Senator David Senjem of Rochester and John Murphy of the Mayo Clinic
Expansion key to Mayo's and
A Civic Caucus Focus on
Competitiveness Interview January 24, 2014
Dave Broden (vice chair),
Paul Gilje (coordinator), Randy Johnson, Sallie Kemper, Dan Loritz
(chair), John Murphy, Dana Schroeder, State Sen. David Senjem,
State Senator David Senjem and Mayo Clinic's John Murphy say that it
was Mayo Clinic's and Rochester's visions and future plans that
convinced the 2013 Legislature to pass a law creating Destination
Medical Center (DMC), the largest economic development effort in
Minnesota and one of the largest in the country. In today's
competitive health care environment, Senjem and Murphy say, Mayo
Clinic's continued success and growth in Minnesota depends on
Rochester's ability to sustain the access, development, service and
public infrastructure necessary to remain competitive with other
destination medical centers.
The DMC project will bring over $5.6 billion
in private investment in Rochester over the next 20 years, along with
public investment of $585 million from state and local jurisdictions.
It seeks to create at least 35,000 new jobs. Senjem stresses that none
of the public dollars will be used to pay for Mayo buildings or
programs. Instead, it will be used for the infrastructure investment
necessary to support Mayo's expansion plans and the growth of hotels,
restaurants and other amenities and services in Rochester.
Murphy points out that DMC is an economic
development plan and does not address the affordability of health
care. However, Senjem adds, if Mayo is going to grow, it must continue
to focus on the efficiency and quality of health care. He concludes
that DMC is a wise investment for Minnesota that will change the face
of downtown Rochester and ensure that Mayo will continue to be
Issues to address. Prior to the meeting,
Murphy and Senjem were asked to prepare for questions on Rochester's
Destination Medical Center project, its relationship to Mayo Clinic
and its contribution to Minnesota's foundational competitiveness and
John Murphy is a
public affairs specialist at Mayo Clinic. He provides communications
strategy development and support for a variety of groups at Mayo
Clinic, including patient/visitor experience, emergency management,
volunteers and a new initiative, Destination Medical Center.
Murphy has served as part of the media
relations team for Mayo Clinic and as a spokesperson to the media. In
2012, he became a hospital volunteer, serving in the roving ambassador
pilot. Prior to joining Mayo in 1999, Murphy was senior vice president
and director of marketing and communications for Bank One Illinois. He
received his B.A. in Political Science and his M.A. in Education
Administration from the University of St. Thomas. He has completed
post-graduate work in Communications at the University of Wisconsin.
Minnesota State Senator David Senjem
(R-District 25) represents parts of Dodge and Olmsted Counties,
including part of the city of Rochester. He was first elected to the
Senate in 2002 and was reelected in 2006, 2010 and 2012. He served as
GOP Senate minority leader from 2007 till 2011 and as majority leader
from 2011 to 2013.
Senjem serves on the following legislative
committees: Capital Investment, Finance (Transportation and Public
Safety Division), Taxes, and Transportation and Public Safety. His
previous public service includes serving on the Rochester City
Council, the Rochester Park Board and the Olmsted County Environmental
Commission. He also served as vice chair of the Community and Economic
Development Committee of the National League of Cities. He worked at
from 1964 until his retirement in 2008,
serving in numerous roles and retiring as Environmental Affairs
Officer. He has a B.A. degree from Luther College in Decorah, Iowa.
Prior to the 2013
legislative session, legislators were briefed about a new vision for
Mayo Clinic and the city of Rochester. Minnesota State Senator
David Senjem said legislators learned that after several years of
study and analysis, Mayo developed a vision of a track toward
expansion and growth, based its historical experience. "Mayo's
tradition has been to be one of the finest health-care institutions on
earth," he said. "The track toward continued growth reflects Mayo's
need to grow to accommodate the medical marketplace and demands,
prompted by anticipated changes in laws and medicine. Legislators were
informed previous to the 2013 legislative session about making Mayo
and Rochester a destination medical center for the world," he said.
