Impact Muni Bond: Post-covid hospital infrastructure expansion in the Twin Cities

Guest Author

Anna Rautenberg

Editor’s note: ImpactAlpha has partnered with HIP Investor to highlight upcoming bond issues with social and/or environmental significance. Disclaimer: Nothing in this post or on ImpactAlpha.com shall constitute an offer to sell or solicitation of an offer to buy bonds.


  • CUSIP bond identifier: 60374VEW9
  • Issuer: City of Minneapolis, Minnesota
  • Impact entity rated by HIP: Abbott Northwestern Hospital
  • Muni sector: Healthcare
  • Closing date: May 2, 2023
  • Bond amount: $363 million
  • HIP Impact Rating: 58% connoting “net positive” (higher than 50 on 100-point scale)

Bond description: The City of Minneapolis, Minnesota, is issuing a $363 million bond this week aimed to finance the construction of an approximately 575,000 square foot, ten-story Surgical and Critical Care Pavilion, together with related infrastructure, at the Abbott Northwestern Hospital. The Hospital is part of the Allina Health System and is the largest private hospital in the “twin cities” of Minneapolis-Saint Paul, serving more than 200,000 patients across the Upper Midwest.

The construction of the Pavilion, financed by this issuance, is just one of several Allina’s multi-year infrastructure projects, which include building a more energy-efficient and sustainability-friendly power plant for heating, cooling, power and water at the hospital campus, and a new parking facility – all of which are expected to serve patients, nurses, and doctors for the next 50 years.

The Care Pavilion will accommodate modern surgical technologies, as operating rooms the Hospital has been relying on so far were built in the 1950s, at a time when very little technology was used during surgeries, which have limited the types of procedures that can be performed there currently. Once completed, the new facility will include 30 operating rooms, expanded heart services, four floors of inpatient beds, and a shelled floor for future expansion of patient care, along with a centralized kitchen and more sterile spaces for the larger Abbott Northwestern campus.

The building is also planned to be highly energy efficient; the project underwent an environmental assessment conducted by the city of Minneapolis’s Principal City Planner which concluded no negative environmental impact.

Revitalizing infrastructure

Covid-19 as an external shock to the healthcare system: Minnesota experienced one of the worst healthcare crises across the nation during the Covid-19 pandemic in 2020 and 2021. Intensive care units were almost at full capacity and health care workers were in short supply with daily case averages reaching almost 3,000 patients during the pandemic surges. It was one of the several Midwest states, where low vaccination rates only exacerbated the crisis.

While struggling with staffing as well as lack of sufficient equipment and space, the crisis revealed that hospitals’ infrastructure was under-resourced for a pandemic, which forced many institutions to face financial instability. Nearly 40% of the nation’s more than 6,000 hospitals were expected to operate at a loss in 2021, as a near shutdown drastically decreased the number of surgeries and routine medical care which hospitals depend on for the bulk of their revenues.

In 2020, hospitals were projected to lose $323 billion and nearly four dozen hospitals closed or declared bankruptcy. In Minnesota, hospitals and health care systems were collectively losing $31 million in revenue per day in the first months of the pandemic as a result of reduction in patient volumes. This represented an average drop of 55% in patient revenues.

Impact assessment: This external shock to the healthcare system, caused by Covid-19, resulted in halting or significantly slowing down nearly all infrastructure projects vital to ensuring patients’ safety and saving lives. Only recently have many of the Minnesota hospitals started picking up the pace in those projects. To mitigate risks such as pandemics or other external economic shocks to healthcare, investments in infrastructure expansion and upgrading in this critical sector are very much needed.

Abbott Northwestern Hospital is not only the largest private hospital in the Twin Cities, it is also on the list of US Best Hospitals in 2021 with a special recognition in the field of cardiology. This industry-leading assessment was based on hospital recommendations from peers, patient experience, and medical key performance indicators (KPIs), such as patient safety, hygiene measures, and quality of treatment. Both the Hospital’s size and capacity, as well as the quality of provided health services reinforce its impact among the local healthcare institutions.

Impact Measurement: HIP measures the impact of over 5,000 individual hospitals across the USA as well as hospital systems through 15 metrics, including highly-weighted metrics:  health outcomes on several dozen procedures; patient satisfaction with doctors, nurses, pharmacists, and the administrative staff, measured through a publicly reported survey of patients’ perspectives of hospital care; and, “Disproportionate Hospital Share (DHS),” which quantifies hospital’s social-equity impact by rewarding institutions with a significantly disproportionate number of low-income patients (Medicaid and uninsured).

HIP’s data-driven approach also includes Medicare spending per beneficiary, and assessment of the energy performance of a hospital property relative to its peers (Energy Star score). On top of that, HIP Ratings include Charity Care, capturing the hospital’s cost of charity care as a proportion of its gross revenue. HIP’s 15 metrics aggregate into five impact pillars (also aligning with Environmental, Social and Governance categories). The Health pillar, which builds into the “S” of the ESG, is the most material in HIP’s framework in the healthcare sector. Another highly material pillar is Trust (governance and transparency metrics).

Abbott Northwestern Hospital earns a “net positive” HIP Rating of 58% (on a 100 point scale), with the hospital’s quantified performance leading in the HIP Health and HIP Trust pillars – and rising above the hospital sector’s average of 55%.

Abbott excels in its health outcomes, high patient satisfaction and a low number of medical complications. The Hospital also has a high value in Case Mix Index, which indicates that it treats a great number of complex, resource-intensive patients, including Medicare and Medicaid beneficiaries, for which it will be reimbursed at a higher rate. Additionally, the results of hospital inspections place it well above the average due to a significantly low count of regulatory violations per hospital bed.

Areas for improvement include timely and effective care – such as time spent by different types of patients in the Emergency Department before leaving from the visit; and percent of healthcare workers given influenza vaccination. Abbott also lags in Charity Care, and Medicaid charges as percent of its gross revenue.

Increasing resilience

The projects that the Abbott Northwestern Hospital has undertaken have a great potential to further increase the level of safety and quality of healthcare services provided to the local community, to allow access to implementing innovative technological solutions in healthcare, and can positively impact the environment by boosting energy efficiency.

Infrastructure investments, in general, increase hospital’s resilience at the time of pandemics, extreme weather events, or other external shocks, as well as the resilience of the local economy through creating job opportunities and purchasing goods and services from the local community.

“Net positive” on health care outcomes

Overall, infrastructure investments in hospitals providing top-quality healthcare services are necessary, particularly in the form of a capital injection in the post-pandemic recovery. This bond is therefore worth considering, as Abbott Northwestern Hospital excels in the most material Health metrics of HIP’s rating: health outcomes, patient satisfaction, and case mix. However, this analysis also highlighted certain gaps associated with the Hospital’s performance in providing equitable, accessible and affordable healthcare, which should encourage the Hospital to take actions to address these gaps and to support disadvantaged communities more efficiently.


Anna Rautenberg is an ESG Impact Investing Analyst at HIP Investor

HIP Investor Inc. is a state-registered investment adviser in several jurisdictions, and HIP Investor Ratings LLC is an impact-ratings firm evaluating impact and ESG on 123,000 municipal entities, 250,000 muni-bond issuances, and 12,000 corporates for equities and bonds. HIP Impact Ratings are for your information and education – and are not intended to be investment recommendations. Past performance is not indicative of future results. All investments are risky and could lose value. Please consult your investment professionals to evaluate if any investment is appropriate for you, your goals, and your risk-return-impact profile.