Mayo Clinic Operations Break Even in 2008

Thursday, March 12, 2009

ROCHESTER, Minn. — Mayo Clinic ended 2008 in a break-even financial position, officials report today.

"The year 2008 was difficult for Mayo Clinic from a financial perspective, as it was for the broader U.S. economy," notes Jeff Bolton, Mayo Clinic's chief financial officer.

In 2008, Mayo Clinic's expenses significantly outpaced increases in revenue — expenses grew 7.6 percent compared to a 4.5 percent growth in revenue. Bolton attributed the increase in expenses to start-up costs associated with the opening of Mayo Clinic's hospital in Florida and growth in staffing levels.

Meanwhile, patient volumes remained relatively flat.

"Mayo's net operating income is returned to programs that support patient care, education and research," Bolton says. "When operations perform below targets, it puts significant pressure on funding for our research and education missions."

Although faring better than industry benchmarks, Mayo Clinic's investment portfolio was down 18 percent, or about $700 million, for the year. Simultaneously, the pension fund dropped from being fully funded in October to being about $1.2 billion underfunded by the end of December. The significant change in the funded position of the pension plan was due to investment losses in the fund and significant growth in the pension liability. To get the pension plan back into a fully funded position, Mayo Clinic plans to make extra multi-million dollar payments in addition to its annual $210 million pension fund contribution.

"We have been preparing for financial challenges caused by rising costs, reduced reimbursement and demographic shifts resulting in more Medicare patients," says Shirley Weis, Mayo Clinic's chief administrative officer. "The recent economic downturn has dramatically accelerated our need to act. Our efforts to reduce expenses and increase revenue are intended not only to help us weather the current storm but to provide a platform for transformation."

Weis said that Mayo Clinic's primary value — the needs of the patient come first — and strategic priorities — quality, integration, individualized medicine and the science of health care delivery — will continue to guide the organization through this economic downturn. Although the economy is a significant concern, she says, conserving assets, investing in people and building resources will allow Mayo Clinic to move confidently into the future.

2008 Mayo Clinic Financial Highlights

• Mayo Clinic operations ended 2008 in a break-even position.
• Income from patient care was $205 million compared to $293 million in 2007, a decrease of $88 million.
• Mayo Health System (MHS) — a family of clinics, hospitals and other health care facilities serving 70 communities in Minnesota, Iowa and Wisconsin — continued to grow. MHS operations comprise 28 percent of Mayo Clinic's patient care revenue.
• Patient volumes remained relatively steady across the system. (Mayo Clinic Rochester, Florida and Arizona served 526,000 unique patients in 2008.)
• Total revenues grew by 4.5 percent, while expenses grew by 7.6 percent.
• Diversification activities — including health information publishing enterprises, clinical laboratory reference services and technology commercialization — contributed $37 million. These funds provide support for education and research.
• Gifts from benefactors totaled $236 million, which leaves $120 million to go to complete Mayo's five-year, $1.25 billion campaign.
• Mayo research programs garnered $327 million in external funding. Nearly 8,000 active human studies were underway in 2007.
• Investment results were down 18 percent. Mayo Clinic funds and benefactor gifts for research and education totaled $391million in 2008.
• Mayo contributed $189 million to its employee pension plan to keep it strong and secure for the future.
• In 2008, Mayo Clinic provided a total quantifiable community benefit (charity care, unpaid Medicaid, cash and in-kind donations, research, and education) of $605.1 million. In addition, the estimated unpaid portions of Medicare and other senior programs was $765.8 million.

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About Mayo Clinic

Mayo Clinic is the first and largest integrated, not-for-profit group practice in the world. Doctors from every medical specialty work together to care for patients, joined by common systems and a philosophy of "the needs of the patient come first." More than 3,700 physicians, scientists and researchers, and 50,100 allied health staff work at Mayo Clinic, which has campuses in Rochester, Minn; Jacksonville, Fla; and Scottsdale/Phoenix, Ariz.; and community-based providers in more than 70 locations in southern Minnesota., western Wisconsin and northeast Iowa. These locations treat more than half a million people each year. To obtain the latest news releases from Mayo Clinic, go to www.mayoclinic.org/news. For information about research and education, visit www.mayo.edu. MayoClinic.com (www.mayoclinic.com) is available as a resource for your health stories.