CentraCare reports plan for $10 million state grant to launch St. Cloud medical school, expand residencies and start rural research institute

CentraCare and University of Minnesota partners outlined to the House Higher Education Finance and Policy Committee how they plan to spend a $10 million state appropriation to establish a rural‑focused medical school campus in St. Cloud, expand graduate medical education slots and create a rural health research institute.

CentraCare’s Mike Blair, chief financial officer and senior vice president for academic affairs, and Andy Smart, vice president of finance and treasury, told the committee the appropriation’s legislative language allowed funds to be used for tuition support, opening and operating the new campus, residency expansion and starting a rural health research program. The appropriation must be spent by June 30, 2027.

Smart said CentraCare and University of Minnesota partners established a finance subcommittee to oversee and control how the funds are spent and to mitigate financial risk. The subcommittee requires multiple approvals for FTE changes, salary additions and material budget changes, Smart said.

CentraCare provided a multi‑year spending plan and said the funding is intended to cover startup deficits and scholarships while the medical school’s tuition stream ramps up over several years as students progress through four class years. Smart said CentraCare will request the first draw on the appropriation in July 2025 when fiscal 2025 numbers are finalized.

Planned uses summarized by CentraCare include:

- Scholarships: $1.6 million total across the grant period, intended to match scholarship levels at the other University of Minnesota campuses.

- University medical education (UME) start‑up and operational deficits: roughly $4.99 million to cover administrative hires, faculty onboarding and other pre‑opening costs while tuition ramps up.

- Residency program support: about $1.9 million, including resident salaries and certain renovations (CentraCare plans nearly $1.9 million in renovations at Lakeland Clinic to create resident training space).

- Rural health research institute: $1.5 million planned for administrative and program staff and consulting to stand up research operations.

Smart said $155,000 of 2024 startup costs were recorded for technology and initial administrative hires; $1.8 million in 2025 costs covered faculty onboarding and training. Smart told the committee CentraCare has until June 30, 2027 to spend the appropriation and that unspent amounts and timing are managed to coincide with the med school’s multi‑year tuition and enrollment ramp.

Mike Blair and Andy Smart said CentraCare expects to grow residency positions from 18 to as many as 72 over time to align with the med school’s planned output (24 medical school graduates per year when at steady state). Blair said long‑term structural deficits are expected as the program grows and CentraCare is seeking additional ongoing state support to sustain the expanded residency slots. He said when the residency expansion reaches steady state the annual structural deficit could be in the range of $10 million without additional funding or federal changes.

Committee members asked how an ongoing funding request would complement the one‑time $10 million. Blair and Smart said the state appropriation funds startup costs and scholarships; ongoing support would help bridge the structural annual deficit as residents and training capacity scale up. The presenters said they are pursuing philanthropic and federal sources as well but that federal DME and other federal objects are limited by current caps and policy.

CentraCare officials said governance controls, multi‑party approvals and the multi‑year spending plan are in place and that they will present final disbursement requests to the finance subcommittee to ensure compliance with legislative intent.