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 over the next month comes amid a recent uptick in hospitalizations for the infectious disease in Minnesota and before a possible "twindemic" when seasonal influenza starts to circulate. The Minnesota Department of Health reported 403 COVID-19 hospital admissions of Minnesotans for the seven-day period ending Sept. 29, one of the highest totals since May.

Fairview at its peak in May had no room at Bethesda and 150 COVID-19 patients spread across its hospitals, but since then has averaged fewer than 50 patients per day at Bethesda and around 70 systemwide, said Dr. Greg Beilman, incident command leader for Fairview's COVID-19 response.

St. Joseph's can take on that level of COVID-19 care and has units that can be opened if needed to address any surge, but Beilman urged continued public compliance with mask-wearing and social distancing to make sure hospitals aren't overwhelmed.

"If we lose sight of the fact that this is a very contagious disease that has some negative health consequences, we will be right back where we were in May," he said.

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 non-urgent 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.

Fairview expects year-end losses despite $120 million in federal COVID-19 relief from the CARES Act and more than $13 million in state grants. Fairview also received $321 million in federal Medicare loan funding in the second quarter to maintain operations.

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

Conversations with community leaders have suggested new purposes for the two hospital campuses. Ramsey County is considering a lease agreement to transform Bethesda into shelter housing for the growing homeless population in the Twin Cities. The County Board will discuss the plan on Tuesday.

The fate of St. Joseph's remains less clear, but it could be converted into permanent housing, outpatient 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."

The Sisters organization had been an ardent defender of St. Joseph's, opposing some expansion plans at neighboring hospitals that could have undercut its viability. However, the organization in a statement said it supports this change and is negotiating for the addition of its St. Mary's-branded clinics that use volunteer support to provide medical care to the poor and underserved.

"Our deep affection for St. Joseph's Hospital and concern for its staff continues, and we look to a respectful transition to a new model of care in our city," the organization said in a statement provided by spokeswoman Ann Thompson.

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. However, 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 that also center on the east metro.

A statement from the SEIU and Minnesota Nurses Association unions expressed concern about the loss of jobs but also of health care access in an urban St. Paul area that needs it. They asked Gov. Tim Walz, who was briefed by Fairview last week, to try to suspend the closures.

"It is unthinkable that an urban center like St. Paul stands to lose so many patient services at once," said MNA Executive Director Rose Roach.

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, addiction and diseases. Losses at St. Joseph's 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 0.15% 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 this year before expanding it in response to COVID-19. Its closure will leave the Twin Cities with one federally designated LTACH — Regency Hospital in Golden Valley. Some long-term care beds will remain at St. Joseph's until a new location is found for this level of care.

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.

However, Fairview is closing its inpatient mental health unit at Southdale and is unlikely to maintain inpatient care at St. Joseph's unless it can get a waiver to the federal "Institutions for Mental Diseases exclusion" against the warehousing of non-elderly adults in large psychiatric hospitals, said Sue Abderholden, executive director of NAMI Minnesota.

"If all you have left at St. Joe's is the COVID and the mental units, as COVID starts to dwindle in terms of its impact, they are going to hit that IMD exclusion and they're going to close it," she said.

Primary care clinics are closing 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. Eleven of the 16 had temporarily closed due to the pandemic.

The exact number and professions of people losing jobs is unclear, despite the plan to cut 900 positions — or nearly 3% of Fairview's workforce of 34,000 people. Fairview has 1,200 job vacancies, including 300 nursing positions, so one goal is to transfer people into these positions.

Jeremy Olson • 612-673-7744