Based on Mayo's and Rochester's vision and
plan, the 2013 Legislature passed a law creating Destination Medical
Center (DMC). The DMC website describes the project as "an
innovative economic development initiative to secure Minnesota as a
global medical destination now and in the future." In today's
competitive health care environment, the DMC says, "Mayo Clinic's
continued success in Minnesota depends on Rochester's ability to
sustain quality access, development, service and public infrastructure
necessary to remain competitive with other destination medical centers
in the U.S. and abroad."
The website calls the DMC initiative the
largest economic development effort in Minnesota and one of the
largest in the country. "It will result in significant economic
benefits for the state and local jurisdictions and will create
significant job growth and new business opportunities," DMC says.
Mayo Clinic employs 40,600 Minnesotans,
33,400 in Rochester. It claims a $9.8 billion economic impact in the
state, four percent of Minnesota's Gross Domestic Product. It provides
$1.5 billion in tax revenue to Minnesota state and local governments.
DMC and the city of Rochester say key
elements of the DMC strategy are the following:
Over $5.6 billion in private investment in Rochester, Olmsted
County and Minnesota, approximately $10 in private investment to
every $1 in public investment.
Public investment of $585 million from state and local
The investment is not an upfront payment, but is structured over
a 20-year period.
None of the public dollars will be used to pay for Mayo
buildings or programs.
Seeks to create at least 35,000 new jobs in Minnesota and bring
tax revenue in excess of $7 billion to the state.
By relying upon the draw and attraction of one of the world's
leading medical institutions and by expanding the availability of
lodging establishments, restaurant offerings, arts venues and
attractions and entertainment options, the goal is to attract more
employees and patients who want to come to Rochester for their
Mayo investments and other private
investments over the 20-year period of the DMC project would be equal
to the cost of three Disney Worlds in downtown Rochester. Senjem
said Mayo's planned investment of $3.5 billion and $1.5 billion in
other private investments aligning with theirs would bring a
substantial new tax base to Minnesota. As a way to explain the
significance of DMC to legislative colleagues, he pointed out that
"when Disney World came to Orlando they spent $311 million to build
the complex. That's worth $1.7 billion in today's economy. Mayo's plan
is equal to three Disney Worlds in downtown Rochester. That's a pretty
dramatic investment within our community. This is going to change the
face of downtown Rochester. "
Building permit values will determine the
size of the state's and the city's contributions to a city
infrastructure fund for DMC projects. Senjem said Rochester's
property taxes, even though Mayo pays $8 million a year, covers city
police, fire and part of public works, but not the infrastructure
needs for the anticipated new growth. "The thought was," he said, "if
we're going to grow the state's tax base substantially, is it possible
to capture a portion of that new tax base and put it back into the
infrastructure investment it's going to take for Mayo to make all this
happen within the city of Rochester?"
After considering several options for doing
this, it was determined that the state and the city will index their
contributions to the DMC project off new building permit values. The
state and city contributions to the DMC infrastructure pool will be
equal to 2.75 percent each of the building permit values of any new
buildings or expansions, Mayo and non-Mayo, in the yet-to-be-defined
"medical district" of the city. Senjem referred to this method of
financing as "building permit-increment financing." He was contrasting
it to tax-increment financing (TIF), in which a city captures the
total property taxes on the increased property values in a certain
area to finance costs of development and redevelopment projects. TIF
may be used on selected DMC projects.
Senjem said that no state money flows to
Rochester until Mayo's and other private investment has reached$200
million, as determined by building permit value. At that point, the
state authorizes 2.75 percent of $200 million, or $5.5 million, to go
into the infrastructure pool for DMC, up to a total state cap of $327
million over the life of DMC. The city of Rochester will put the same
amount of money into the pool, up to a total city cap of $128 million.
