Mayo’s ul­ti­ma­tum to Minn.

Clinic wants $600 mil­lion in im­prove­ments by state

Modern Healthcare - - FRONT PAGE - Joe Carl­son

The Mayo Clinic, syn­ony­mous with south­ern Min­nesota for more than a cen­tury, says state law­mak­ers must pay about $600 mil­lion over 20 years in an un­usual bor­row­ing plan to en­sure the famed clinic will con­tinue in­vest­ing in the re­gion.

While the ex­act terms of the large pub­lic fi­nanc­ing pro­posal are unique, Mayo’s idea dove­tails with trends both in Min­nesota and among large em­ploy­ers na­tion­ally, where busi­nesses use their clout as job cre­ators to ex­tract fi­nan­cial in­cen­tives from pub­lic cof­fers.

The Min­nesota Vik­ings, for ex­am­ple, per­suaded law­mak­ers last year to prom­ise more than $500 mil­lion in pub­lic spend­ing for a $1 bil­lion foot­ball sta­dium af­ter the team threat­ened to move. And large not­for-profit health­care em­ploy­ers in other states, such as the Cleve­land Clinic in Ohio and the Scripps Re­search In­sti­tute in Palm Beach County, Fla., al­ready re­ceive state sub­si­dies to sup­port their op­er­a­tions.

Mayo pledged last year to spend $3.5 bil­lion to im­prove its flag­ship health cen­ter in Rochester and a set of de­vel­op­ments now known col­lec­tively as the Des­ti­na­tion Med­i­cal Cen­ter project. Last week, the sys­tem said it would also bring at least $2.1 bil­lion in pri­vate in­vest­ments from other sources to im­prove en­ter­tain­ment, lodg­ing and tourism op­tions in the city of 100,000 peo­ple.

But the plan would hinge on com­mit­ments from state and lo­cal gov­ern­ments to build park­ing lots, bridges, mass tran­sit op­tions and en­hanced streetscapes. Money to pay for those im­prove­ments would come from the in­come and sales taxes paid by new em­ploy­ees, as well as cor­po­rate fran­chise and state taxes paid by new or ex­panded busi­ness.

Mayo Pres­i­dent and CEO Dr. John Nose­wor­thy said the renowned physi­cian-led health sys­tem is of­ten ap­proached by other cities and states that can of­fer fi­nan­cial in­cen­tives in ex­change for ex­pan­sions, but that the sys­tem would rather keep op­er­a­tions in Min­nesota.

“Why would we ever want to leave this state to con­tinue to grow our global foot­print? We don’t want to do that,” Nose­wor­thy said dur­ing a Jan. 30 news con­fer­ence in St. Paul. “But we need to have se­cure pub­lic fund­ing of the in­fra­struc­ture if we are go­ing to make this the global busi­ness cen­ter. And th­ese are the de­ci­sions we have to make on a pure busi­ness sense go­ing for­ward.”

Greg LeRoy, ex­ec­u­tive di­rec­tor for the Washington-based pub­lic ad­vo­cacy or­ga­ni­za­tion Good Jobs First, said re­quests for pub­lic sup­port of large pri­vate in­vest­ments are be­com­ing more com­mon in all in­dus­tries, as high-paying jobs grow scarcer and law­mak­ers are driven harder to com­pete for them.

“We call it ‘job black­mail,’ ” LeRoy said. “You’ve got a smaller num­ber of jobs and a larger num­ber of pub­lic of­fi­cials anx­ious to ap­pear more ag­gres­sive on the econ­omy. That ben­e­fits big em­ploy­ers. I would urge Min­nesota of­fi­cials to … bargain as smart as they can, really try to un­der­stand Mayo’s hand in this poker game.”

Would Mayo truly leave Rochester? Sys­tem of­fi­cials said in in­ter­views that it’s not a ques­tion of up­root­ing from the city, but rather de­cid­ing where to spend its $3.5 bil­lion on new clin­i­cal and ad­min­is­tra­tive fa­cil­i­ties.

“Mayo Clinic is not go­ing to dis­ap­pear from the state of Min­nesota,” said Dr. Bradly Narr, med­i­cal di­rec­tor for Mayo’s Des­ti­na­tion Med­i­cal Cen­ter project. “The ques­tion is, what pieces of the des­ti­na­tion prac­tice are go­ing to grav­i­tate here, and where are we go­ing to grow else­where?”

Some law­mak­ers im­me­di­ately pledged sup­port.

“This is an in­cred­i­bly valu­able as­set for the state of Min­nesota,” said state Sen. David Sen­jem, who re­cently re­tired from Mayo af­ter 44 years. “And we’re go­ing to work col­lec­tively as a state Leg­is­la­ture to make sure that this as­set not only stays here, but grows here. And we have an op­por­tu­nity through this piece of leg­is­la­tion to do that. We have to en­sure that Mayo is a part of Min­nesota for the long-term fu­ture.”

Bill Blazar, a se­nior vice pres­i­dent with the Min­nesota Cham­ber of Com­merce, said that although Mayo is a not-for-profit or­ga­ni­za­tion, it has to make busi­ness de­ci­sions like any other com­mer­cially driven or­ga­ni­za­tion— and law­mak­ers have to un­der­stand that.

“It’s just re­al­ity,” he said. “Ev­ery busi­ness, whether it’s the Min­nesota Vik­ings or the Mayo Clinic or Fred’s Ma­chine Shop, has op­tions. Fred’s can move to Wis­con­sin, the Vik­ings can move to Cal­i­for­nia, and Mayo could move to Florida or Ari­zona or 52 other places that would like to have them. That’s just re­al­ity.”

Spokes­peo­ple for the gov­er­nor’s of­fices in Florida and Ari­zona, both of which host large Mayo health cen­ters, de­clined to com­ment on whether their states have of­fered fi­nan­cial in­duce­ments.

Min­nesota Gov. Mark Day­ton said he will be en­cour­ag­ing the Leg­is­la­ture to pass a tax-in­cre­ment fi­nanc­ing plan in the next few months, though he hedged on the de­tails, say­ing dur­ing the Jan. 30 news con­fer­ence, “I don’t know if this is ex­actly the right fi­nanc­ing plan.”


In an­nounc­ing the Des­ti­na­tion Med­i­cal Cen­ter plan, Mayo Clinic CEO Dr. John Nose­wor­thy, cen­ter, said the sys­tem’s $3.5 bil­lion plan de­pends on Min­nesota spend­ing $600 mil­lion.

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