Dive Brief:
- Rochester, Minnesota-based Mayo Clinic on Thursday reported increased operating revenue and income year over year in its second quarter earnings, driven by higher outpatient visits and surgical cases.
- The nonprofit posted $4.5 billion in operating revenue, up 10.8% year over year, and $300 million in operating income. Operating expenses rose 7.5% compared to the prior-year period, totaling nearly $4.2 billion, though the cost of salaries and benefits increased at a slower rate this quarter compared with last year.
- The earnings mark the second consecutive quarter of increased operating margins for Mayo, as the health system attempts to turn around after a rocky 2022 when its operating profit was cut in half.
Dive Insight:
Mayo Clinic’s second quarter results, which reflect both increased patient demand for services and continued inflationary pressures, echo results posted earlier this month by fellow nonprofits Kaiser Permanente and Mass General Brigham.
Nonprofit hospitals endured their worst operational year in 2022, squeezed by economic pressures and investment losses. Last year, credit ratings agency Fitch Ratings downgraded the sector to “deteriorating.”
Mayo also suffered in 2022. Last year, the company said contract labor expenses rose 37% and were a contributing factor to its profit loss.
This quarter, the hospital operator reported stabilizing salary and benefits expenses. Employee salaries and benefits accounted for 58.2% of Mayo Clinic's expenses for the quarter, down slightly year over year, when they accounted for 59% of total costs. Increases in salary and benefits costs were expected as part of “planned salary increases,” according to the earnings report
Demand for services at Mayo rebounded, with outpatient visits, admissions and surgeries surpassing 2021 and 2022 levels.
Mayo reported the most growth in surgical volume and outpatient cases, which grew 8.4% and 6.5%, respectively, over the past six months compared to the same period in 2022. Patient days for the first half of the year dropped by 1.1%.
Despite rebounding performance this quarter, Mayo’s operating income still fell short of 2021 when the nonprofit reported an operating income of $451 million in the second quarter.
Mayo is seeking to expand its geographic footprint by opening a $198 million Wisconsin hospital in the fall next year in addition to a billion dollar expansion of its home campus in Rochester.
