Regulatory pressures force Mayo Clinic to rethink how it does business, cut costs

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The “perfect storm” of reduced revenue and the need to rein in skyrocketing healthcare costs led the Mayo Clinic five years ago to begin to make changes to the way it operates and delivers care.

Its Minnesota campus is ranked one of the best hospitals in the nation by U.S. News & World Report, but even The Mayo Clinic isn’t immune to the financial and regulatory challenges facing the healthcare industry.

Although the nonprofit organization reported $11 billion in revenue last year, outside analysts project that the healthcare system could see its reimbursements decline 5% to 20% over the next five years, according to The Wall Street Journal (sub. req.).

The “perfect storm” of reduced revenue and the need to rein in skyrocketing healthcare costs led the system five years ago to begin to make changes to the way it operates and delivers care.

So when heart surgeons wanted two more operating rooms, CEO John Noseworthy not only turned them down, he asked the cardiac surgery department to cut its costs by 20%, the WSJ reports. The changes weren’t easy, the article notes, but the department complied to streamline processes and make them more efficient. For example, the WSJ reports that surgeons now operate daily instead of every other day. To avoid overtime, some shifts start later in the day.

So far the initiative has involved 400 projects across the system that have cut $900 million, WSJ reported. But there is more to be done, Noseworthy told the publication. Like hospitals across the country, the Mayo faces new payment policies from Medicare and potential repeal of the Affordable Care Act as well as patients responsible for more of the costs of their care due to high-deductible health plans.

“The storm is still coming,” Noseworthy told the WSJ.

RELATED: Damage control: Mayo Clinic CEO backpedals on cherry-picking patients with commercial insurance

Earlier this year, Noseworthy took heat after a newspaper reported he told staff during a speech that the organization also needed to prioritize patients with commercial insurance over those with Medicaid or Medicare in cases where all other factors are equal. 

He later backpedaled and said he regretted the word choice that implied the Mayo would cherry-pick patients. The organization would continue to serve patients who have government insurance, Noseworthy said.