Basic business ample, investment portfolio clobbered
By Bob Freund
freund@postbulletin.com
On financial ledger pages, Mayo Clinic looked a lot like other healthcare giants last year.
The dollars generated by its basic business -- medical care -- were ample. Mayo gained $115.3 million from treating patients, or about 4 percent of what it took in from them and their insurers.
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"I'm not surprised that 2001 was a decent year for them," said Nancy-Ann DeParle, who led the U.S. Health Care Finance Administration during the Clinton administration and now works as a health care advisor in New York. "That is what I have seen in the data …; about other hospitals and clinics and doctors' practices."
But, also like many other big institutions, Mayo's investment portfolio was clobbered by the marketplace. The blow was big enough to give the clinic a total loss of $59.1 million at year-end.
The 2001 loss was second only to the $62.3 million bath Mayo took in 1994, when pummeled investments also were a factor. That was a time when the clinic was much smaller with a little over half the current $4.1 billion in system-wide revenues.
Overall, Mayo's top officials say they are happy with 2001's results. Income from all operating departments -- medical treatment plus research and education -- reached a record $53.2 million after the bills were paid. That was "significantly better than last year's performance ($16 million) and essentially on plan," president Dr. Michael Wood said in a written statement about Mayo finances.
DeParle notes that Congress gave Medicare payments nationwide a boost against inflation last year. Health care premiums paid by plan members and employers also were up nationwide, presumably to afford bills from the health industry.
At the same time, Mayo's type of institution, with its research spending, often fares worse than pure hospital or patient care companies.
"I suspect Mayo does better than its peer institutions," says DeParle, who also teaches health policy part time at the Wharton School of Business at the University of Pennsylvania. "The fact that they are doing well with all those different missions and that last year was a good year makes them stand out a little bit."
Nonetheless, Mayo's investment portfolio is significantly thinner than a year ago.
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"Everybody has (lost money); they're not immune to the market," says John Kralewski, professor of health services research in the University of Minnesota's Department of Public Health.
Mayo depends on investments to pay for some research and education operations. This year, that "allocated" amount was $51.3 million, or about 22 percent of those bills. The big hit came in its "unallocated," or reserve, investments. Mayo said today it booked a loss of $124.8 million in its investment portfolio in 2001.
Mayo officials say they can afford the losses and the institution is far from financially troubled. The clinic's net worth systemwide exceeds $2.5 billion, and its total holdings top $5.6 billion. Mayo's executives stressed in the report issued today that they "fully anticipate a positive investment position over the long term."
It's hard to compare Mayo with other institutions, because of its size and scope. But its 2001 was not unlike those of other healthcare institutions, Kralewski says.
"Most of the group practices that we work with, the big multispecialty practices, they're doing OK," he observes, " …; not making tons (of money), but they're doing OK financially."
