Mayo Clinic more than doubled its operating income in the third quarter from $86 million a year ago to $182 million this year. Mayo said increased patient services and premium revenues are behind the improved finances.
The healthcare giant’s revenues increased 9.3% to $2.9 billion in the third quarter, according to financial statements.
Though Mayo is enjoying positive finances, things are not all rosy for the highly-rated healthcare company. Politico recently reported on complaints from people in Albert Lea, Minnesota, a rural community with a hospital that will lose inpatient care as Mayo consolidates services.
In the financial statements, Mayo Clinic said its expenses increased nearly 6% in the third quarter to $2.79 billion. However, it enjoyed a better operating margin for the third quarter compared to a year ago: it improved from 3.2% last year to 6.1% in the third quarter.
The company’s long-term debt inched up slightly from $2.4 billion last year to about $2.6 billion this year. On the other hand, cash equivalents also increased from $48 million to $57 million in this year’s Q3.
Overall, Mayo Clinic’s third quarter showed positive numbers. The Rochester, Minnesota-based company is successfully weathering the storm of reduced reimbursements and fewer inpatient stays that's affecting all systems.
However, Mayo Clinic is facing its own difficult period for another reason. The health system plans to consolidate services among its Albert Lea and Austin, Minnesota, hospitals. In the plan, the Austin facility will handle all inpatient services, as well as offer outpatient care. Albert Lea, which is 25 miles away, will handle primary and specialty care, emergency care, behavioral health, pharmacy and other services.
Mayo Clinic officials argue the consolidation is needed because of staff shortages, rising costs and lower reimbursements. Nearly all of the services at the two rural facilities are now outpatient, they said.
“It’s no longer feasible to duplicate some of our most complex and expensive healthcare services in neighboring communities. We are navigating challenging times in healthcare, so we are taking proactive steps to adjust the services offered on each campus,” said Dr. Bobbie Gostout, vice president of Mayo Clinic.
The plan brought opposition from the community. Residents of Albert Lea have formed a Save Our Hospital organization and some Minnesota officials have questioned the move. Minnesota Attorney General Lori Swanson sent a letter to Mayo Clinic President and CEO John Noseworthy asking him to delay the plans pending a financial review by local groups opposed to the decision. Noseworthy declined the request.
Dr. Annie Sadosty, regional vice president for Mayo Clinic Health System’s Southeast Minnesota Region, wrote a column in the Post-Bulletin saying the organization’s plan to consolidate the services of two hospitals is part of a long-range plan to improve rural health. She said a multi-disciplinary team of staff from the two facilities studied the issue for more than 18 months before recommending the consolidation plan.
Sadosty said Mayo Clinic’s goal is to preserve healthcare in rural communities now and in the future. “It is not motivated by, nor is it expected to achieve, short-term profits,” she wrote.
Though Mayo enjoyed a positive third quarter for finances, the healthcare giant cannot escape the issues many rural hospitals face. Lower reimbursements and fewer admissions are forcing hospitals to close or lay off employees. Since 2010, 82 rural hospitals closed have closed since 2010, and the National Rural Health Association said 673 additional facilities could close. That represents more than one-third of rural hospitals.