The DMC legislation authorizes the city to raise these funds from
local taxes, such as sales taxes, lodging taxes and food and beverage
The DMC economic development agency will
propose the boundaries of the medical district, with final approval
given by the DMCC board, working in concert with the Rochester city
council. Senjem said the district would likely encompass the city's
downtown area, probably somewhere between Mayo and St. Mary's Hospital
campus and where the future University of Minnesota campus is planned.
Responding to a question, Senjem clarified
that the city, not Mayo Clinic, gets the state and city money
dedicated for infrastructure needs, whether for new Mayo buildings or
for new hotels, restaurants or other amenities.
About 30 percent of patients' time when they
come to Rochester is spent at Mayo Clinic and about 70 percent is
spent in the outside community. Mayo Clinic Public Affairs
Specialist John Murphy said that in 2009, then-Mayo CEO Dr. Glenn
Forbes recognized that while almost everybody has a positive Mayo
Clinic story, people are not necessarily happy with their experiences
in the larger Rochester community. Forbes, whom Murphy described as a
visionary, wondered how the community could better embrace Mayo's
patients. He asked what Mayo's vision and strategy were and started
exploring how Mayo and the city of Rochester could become a medical
destination. "The competition is great," Murphy said. "Other medical
centers in the U.S. are doing this, such as the Cleveland Clinic and
Johns Hopkins. They have strategies for creating medical
"That's how it was born," Murphy said. "It
evolved into the idea of how Rochester can support Mayo's continued
growth and expansion."
The DMC strategy is not just about keeping
Mayo competitive, but also about keeping Minnesota the world's center
of medicine. Mayo's strategy, Murphy said, needed to look at how
the clinic stays competitive and what the effect of the Affordable
Care Act (ACA) will be. "It's Mayo looking at our market, looking at
the competition and changes in health care and saying 'How can we best
meet the needs of people seeking care?'"
"Minnesota is the epicenter of so many new
medical devices, so many new things," Murphy said. "We have the
University of Minnesota and Mayo Clinic. How do we keep Minnesota as
that center? That's what Destination Medical Center does. It says,
'This is our investment.'"
Mayo provides the "pinnacle of care."
Responding to a question about how clinics from smaller towns might
feed into Mayo, Murphy referred to the concept of a "pinnacle of
care." "At the top of the triangle are the really hard, complicated,
tough cases that Mayo Clinic in Rochester has become famous for,"
Murphy said. "At the bottom of the pyramid is care closer to home,
things like calling a nurse line, moving up to urgent care or
convenience care or the emergency room of your local hospital. They
all feed those hard, complicated cases up to the pinnacle of care."
Mayo decided that the top of the pyramid
will be at Mayo Clinic in Rochester.
When asked why Mayo made that decision, Murphy said mostly it was the
history of Minnesota, Mayo's tradition here, its love for the state
and the work ethic here. "Minnesota is home to the Mayo Clinic," he
"We never had an inkling of a suggestion
that Mayo would move out of Minnesota," Senjem added. "For me,
however, as a legislator, as I often told people, 'We've got one swing
of the bat on this one. We'd better hit the ball.' If not, I honestly
feared there would be other decisions and other directions that Mayo
"Why would you stay in Rochester?" he asked.
"Except there's a medical culture and exceptional people there in
terms of the workforce. You can move the equipment. You can move the
buildings. But you can't move those Minnesota values and that culture
of caring we have in Rochester."
Attracting the needed workforce to Rochester
ties right into the DMC concept, Murphy said. DMC is designed to get
the patients Mayo needs and also to attract and retain the very best
medical talent in Rochester. "Are we creating the environment there
where world-class scientists will want to be?" he said.
Telemedicine is part of the strategy of
providing the most appropriate care at the right place at the right
time. According to Murphy, the ACA is focusing people more on
their health care and their health care dollars. I think telemedicine
is going to be part of that. People are going to say, "What's the most
efficient, best-value way to do it?"
Senjem noted that the Mayo Health System has
50 or 60 clinics across southern Minnesota and northern Iowa that are
all wired into Mayo Clinic through telemedicine.
