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Mayo Clinic feels effects of recession, Medicare

  • Article by: CHEN MAY YEE
  • Star Tribune
  • March 12, 2009 - 11:31 AM

Even Mayo Clinic is hurting in this economy.

The Rochester-based institution said Wednesday that it barely broke even in 2008 as expenses raced ahead of revenue.

While the number of patients was stable, income from patient care fell by almost one third during the year. Mayo also increased spending on research, adding staff and opening a hospital in Florida.

Revenue grew 4.5 percent, to $7.2 billion, but expenses rose faster, by 7.6 percent, also to $7.2 billion.

While Mayo is not-for-profit, that means less left over for funding Mayo's other commitments.

"When operations perform below targets, it puts significant pressure on funding for our research and education missions," said Chief Financial Officer Jeff Bolton in a statement released late Wednesday.

Mayo's main campus in Rochester and its branches in Jacksonville, Fla., and Scottsdale, Ariz., served 526,000 patients in 2008, about the same as a year earlier. But income from patient care was $205 million, down from $293 million in 2007.

Like many institutions, Mayo also suffered big investment losses last year. The clinic's portfolio was down by 18 percent, or about $700 million, for the year. At the same time, the clinic's pension fund went from being fully funded in October to being underfunded by $1.2 billion by the end of December.

Gifts from benefactors totalled $236 million in 2008, down from $373 million the previous year.

Mayo has warned for a couple of years that it is under financial pressure because changing demographics means it is treating many more Medicare patients than before. Medicare tends to pay less than private insurers for the same services. Mayo has started a health policy center and has been advocating payment reform on the national stage.

Almost 40 percent of patients at Mayo Rochester are on Medicare. In Jacksonville and Scottsdale, between 50 and 60 percent of patients are on Medicare.

"The recent economic downturn has dramatically accelerated our need to act," said Shirley Weis, chief administrative officer. "Our efforts to reduce expenses and increase revenue are intended not only to help us weather the current storm but to provide a platform for transformation."

Chen May Yee • 612-673-7434

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