Under new law, hospitals face fines if they don’t alert Minnesotans of closures, reduced care

Hospitals face new penalties if they fail to notify Minnesotans of closures or substantial changes that can reduce local access to care, especially in rural parts of the state.

State regulators met Wednesday with hospital leaders to explain the updated reporting requirements, which took effect in July and are designed to alert patients well before their local providers cut services.

Under a three-year-old law, Minnesota had already hosted 17 public hearings, giving people the chance to voice concerns about everything from Allina Health’s closure of intensive care beds at its Mercy Hospital campus in Fridley, to the conversion of one of Minnesota’s smallest hospitals in Mahnomen into the state’s first rural emergency center with no inpatient beds.

But lawmakers sought in the 2024 Legislature to add teeth to the reporting requirements, especially after a controversial hearing in January — months after Essentia Health had stopped scheduling baby deliveries at its hospital in Fosston.

Under the updated law, hospitals must alert the public six months before closing or reducing operations, or explain to state regulators why they couldn’t provide that much advance notice.

The state can fine hospitals up to $60,000 if they don’t provide notice and arrange public hearings so that people can voice support or opposition for their changes.

The state cannot, however, block hospitals from following through on planned closures.

“The department is still not making the decision for you. We’re just holding you responsible for this component,” Maria King, director of the state health department’s health regulation division, told hospital leaders during the meeting Wednesday.

Minnesota increased oversight of hospital closures at a time when many smaller operators are struggling to stay open or provide a full array of inpatient and outpatient services. The Fosston hospital is among more than 20 in Minnesota that has stopped scheduling baby deliveries because of staffing shortages and rising insurance costs — forcing women in labor to travel farther for their deliveries.

A report from a national advocacy group last month listed seven rural Minnesota hospitals at immediate risk of closing based on their weak financial data — although the threat appears much larger in other states. The report said 360 hospitals nationwide are at risk of closing.

Minnesota has made aggressive use of the federal critical access program to maintain a broad network of rural hospitals for far longer than many states. Mayo Clinic’s hospital in Springfield, Minn., was the only one in the state to close in the past five years. But many have stayed afloat by cutting or eliminating high-cost or underused services — reductions that can be controversial.

City leaders in Fosston have tried to take back operational control of their locally-owned hospital after Essentia stopped scheduling baby deliveries and diverted women 60 miles to its regional hospital in Detroit Lakes. The dispute rests with an arbitration panel that heard arguments from both sides this summer and will decide whether Fosston’s local hospital board can void its contract with Essentia.

The Fosston case showed cracks in Minnesota’s public reporting system. Essentia leaders argued that they initially suspended baby deliveries when they lost local providers and needed to hire replacements. The leaders said they didn’t intend to make the change permanent until later.

King told the hospital leaders Wednesday that they should, at least, call the state if they are uncertain whether temporary or permanent closures require notice. The updated requires public notice whenever hospitals shut down units that provide newborn care, intensive care or inpatient treatment of mental or substance use disorders. But the law also requires notice when hospitals move any health services to other locations, or make changes that relocate patients.

Hospital leaders complained that the fines and penalties are too severe when considering the confusion over what types of closures must be publicly reported, including changes to affiliated outpatient clinics or non-hospital services.

“Right now ... every time I make a minor change, I need to make a phone call” to determine if the state wants a hearing, said Joel Beiswenger, chief executive of Tri-County Health Care.

The Minnesota Hospital Association in a statement raised concerns about the ambiguity of the updated law, but said it wants hospitals to be transparent about any closures and would work with the state “to follow this law consistently and accurately.”

The revised state law also requires operators to offer to sell their hospitals at fair market prices to the local community before closing or selling them.