Minnesota's Department of Employment and
Economic Development (DEED) was not deeply involved in the DMC
proposal. "The Department of Revenue and the Department of
Management and Budget worked with us," Senjem said. "The governor's
office certainly was supportive in urging agencies to work with us.
DEED doesn't have a lot of money to work with. The Minnesota
Investment Fund is not heavily funded compared to other states.
They're somewhat limited in their ability to provide financial
assistance. They might be able to carve through permit issues. They're
pretty limited in terms of building businesses in Minnesota. DMC was a
piece of legislation and we had to sell it to our legislators, as
opposed to selling it to agencies."
An interviewer asked what the one toughest
question from other legislators was. Senjem answered, "'Why should a
city with its streets paved in gold be given this much extra
attention?' That's the way legislators think. We had to overcome that
Hospitals are partially subject to the
property tax. Senjem said that the parts of a hospital involved in
medical care are taxed, while the parts involved in research and
education are exempt.
Other business incentive legislation would
likely have passed, even if the Mayo package had not. An
interviewer asked whether state incentives or state authorization for
local incentives for 3M in Woodbury, Shutterfly in Shakopee, Baxter
International in Brooklyn Park, and the Mall of America in Bloomington
would have passed the Legislature if the Mayo package had not passed.
Senjem said he thought the other proposals would have passed anyway,
because they were reasonable. "I think whatever we can do reasonably
to entice investment we ought to do," he said.
Two nonprofit boards, established by the DMC
legislation, will manage and control DMC and create the plan for the
initiative. Murphy said that the legislation establishes two
boards. The nonprofit, public Destination Medical Center Corporation (DMCC),
established by the legislation, manages and controls the initiative.
The private, nonprofit Economic Development Agency (EDA) was
established by the legislation to assist in preparing a plan guiding
all public and private development projects intended to attract people
Murphy said DMC is entering a community
input phase. Eight key areas have been identified as part of the
visitor/employee experience component of DMC. In each area, groups are
being formed to gather community input and ask residents what their
vision is for what Rochester should be. That information, he said,
will be used to help devise the master plan and the land-use plan, in
conjunction with the city of Rochester. This phase is also when Mayo's
vision of what it needs comes into the planning.
"We're in the embryonic stages of this,"
DMC is not aimed at improving the
affordability of health care. In response to a question about what
in this vision is going to make health care more affordable, Murphy
clarified that DMC is an economic development plan for the state to
keep Minnesota globally competitive. He said it doesn't address the
affordability of health care.
Senjem said if Mayo is going to grow,
efficiency and quality of health care have to continue to be part of
the Mayo theme: a quality result in an efficient way at an affordable
price. Mayo will continue to address cost reductions. An interviewer
commented that the image of Mayo is that you're spending more to get
what you need. He asked if Mayo is going to be a place that serves the
poor. Murphy said 80 percent of Mayo's patients come from within 120
miles of Rochester, 18 percent are national patients and two percent
An interviewer asked what in the $3.5
billion investment Mayo is making would have a positive effect on cost
structure. Senjem said he didn't think anything in the investment
would, but said most of the $3.5 billion will come from grateful
patients and benefactors, rather than from patient payments. Mayo has
departments on health care efficiency and how you can get the most out
of the medical dollar. "It's a central core value there," he said.
Don't lose sight of Mayo's leadership in
state-of-the-art technology and capability. An interviewer
commented that with all the discussion of cost, we don't want to lose
sight of the leadership and state-of-the-art medical technology and
capability that Mayo provides by being out front in type of care,
procedures, research and treatment. That has to be part of the
dialogue, he said. Senjem noted that Mayo's team approach to medicine
can make a real difference in outcomes.
Rochester will need remote parking ramps and
a way to get people into downtown. Responding to a question about
Mayo's view of what the city and county should be doing to advance DMC,
Senjem said, "If we're going to add 35,000 new employees, our downtown
will change. We can't just keep building new parking ramps. We need
remote parking with ways to get people into downtown, whether by rail
or express bus. We must have a way to move people." He said Mayo
employees don't directly pay for parking, but patients do pay.
