Mayo Clinic pulled in $302 million of operating income (6.8% operating margin) during the third quarter, raising the organization’s year-to-date up to $751 million (5.7% operating margin), according to financial documents published Thursday afternoon.
The quarter’s $307 million bottom line adds to an already strong year for the Rochester, Minnesota, based nonprofit. As of Sept. 30, Mayo Clinic added almost $1.3 billion to its net assets in 2023.
“Mayo Clinic's third quarter performance is the result of continued strong demand for clinical services, stabilization of workforce issues and focused performance improvement initiatives,” the system’s management wrote in the filing.
The organization increased its net medical service revenue 7.7% year over year to $3.8 billion, while total operating revenue grew 8.2% to almost $4.5 billion, according to the filing. Year-to-date, those same revenues grew 8.8% to $11.2 billion and 9.3% to $13.2 billion.
Volume metrics showed “sustained strong demand for services” across Mayo’s locations. Across three quarters, outpatient visits are 6.6% higher than in 2022, surgical cases are 7% higher, admissions are up a softer 3% and total patient days are down -0.7%.
Mayo achieved its healthier margins by keeping its operating expenses in check relative to the revenue increases.
Total operating expenses for the quarter rose 4.8% year over year to $4.2 billion. Salaries and benefits increased just 2.4% but at almost $2.4 billion still represent a hefty 57.4% of total operating expenses.
Supplies and services for the quarter increased 9.5% from the prior year, facilities spending rose 1.2% and finance and investment expenses increased by 14.3%, according to the filing.
Year to date, Mayo’s expenses are up 5.3% to more than $7.2 billion. Nine-month salaries and benefits spending is up 5.3%, an increase the system’s management attributed to “planned salary increases as well as an increase in overall [full-time equivalents] in consultant staff and allied health employees as recruitment continues to make progress.”
Mayo’s investments took a hit this quarter as the organization tallied a $132 net loss on unallocated investment return. The organization’s primary investment vehicle, the $13.4 billion Long-Term Fund, generated a 0.2% loss for the quarter but has so far returned 4.3% year to date.
The system added $282 million in capital expenditures this quarter, bringing the year-to-date total to $792 million. Almost half, $366 million, has been earmarked for “major project spending,” which among other efforts includes bed tower modernization and expansions in Mankato, Minnesota, and La Crosse, Wisconsin.
“Significant investments in new capacity continue, as do investments in strategic areas of digital transformation and technology,” management wrote.
Mayo Clinic had reported $16.3 billion in revenue, a 3.7% operating margin and a $655 million decline in net assets across the entirety of 2022. It employs more than 76,000 people and has major campuses in Minnesota, Arizona, Florida, Wisconsin and Iowa, though it provides care across the U.S. and more than 100 other countries through its programs. As of Sept. 30, the organization has 349 days of cash on hand.
Mayo’s filing and its strong operating margins stand apart from those released by its fellow large nonprofit systems over the past week. Sacramento-based Sutter Health, for instance, slipped to a -0.1% operating margin for its third quarter while Chicago-based Catholic giant CommonSpirit Health opened its fiscal year with a -5.1% operating margin.