Report: Rising costs trim Mayo Clinic margins in 3rd quarter

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Mayo Clinic's new quarterly financial report reveals its operating surplus was trimmed as costs continue to rise across multiple sectors.

The report, which covers the period ending Sept. 30, details cost increases of 9.7 percent in supplies and services, 9.2 percent in salaries and benefits and 9.1 percent in facility costs.

Mayo's revenue increased just less than 5 percent to $2.5 billion. But the operating surplus was $120 million, down from $205 million during the same period in 2014 because of the increases in costs.

The operating margin also declined from 8.5 to 4.8 percent.

The clinic's charity write-offs fell from $52 million over the first three quarters of 2014 to $43 million during the same timeframe this year.


Mayo Clinic officials did not respond to requests for comment on Wednesday. The reports are filed on the Electronic Municipal Market Access website and considered public information because Mayo Clinic has issued bonds to investors.

The financial numbers may be skewed by an unusually strong calendar year in 2014. It's year-end revenue totaled $9.8 billion with an operating margin of 8.5 percent. Mayo credited that success with increased efficiencies among employees, which created additional revenue.

However, Modern Healthcare reports that part of the success was due to a "slimming down" of staffing and health care benefits. The latter was necessary to avoid paying the Affordable Care Act's so-called Cadillac tax, which pushed some of the costs to employees.

Some analysts have said that the ACA also provided many medical facilities with a one-time boost in 2014 revenue while the country's system was reconfigured. That could play a role in taking the shine off Mayo's 2015 financial outlook when compared to past data.

No matter how the numbers are portrayed, Mayo remains committed to investing in its future in Rochester.

As part of the Destination Medical Center initiative intended to transform Rochester into a higher profile spot for patients across the globe, the clinic has committed to spending $3 billion on facilities over the next 20 years. As part of that commitment, roughly another $3 billion will be invested by private entities to provide the necessary support infrastructure for the clinic's expansion plans.

The DMC plans are projected to create around 30,000 new medical jobs in Rochester over the next 20 years while roughly doubling the city's population of around 110,000.

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