Healthcare Business News

Mayo Clinic increases surplus in second quarter as capital projects loom

By Beth Kutscher
Posted: August 13, 2014 - 3:00 pm ET

The Mayo Clinic reported a higher operating margin in the second quarter compared with the same period last year as its revenue increased while salary costs remained flat.

Its operating margin increased to 7.9% for the quarter, up from 5.6% in the prior-year period.

The 25-hospital system based in Rochester, Minn., reported a surplus (PDF) of $336.4 million on revenue of $2.4 billion for the quarter ended June 30. That compares to a surplus of $220.6 million on $2.3 billion in revenue during the same period in 2012.

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In November, Mayo confirmed local media reports that it planned to layoff 82 employees who provided transcription services at seven hospitals. Those services are being outsourced. Mayo is one of a number of providers trying to contain growing salary and benefit costs.

Sixteen of the system's hospitals are in Medicaid expansion states. Across the group, Mayo reported that write-offs in the first half of 2014 declined to $36.1 million compared with $37.5 million last year.

Self-pay revenue composed 4.8% of total medical service revenue, slightly below the 5% seen in the first half of 2013. The system did not break out other operating metrics in its quarterly earnings report.

Mayo issued $300 million in three series of bonds in the second quarter, which received Aa2 ratings with a stable outlook from Moody's Investors Service. The system has increased its debt 69% since 2010, increasing its borrowing at recent low interest rates, in part to fund its pension obligations, Moody's said.

In addition, Mayo is planning to spend $700 million annually over the next four years on capital projects, according to the agency.

Follow Beth Kutscher on Twitter: @MHbkutscher

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