Dive Brief:
- Rochester, Minnesota-based Mayo Clinic reported increased year-over-year operating revenue and income in its third quarter earnings, on higher outpatient visits and surgical cases.
- The nonprofit posted $4.5 billion in operating revenue, up 8.2% year over year, and $302 million in operating income. Operating expenses rose 4.8% year over year, totaling nearly $4.2 billion.
- The earnings mark the third quarter Mayo has posted net income after the operator struggled last year. The health system reported profits last year that were half its 2021 returns, after contract labor expenses increased 37% year over year.
Dive Insight:
Nonprofit hospitals endured their worst operational year in 2022 as health systems were pressured by sky-high labor costs and investment losses.
Now, the health system — which operates a network of hospitals in Minnesota, Arizona, Florida, Wisconsin and Iowa — is reporting rebounding revenue and income. Revenues outpaced expenses due to “sustained strong demand” for healthcare services, executives said in the operator’s third-quarter filing.
Outpatient visits and surgeries for the nine months ending Sept. 30 surpassed 2021 and 2022 levels, rising by 6.6% and 7% compared to 2022, respectively.
Supplies and service expenses, which include contract labor, grew 9.5% in the third quarter compared to the prior year period to total $1.5 billion. The rate of growth has slowed since the third quarter last year, when Mayo reported supplies and services expenses were growing by 13.9% year over year.
Salary and benefits expenses continued to stabilize this quarter, rising less than 3% compared to the prior-year period.
Mayo attributed this quarter’s modest increases in salary expenses to planned wage hikes, and added that expenses were a sign that “recruitment continues to make progress.”
The operator brought on additional full time equivalent staff this quarter, including consultant staff and allied health employees — who are typically cheaper long term compared with contracted workers.
Mayo invested an additional $282 million this quarter for capital expenditures. The health system has spent $792 million on capital expenditures this year, almost half of which is dedicated for “major project spending.”
Part of that spend has gone to bed tower modernization and expansions in Mankato, Minnesota, and La Crosse, Wisconsin, according to the report. Mayo also has a billion dollar expansion of its home campus in Rochester underway.
The results are a contrast to Mayo’s peers. Chicago-based CommonSpirit Health reported net losses of $738 million in the first quarter of 2024 earlier this week on investment losses. Boston-based Mass General Brigham has offered some tech workers voluntary separation agreements and may conduct layoffs in early December to cut costs.
