COVID-19 impact forces Essentia Health to cut 900 employees

“Despite our best efforts, the many cost-reduction measures we’ve taken over the last several weeks are not sufficient to preserve our mission and the health of the organization,” said Essentia Health CEO David C. Herman, MD.

About 900 employees — approximately 6 percent of Essentia Health’s workforce — are being laid off as the non-profit healthcare provider faces operational losses of nearly $100 million.

It's the second announcement of job cuts in two days by major Duluth employers. On Wednesday, it was revealed that AAR is shuttering its aircraft maintenance base. The firm employs about 300 people. Both companies are being negatively affected by the COVID-19 pandemic.

Hardships caused by the pandemic continue to grow, Essentia said in a Thursday announcement, with Minnesota hospitals and health systems expecting to lose almost $3 billion in the first three months of this year. At Essentia, operational losses are related to declines in patient volumes since the beginning of March. Additional losses are expected, Essentia said. The company did not say how the losses will affect the development of its new Duluth medical campus.

“Despite our best efforts, the many cost-reduction measures we’ve taken over the last several weeks are not sufficient to preserve our mission and the health of the organization,” Essentia Health CEO David C. Herman, MD, said in a news release. “This has prompted our leadership team to carefully consider the most difficult decision we’ve faced since I joined Essentia five years ago and move forward with permanent layoffs.”

Essentia noted it has worked to offset the revenue decline while prioritizing patient and staff safety. Some employees were placed on administrative leave, hours have been made flexible, physician and executive leader compensation has been reduced, capital expenditures have been limited, services were reduced and discretionary spending was limited. 

“It is very scary. These are jobs one hopes will be filled again, that they’ll be back," said Brian Hanson, president and CEO of the Area Partnership for Economic Expansion (APEX). 

Hanson was personally involved in recruiting AAR to the former Northwest Airlines maintenance base. With airline industry cuts, he said AAR had little choice but to reduce its cuts as revenue declined. He urged people to buy local and, particularly, do business with healthcare providers.

"One thing people should take from this is that, if you want to take care of your medical care, do it now. It’s good for patients and good for the provider,” he said.

“While surgeries and procedures are restarting at our facilities, we are approaching that process carefully and slowly to protect our communities, patients and staff, preserve personal protective equipment and ensure available hospital beds for COVID-19 patients,” Essentia said. 

The healthcare system will continue to provide health insurance for noncontract employees for the next three months. Staff covered by collective bargaining agreements have other protections, including the right of recall. Additionally, there are about 850 Essentia workers on administrative leave with benefits through July 31, with the intention of being called back to work as needed.

 “I recognize and deeply appreciate all our colleagues’ contributions,” Dr. Herman said. “While the COVID-19 crisis has resulted in significant shifts in society and how we care for our communities, our commitment to safe, high-quality patient care is unwavering. As painful as these actions are for all of us at Essentia, we are taking these steps to ensure Essentia is here to make a healthy difference in people’s lives, today and into the future.”