's request to block the Department of Health and Human Services from deferring $260 million in quarterly reimbursements for Medicaid claims Minnesota has already paid out.

Similar scenarios are unfolding at safety net hospitals across the country. Last week, Moody's Ratings downgraded the credit of Boston Medical Center to the cusp of junk, citing "materially limiting financial flexibility amid ongoing operating losses."

Looming Crisis

Still, the picture is especially stark in Minnesota. Hennepin is grappling with aging facilities that have at times hamstrung the staff's ability to treat patients. Some of the buildings are more than 100 years old, and in the last 16 months, it's experienced over 80 "catastrophic" events such as flooding or HVAC failure, according to testimony from Joe Mathews, the chief financial officer of Hennepin County.

The National Nurses United union warned of drastic, irreversible impacts from the facility's closure. Janell Johnson Thiele, a career nurse and one of three nurse union leaders at HCMC, has been advocating for legislators to pass a funding solution. 

"I'm trying to help keep everyone calm so we can show up every day," she said in an interview. "The uncertainty of, 'are we going to be employed at the end of this legislative session or not?' is very scary."

Nate Scott, a physician at Hennepin Healthcare, also warned about the risks to the state's medical teaching pipeline. Providers have already begun to resign at a significantly higher rate than in previous years, he said in testimony to the House Health Finance and Policy Committee, potentially jeopardizing the facility's accreditation as a level 1 trauma center.

Hennepin County, which now runs the health system, has a AAA credit rating from Fitch Ratings and $1.8 billion of direct debt, which includes bonds as well as leases and subscriptions. Asked about the potential impact to the county's credit, Fitch analysts said they're encouraged by the strength of the county's management and the level of existing general fund reserves, and that they are waiting to see the outcome of the legislative session.

"I am hoping this opens a larger conversation about the benefit of a public safety net hospital," said Ashlee Gabrysch, senior director at Fitch.