The state and Olmsted County will provide
transit aid for DMC. An interviewer asked whether Rochester's
airport will have to grow and what the implications are of high-speed
rail. Murphy said there is a transportation input group. Senjem
pointed out that Rochester's airport has an11,000-foot runway. He said
the state will provide the city with $116 million over 20 years for
transit aid specific to DMC, along with a contribution of $33 million
from Olmsted County. The DMC money must stay within the medical
district in the city.
Part of EDA's role is to recruit businesses
to Rochester. An interviewer asked who is reaching out to
companies and startups to let them know that Rochester is a place they
could locate their businesses. Senjem said that is part of the role of
the EDA. "Not only do they create the plan and the vision, they also
go out and recruit the companies," he said. "It might be a hotel; it
might be a biotech company." Murphy said the needs of biotech
companies are changing and they prefer an urban environment. "Young
people want to work downtown, live downtown," he said. "I think
attracting that group is going to be a major emphasis."
Mayo has enough property for its own
expansion. An interviewer asked about land assembly issues for DMC.
Senjem pointed out that Mayo owns a lot of land to the south and
towards St. Mary's. "It will be awhile before they run into that kind
of issue with respect to the expansion," he said. Murphy said Mayo has
the property it needs to do its own expansion.
DMC estimates there will be 35,000 new jobs
in Rochester over the next 20 years related to the DMC project.
Mayo has 33,400 employees in Rochester right now. Senjem said some of
the new jobs will be at Mayo and some will be in hotels, restaurants,
and other businesses complementing Mayo's expansion.
"Finding people for the jobs going forward
is probably one of biggest challenges in the future," he commented. He
said there is an early interest in modeling the German apprenticeship
program in Rochester for higher technical education.
Mayo has a large economic impact on
Rochester. Responding to a question about the economic impact of
Mayo, Murphy noted that Mayo employees live in 60-some of Minnesota's
87 counties. Senjem added that 56,000 employees come into the
Rochester area every day, not all to Mayo, but largely because of the
influence of Mayo on the city's economy.
An interviewer pointed out that many of the
people in surrounding small towns work at Mayo. They have good jobs,
and they can live in a small town and their kids can go to small high
The University of Minnesota Medical School
and Mayo Medical School have two different cultures. An
interviewer asked whether there is something the University of
Minnesota Medical School and Mayo Medical School could do together so
that the expansion of medical education would be in Rochester. Murphy
said there are a lot of partnership programs between Mayo Clinic and
the University of Minnesota, Rochester, which now has approximately
Senjem added that in the early years of Mayo
Medical School, which has 43 students per class, there would regularly
be criticism at the time of reaccreditation that there wasn't enough
classroom time. But, he said, Mayo Medical School's model is that
students work and learn alongside a physician. "Mayo students learn by
seeing and doing and listening, as opposed to being in the classroom,"
he said. 'So you have two cultures that would need to come together. "
In conclusion, Senjem said, "As
far as I know, DMC is one of the largest economic development programs
by any state in the history of this country, in terms of money. It's a
magnanimous sort of undertaking. I think it's a wise investment for
Minnesota. Mayo will now and forevermore be embedded in Rochester. All
of us are going to have access to the finest medical care in the
"The future looks bright," Murphy added.
The Civic Caucus
is a non-partisan,
tax-exempt educational organization. The Interview Group
includes persons of varying political persuasions,
reflecting years of leadership in politics and
business. Click here
to see a short personal background of each.
S. Adams, David Broden, Audrey Clay, Janis Clay, Pat Davies, Bill
Frenzel, Paul Gilje (coordinator), Randy Johnson, Sallie Kemper, Ted
Kolderie, Dan Loritz (chair),
Tim McDonald, Bruce Mooty, John Mooty, Jim Olson, Paul Ostrow, Wayne
Popham, Dana Schroeder, Clarence Shallbetter, and Fred Zimmerman