Despite a $1 billion investment to implement a new medical records system and $50 million of lost revenue due to the massive transition, 2018 was a solid one financially for Mayo Clinic.
Mayo Clinic Chief Financial Officer Dennis Dahlen described the 2018 financial results, released this morning, as showing “a very good year… all under the footprint of finishing the transition to Epic.”
Many other medical institutions that have adopted the very expensive Epic system found that it spurred financial losses for the transition year.
Overall, Mayo Clinic tallied revenue of $12.6 billion, up from $11.99 billion in 2017. Net operating income was mostly flat at $706 million for 2018, slightly down from $707 million in 2017.
“In the face of all of that (the Epic transition), we essentially hit the same number we did last year,” said Dahlen.
While undergoing the transition to the extensive new electronic health records system, Mayo Clinic treated more than 1 million patients in 2018. That’s about the same number of patients treated in each of the previous two years.
Donations were up by 18.9 percent from 2017, to $504 million.
“2018 was an extraordinary year for Mayo Clinic by all measures,” said Mayo Clinic CEO Gianrico Farrugia.
Jeff Bolton, Mayo Clinic’s chief administrative officer, attributed the past year’s financial success to the clinic’s staff.
“Our strong performance in 2018 is due to the innovative and collaborative efforts by Mayo employees who adapted to changes across the organization while remaining focused on the best interest of our patients,” he wrote in the announcement of the financials.
Mayo Clinic’s income from its “diversified sources of revenue,” or for-profit operations, such as Mayo Clinic Labs and Mayo Clinic Ventures, was $1.3 billion, up 8.8 percent from 2017.
Dahlen said Mayo Clinic is “doubling down” on the diversified revenue sources for 2019.
“That’s a space that we’re going to grow,” he said, citing the Discovery Square One complex in the Destination Medical Center area in downtown Rochester as one example of that.
In 2018, Mayo Clinic invested $724 million in capital projects. It ended the the year with $9.5 billion in cash reserves, up from $8.9 billion in 2017.
“Those reserves provide resilience for downturns or disruption,” said Dahlen.
Looking to 2019, Moody’s Investors Service recently issued a negative outlook report for the nonprofit hospital sector, with the prediction that operating cash flow “will either remain flat or decline by up to 1 percent” and bad debt could grow by 8 percent to 9 percent “as health plans place greater financial burden on patients.”
Dahlen said the Moody’s report does not worry Mayo Clinic much.
“As we look to the year ahead, we see a lot of upside. We continue to see more people seek out Mayo than we are able to serve,” he said. “A lot of the nonprofit health care sector does not have that excess demand.”
Dahlen added that, of course, Mayo Clinic will need to keep costs in line and manage well for a positive 2019.
“We fight many of the same demons others do, but operate in a little bit of a different spectrum than the industry at large,” he said.
One area where Mayo Clinic hopes to gain ground in 2019 is through more business partnerships to develop its digital “platform.”
“Mayo Clinic is already in many ways a platform, but we’re expanding into the digital space,” said Dahlen.