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August 13, 2014 01:00 AM

Mayo Clinic increases surplus in second quarter as capital projects loom

Beth Kutscher
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    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.

    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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        • - Hospital of the Future
        • - Value Based Care
        • - Hospital at Home
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        • - Future of Staffing
        • - Hospital of the Future (Fall)
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