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Mayo Clinic latest health system to report hit by volatile equities market


Despite an investment loss 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 investment results fell sharply in 2018 year-over-year. The system reported a $369 million investment loss compared with a gain of $595 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.

Dahlen said Mayo did adjust its investment allocation, pulling a little money out of the equities market once it decided the markets were trending lower near the middle of the year.

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.