Mayo Clinic closed out 2014 with an improved operating margin, thanks in large part to a focus on slimming down the expense side of its balance sheet.
The prominent Rochester, Minn.-based health system has now improved its operating margin, year over year, in six consecutive quarters.
Mayo's year-end operating margin was 8.5% compared with 6.5% at the end of 2013. The operating surplus increased 36.3% to $834.3 million (PDF).
Revenue rose 3.6% from 2013, totaling almost $9.8 billion. Expenses, however, grew at a slower 1.3% clip. As in previous quarters, Mayo reduced salaries and benefits to employees.
The 25-hospital not-for-profit system previously eliminated almost 200 medical transcriptionist jobs, outsourcing the department. Mayo is also slimming down on health benefits, shifting more costs to employees in part to avoid the Affordable Care Act's so-called Cadillac tax on generous health plans.
Although Mayo's day-to-day financial operations continued to improve, its investments took a hit. Mayo's unallocated investment returns dropped 47% from 2013 to 2014, but still totaled nearly $230 million.
That trend was evident throughout the hospital industry in recent earnings reports. Other large organizations such as ProMedica Health System in Toledo, Ohio, Geisinger Health System in Danville, Pa., and BJC HealthCare in St. Louis have recently reported similar deterioration in their investment income.
Other areas of growth for Mayo in 2014 included its retail pharmacy, where sales were up 53% to $251.4 million. Revenue from Mayo's commercialized technology projects, such as Mayo Clinic Ventures, was up 11% to roughly $67 million.
Mayo also recorded $24 million in “oil- and gas-producing activities” in 2014, up from $700,000 in 2013. A Mayo spokesman said the revenue is related to a benefactor's gift that included oil field royalties.
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