Hennepin County’s hospital aims to cut $50 million in costs amid ‘dire’ financials

Finances have gotten so dire at HCMC in Minneapolis that sustaining the hospital’s most critical operations will probably require job cuts and reductions in other health care services.

That message over the past week from Hennepin Healthcare System marks the second time in less than a year that leaders have sent urgent distress signals over mounting red ink at one of the state’s most prominent safety-net medical centers.

HCMC leaders went public last summer with their pleas for help, saying the health system had lost money on operations in seven of the past eight years. Now, a new leadership team is sounding the alarm.

“It’s a dire, daunting time — it’s a terrible time," said Dr. Kevin Croston, who was recently named co-interim administrator at Hennepin Healthcare.

HCMC and its clinics play a critical role in Minnesota’s health care system for treating traumatic injuries and training the next generation of emergency room physicians, while also caring for thousands of patients who are uninsured or rely on public assistance programs.

The health system is “now fully in crisis mode” and likely will need tens of millions of dollars in savings throughout the rest of the year, even after cutting $50 million during the first quarter, Croston wrote in a Jan. 16 email to employees.

“Over the next few weeks, we will make difficult decisions to keep the hospital open and stabilize operations,” he wrote.

Croston stressed Hennepin Healthcare will focus on marquee services such as the trauma program and burn unit that have distinguished HCMC, the state’s 12th largest hospital in terms of admissions. It was formerly known as Hennepin County Medical Center.

The health system also will prioritize pediatrics, hyperbaric medicine, care for stroke patients and its expertise in technology known as ECMO, which is critical for patients with severe heart and lung failure.

“We’re trying to be pragmatic, realistic,” said David Hough, who was Hennepin County administrator for more than a decade and also was named co-interim administrator of Hennepin Healthcare in January.

The message is a shift from December, when Dr. Thomas Klemond, interim CEO at Hennepin Healthcare, expressed confidence to county leaders that the organization in 2026 would not lose money on operations. Those budget projections were overly optimistic, Croston said, as shown by the hospital’s struggles to make payroll in January.

Klemond resigned from the interim CEO position on Jan. 13.

Beyond the cost cutting, Hennepin County will turn to the Legislature for help funding the health system by extending and repurposing a sales tax that currently pays for Target Field’s construction debt.

For the past two years, county officials have sought authority from state lawmakers to continue collecting the 0.15% tax, which raises about $55 million a year, after the debt is repaid. Much of the future revenue would fund health care access, operations and facilities, including Hennepin Healthcare.

“We will continue to fund the library hours, the youth sports grants — kind of the original package of the ballpark sales tax," said Hennepin County Commissioner Jeff Lunde. “But then we will look at putting the balance toward health care.”

Help from the state is appropriate because patients from across Minnesota come to HCMC for care, said Hough, who co-signed the email to employees.

“We’re guardedly optimistic,” he said. “We’re going to do everything we can to turn this around ... so it can continue to be a statewide resource.”

County officials have been overseeing HCMC’s operations and its $1.6 billion annual budget. Since the fall, they’ve been assisted by Hough and Croston, who previously was CEO of Robbinsdale-based North Memorial Health.

Hennepin Healthcare is one of the state’s largest providers of care to low-income patients covered by the state-federal Medicaid program, but the program is facing big cuts that will hit hospital reimbursements in 2027.

Hennepin Healthcare employs more than 7,000 people. In early January, the health system had to rely on a line of credit from Hennepin County in order to meet payroll, but such bailouts from taxpayers can’t continue, Croston said.

The system is changing how it handles medical bills to make sure all revenue is collected where possible, Croston said in his email to employees. Health care collections can be difficult due to health insurer rules and high deductibles for patients.

Croston also invited employees to submit cost-saving ideas.