Financial pressures are forcing North Memorial Health to eliminate 103 jobs as well as outpatient mental health services at its flagship hospital.

Officials say the health system is struggling at its Robbinsdale medical center with continued growth in patients covered by government-sponsored health plans, which pay less for services than commercial health insurers.

In addition, North Memorial Health learned earlier this year that Hennepin County is eliminating a $22 million subsidy that helped cover expenses during 2023.

The health system says it will work with about 3,400 current mental health patients to find new outpatient providers between now and Aug. 30, which is the expected close date. This reduction comes as demand for these mental health services has grown in recent years.

North Memorial is also planning to eliminate its level-two neonatal intensive care unit in Robbinsdale, which means the hospital's nursery will be staffed and equipped only for newborns with normal deliveries.

"We're truly at a point where we're struggling to survive the headwinds that are facing all of health care, but more importantly survive the payer mix that we serve here in Robbinsdale," Trevor Sawallish, North Memorial chief executive, said in an interview. "And it's reaching a critical point."

The share of inpatients covered by lower-paying Medicare and Medicaid government insurance programs is significantly higher at the Robbinsdale hospital, Sawallish said, than the statewide average. North Memorial's Maple Grove community hospital, meanwhile, had the highest share of commercial insurance coverage of any hospital in Minnesota in 2022, according to state Health Department data.

Commercial insurers are thought to provide the highest reimbursement rates, in general, to health care providers. Medicare payments typically are lower, hospitals say, followed by rates from Medicaid and related state-federal programs for lower-income residents.

The Minnesota Nurses Association blasted the announcement, saying nurses are among those losing jobs while top executives at North Memorial continue taking home large paychecks.

"To blame patients who cannot pay more for the vital care they need only underscores the true interests and motivations of these executives: the bottom line and the highest-paying customers, like those at North Memorial's wealthier suburban campus," the union said in a statement. "These closures by North Memorial executives follow a clear pattern: close services that do not make enough money — especially birth and newborn care and mental health — in the most at-need communities who cannot afford to pay more and who lack easy access to alternative options for care."

North Memorial's medical center in Robbinsdale ranked as the state's 10th-largest hospital in terms of beds staffed for patients in 2022. The health system also runs 25 clinics located mostly in the west metro and a large EMS service with 10 helicopters and 140 ambulances and other response vehicles.

It employs more than 5,000 people.

Following downsizing announcements last year at Allina (350 jobs) and Fairview (250 jobs), North Memorial Health becomes the third Hennepin County-based health system to cut a significant number of jobs in less than a year.

To varying degrees, all three health systems have cited industrywide challenges with labor costs and lack of capacity at step-down facilities, which means some patients stay longer than they need to in hospitals. Analysts have said these trends could prompt hospitals to cut services including mental health, obstetrics and pediatrics, since these patients generally need fewer surgeries that drive profitability.

In 2023, North Memorial Health reported an operating loss of $8.5 million on about $1.1 billion in revenue, an improvement over a $12.8 million operating loss the previous year. Last year's results, however, included about $24 million in funding to care for low-income residents that Hennepin County opted not to renew in January.

"I'm not in any way saying that the county was the reason that we're struggling — they didn't cause the problem," Sawallish said. "But the fact that they did cancel that is putting our hospital in a really precarious spot and putting us in immediate jeopardy."

The 103 job cuts include workers in clinical and nonclinical roles, most of whom are connected to the Robbinsdale campus. The reduction isn't happening all at once.

Outpatient mental health services in Robbinsdale, for example, are scheduled to close at the end of August, which will affect about 27 clinicians. In a statement, North Memorial Health said it's talking with "local partners throughout the community to identify alternate care sites and providers for our current patients."

The timing of changes in the neonatal ICU is still under discussion. Babies expected to need more advanced care will be directed to other hospitals, such as Maple Grove.

"It's going to be a normal newborn nursery after this change," Sawallish said. "It's something we really would like to maintain in this community, because you never know when a mom or family might need us. But because of the low census and because of the costs, it was one of the areas we felt we needed to adjust."

Beyond job cuts, North Memorial Health is looking to shore up its finances through a change in state law that would let the hospital participate in the Medicaid Directed Payments Program. This could provide supplemental funding by drawing down more federal Medicaid dollars, so long as there's a new funding contribution from state or local government.

Legislation has been introduced to add North Memorial to the program, which is currently helping cover expenses at Hennepin Healthcare in Minneapolis, Sawallish said.

"If you look at who we serve and our service to some of the poorest ZIP codes around, we have a very similar population to [Hennepin Healthcare]," Sawallish said. "They will have a little bit more Medicaid, but overall the government payment mix looks almost identical."

Health Department data shows nearly 50% of all patients admitted to Hennepin Healthcare in 2022 were covered through Medicaid and related programs: the highest share of any hospital and higher than the statewide average of 22%. The Medicaid share at North Memorial's hospital in Robbinsdale at the time was 24.7%, while the rate in Maple Grove was 19.6%.

Medicare paid for 52% of all patients admitted to North Memorial's hospital in Robbinsdale in 2022, according to the Health Department, while the statewide average was 44.7%. The Medicare share that year was 31.6% at Hennepin Healthcare and 23.4% at Maple Grove.