Mayo Clinic Finances Rebound in 2009

Thursday, February 25, 2010

ROCHESTER, Minn. — Mayo Clinic leaders today announced that the organization surpassed its financial plan in 2009, helping it rebound from a break-even 2008 performance.

In 2009, income from current activities (i.e. net operating income) was $333 million, translating into a 4.4 percent operating margin, which aligns with the clinic's long-term target margin goal. Because Mayo Clinic is a not-for-profit organization, all income is reinvested into Mayo Clinic patient care, education and research programs.

"This past year, we had the opportunity to demonstrate that we can thrive in a difficult economic environment because we have one focus — keeping the needs of the patient first," says John Noseworthy, M.D., president and chief executive officer of Mayo Clinic. "Our strong operational performance in 2009 is due to the significant effort and innovation of our staff."

Shirley Weis, the clinic's chief administrative officer, noted that an operating margin of 4.4 percent allows Mayo to provide funds for research and education initiatives; invest in the latest technologies and staff to ensure the highest level of health care; and provide for very modest growth without incurring additional debt.

Dr. Noseworthy and Weis outlined several areas of focus that contributed to Mayo Clinic's success in 2009. The multi-site organization moved boldly to work as a single entity, concentrating on expense management, streamlined decision-making and redesigning the way patient care is provided. Leaders also worked closely with staff to preserve jobs during this financially challenging time.

"Employees on all campuses have concentrated on quality and transparency, elevating our performance and allowing us now to add a new focus — an emphasis on our costs and the need to be affordable for patients and payers, with a sustainable business model for the organization," Weis stressed.

Mayo Clinic leaders said that the clinic made great strides in reducing costs for delivering patient care services — holding expense growth to less than 1 percent in 2009 — but noted that the institution will continue working to improve affordability for patients.

Financial Highlights

Jeff Bolton, Mayo Clinic's chief financial officer, summarized recent efforts to reduce resource use by redesigning work processes to become more efficient. "The goal was to drive down costs, find ways to cost-effectively care for our patients and ensure that we see a broader mix of patients," Bolton says. "These efforts contributed to a strong turnaround in the organization's 2009 financial performance, and solid financial results are necessary for Mayo Clinic to continue its mission."

• Patient volumes remained relatively steady across the system. (Mayo Clinic campuses in Rochester, Florida and Arizona served 528,000 unique patients in 2009.)
• Income from patient care was $474 million compared to $204 million in 2008, an increase of $270 million.
• Total revenues grew by 5.0 percent, while expenses grew by 0.4 percent.
• Mayo Health System — a family of clinics, hospitals and other health care facilities serving 70 communities in Minnesota, Iowa and Wisconsin — continued to grow. Mayo Health System operations comprise 28 percent of Mayo Clinic's practice revenue.
• Diversification activities — including health information publishing enterprises, clinical laboratory reference services and technology commercialization — contributed $57 million in income. These funds support education and research.
• In 2009, grateful patients and others contributed more than $236 million to support Mayo Clinic's mission. The total number of gifts increased by 21 percent. The five-year campaign for Mayo Clinic was completed on Dec. 31, 2009, exceeding its $1.25 billion goal by $102 million.
• Mayo research programs garnered $324 million in external funding, while Mayo Clinic funds and benefactor gifts for research and education totaled $400 million in 2009.
• Investment results made significant gains, returning 12.4 percent. However, because there is significant variability of results from year to year, Mayo can't rely on strong stock market performance as a stable source of funding for the long-term.

Bolton reiterated that Mayo's 2009 financial results will help the organization regain some lost ground and replenish reserves in order to prepare for significant financial challenges on the horizon.

"Looking ahead, we see many challenges facing health care providers, specifically an influx of aging baby boomers on Medicare," Bolton says. "Across Mayo Clinic, we are taking steps to ensure that we can meet the needs of Medicare patients long-term and remain financially secure. While advocating for fundamental reform through our Health Policy Center, Mayo also is exploring alternative methods of delivering care to our patients."

2010 and Beyond

While Mayo Clinic constrained capital expenditures last year, the organization plans to invest more in strategic priorities in 2010. This includes capital investments to complete the 17th floor of the Gonda/Mayo Clinic buildings in Minnesota, and enhanced electronic medical records for Mayo Clinic campuses in Arizona, Florida and Mayo Health System.

Mayo Clinic also continues to partner with foundations, benefactors, government and industry to accomplish mutual aims. For example, government and industry provided $324 million in funding for research in 2009, while grateful patients and others contributed more than $236 million to support Mayo Clinic's mission. In addition, Mayo Clinic initiated and continued projects with IBM, Microsoft Corp., the National Cancer Institute, Arizona State University, Virginia Tech and the Minnesota Partnership for Biotechnology and Medical Genomics, to name a few.

These partnerships and activities advance Mayo Clinic's mission and are a major part of the economic vitality of the state, region and individual counties in which Mayo Clinic operates. In February of 2010, data from a study conducted by the Battelle Memorial Institute show Mayo Clinic is responsible for $22 billion in economic impact nationwide, including $9.6 billion in Minnesota. In terms of job creation, Mayo Clinic employs about 56,000 people, including 37,000 in Minnesota, and creates an additional 94,000 full-time jobs through its business expenditures and the employment multiplier effect of these.

"This study confirms that Mayo Clinic is a national economic force, but what's particularly interesting is the size and scope of not only their clinical practice, but also research and educational activities," says Simon Tripp, senior director of the Battelle Technology Partnership Practice. "Mayo Clinic is particularly well positioned for continued leadership in the science and technology-driven 21st century economy; and the nation and Mayo Clinic home states and regions are likely to see significant further impacts."

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