Bethesda Hospital in St. Paul will shrink by half

Fairview Health will cut almost half the beds at its Bethesda long-term care hospital in St. Paul -- and trim an equivalent share of its staff -- as part of its plan to address a budget deficit and new challenges in the evolving U.S. health care system.

The reduction from 89 to 50 beds, announced to staff Friday, will have ripple effects across the state because Bethesda is one of only two federally designated long-term care hospitals (LTCHs) in Minnesota that provide extended rehabilitation and care to patients after they are treated at general acute hospitals.

Bethesda will now provide that extended care to patients transferred from other hospitals in the Fairview system, such as the University of Minnesota Medical Center, but it will no longer accept patients from other hospital systems except in emergencies, said James Hereford, chief executive of Fairview Health.

"We're going to size it more appropriately to serve our patients," he said, "because we simply can't ... run an LTCH that would serve needs beyond those of our own system."

Cuts at Bethesda were proposed earlier this fall in "war room" sessions by Fairview leaders and approved by Fairview's board Thursday, in response to a projected budget deficit of as much as $80 million next year, and in an effort to modernize the hospital and clinic system under its new M Health Fairview brand.

The board did not take action on another leadership proposal, the closure of St. Joseph's Hospital in downtown St. Paul, but it did approve the closure of some sleep medicine facilities in the Twin Cities.

The Bethesda move is the latest in a series of hospital consolidations in Minnesota, including Allina Health's elimination of redundant services between its Mercy and Unity hospitals in the north metro, and Mayo Clinic's merger of its hospitals in Austin and Albert Lea. Mayo also announced the closure of its Springfield, Minn., hospital this week -- the first outright closure of a hospital in Minnesota since the Albany hospital shut down in 2015.

Bethesda has existed as a hospital in some form in St. Paul since 1883, when it was founded in response to the health care needs of the growing Swedish immigrant population. It was part of a national wave in the 1980s of facilities that took advantage of favorable federal regulations and converted to long-term care hospitals.

After Medicare leaders decided in 1982 to exempt long-term care hospitals from planned federal rate cuts, the number of such hospitals increased tenfold to around 400. Bethesda was converted in 1989 by its parent organization, HealthEast, which merged with Fairview in 2017.

Typical LTCH patients include those who are still on ventilators but have stabilized while in intensive care at general hospitals, or who are slowly recovering after hospital treatment of strokes or traumatic brain injuries.

Long-term care hospitals have been controversial; some analysts believe they waste billions in medical spending and that many patients could do just as well if they were transferred directly from general hospitals to skilled nursing homes.

Prof. Neale Mahoney of the University of Chicago and colleagues declared last year that LTCHs were a "historical accident" of a Medicare decision and estimated that the federal program could save $4.6 billion by eliminating them. The researchers also found no significant decline in mortality rates for patients transferred to LTCHs rather than nursing homes for extended care.

"I think that, for the majority of patients who are treated in LTCHs, a (skilled nursing facility) would provide similar quality of care at one third of the cost," Mahoney said in an interview. "It's the most compelling evidence of waste I've seen in the U.S. health care system, which I think is a reasonably strong statement."

Hereford said he couldn't challenge those economic projections, but he defended Bethesda as providing a high level of hospital care for patients that nursing homes can't afford to match, especially given their reimbursement rates in Minnesota.

"Its an important part of our continuity of care," he said.

Even so, a reduction in operations was necessary at Bethesda, as payment levels for long-term hospital care are declining and insurance reimbursement is worsening, Hereford said.

The growth of bundled payments and risk-based insurance contracts have made health care providers more responsible for the cost of patient care and more wary of unnecessary expenditures. Minnesota also has been switching its Medicare plans for seniors from traditional cost plans to Advantage plans, which health care analysts said have been tougher on LTCHs.

Hospital data from the Minnesota Department of Health showed that Bethesda lost money on operations in 2014 and 2016, had a .01% net margin in 2018, and had already scaled back from the 126 beds it had in 2013. State data also showed a 7% decline in Bethesda's admissions since 2013 and a reduction in the average length of stay from 30 days to 25 days.

Preventing other hospitals from sending patients to Bethesda is a competitive move in a community in which hospitals systems have cooperated on everything from surgical safety protocols to public relations during nurse contract negotiations. Hereford said he doesn't expect the move to jeopardize cooperation in other areas.

Leaders had sought to diversify Bethesda in recent years, including the addition of a clinic for the detection and management of concussions. Those outpatient services aren't changing under Friday's announced reduction, Hereford said.

In addition to the Bethesda decision, Fairview also is reducing its staff by about 500 workers as part of its broader cost-trimming plan. It notified 340 employees Friday that they will lose their jobs, though some will be retained through retraining and transfers.

Fairview also is closing a sleep clinic in Chisago City and sleep study centers in Eagan and Maplewood, and retail pharmacies in Brooklyn Park and Eden Prairie.

Jeremy Olson • 612-673-7744

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