The Mayo Clinic, which had been diligently cutting expenses over the past year, has started to see those costs creep up again in the first quarter of 2015.
The Rochester, Minn.-based system reported increases in salaries and benefits as well as supply costs that offset a 5.7% gain in revenue for the period ended March 31. Salaries and benefits rose 7% while supply costs jumped 16.2% at the 24-hospital group.
Mayo did not break out operating statistics, such as patient volume, in its financial filing.
Over the past year, Mayo has made a number of moves to curb its rising expenses. It eliminated nearly 200 medical transcriptionist positions, instead opting to outsource the department. And it began offering scaled-down health benefits with more cost-sharing for employees—saving not only on premium costs but helping to avoid the so-called Cadillac plan tax that the Affordable Care Act will impose on the most expensive employer health plans.
Still, the system reported a decrease in its operating surplus in the first quarter, which fell to $88 million from $155 million in the same period last year. Revenue increased to $2.5 billion from the prior-year period's $2.4 billion.
But after a strong financial performance in 2014, Mayo is in building mode. It has invested $8.3 million, and plans to invest another $2.1 million, in Rochester's Destination Medical Center, a local economic development initiative that will bring together health and wellness as well as retail, dining, sports, arts and convention space. Mayo is investing both capital and staffing hours in the project.
At its own hospitals, Mayo has been doing major upgrades at St. Marys, including an emergency department expansion expected to be completed this spring. Last week, the system held a grand opening for its Richard O. Jacobson building, which will house its new proton beam therapy program and begin treating patients in June. Mayo is building a similar campus in Phoenix that will open next year.