Mayo Clinic latest health system to report hit by volatile equities market
Despite a steep decline in investment returns in 2018 that mirrors some of its peers, not-for-profit Mayo Clinic managed to keep its income from current activities stable.
Rochester, Minn.-based Mayo's total investment returns fell 94% in 2018 year-over-year. The system generated $54 million in total investment returns in 2018, down sharply from $936 million in 2017. Over the same period, income from current activities totaled $706 million in 2018, compared with $707 million the previous year.
Mayo is in good company. Not-for-profit giant Kaiser Permanente saw a 71% drop in non-operating income last year as it also weathers volatile investment markets.
Mayo Chief Financial Officer Dennis Dahlen said the system's long-term returns are still very strong.
"Our portfolio is designed to weather a down year, which is what 2018 was," he said.
In response, Dahlen said Mayo has chosen to retain more of its fourth quarter cash flow in cash and cash equivalents rather than putting it toward investments.
More broadly, Mayo posted $12.6 billion in revenue in 2018, up 5% from just under $12 billion in 2017. The system's expenses rose 5.5%, from $11.3 billion in 2017 to $11.9 billion in 2018.
The system generated $799 million in net cash from operating activities in 2018, up slightly from $795 million in 2017.
Most of Mayo's medical services revenue in 2018—74%—came from its operations in the Midwest, which is where its external lab is located, about the same as in the previous year. About 14% came from its Southwest region in 2018, unchanged from 2017. Another 12% came from its Southeast region, also unchanged from 2017.
In 2018, 59% of Mayo's medical services revenue came from commercial contracts, up from 57% in 2017. Another 24% came from Medicare in 2018, the same as in 2017. Fourteen percent of revenue came from an "other" category that includes self-pay, down from 16% in 2017.
Only 3% of Mayo's medical services revenue came from Medicaid in both 2018 and 2017, or $326 million and $291 million, respectively. The system estimated its unreimbursed cost of providing services to Medicaid patients was $511 million in 2018, up from $503 million in 2017.
Mayo estimates it spent $78 million providing charity care in 2018, about 0.62% of revenue, compared with $72 million in 2017. In 2016, Mayo was near the bottom of Modern Healthcare's list of systems based on the proportion of revenue spent on charity care, at 0.76%.
The investment return on Mayo's endowment fell significantly to $75 million in 2018, compared with $542 million in 2017. Mayo's total endowment was $4.5 billion at the end of 2018, compared with $4.3 billion at the end of 2017.
Mayo has been on a major building spree. It expects to spend $1.5 billion completing ongoing construction projects that are slated for completion over the next three to five years. Mayo is expanding its Arizona campus and is in the midst of a 20-year implementation of its Destination Medical Center, a $5.6 billion project in Rochester.
-Paul Barr contributed to this report.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.