Mayo Clinic kicked off the new year with a solid $149 million in operating income (3.5% operating margin) and a $433 million net increase for its first-quarter bottom line.
The operating income is about on par with last year’s $142 million tally (3.6% operating margin) but a stark turnaround from that quarter’s $227 million decrease in net assets (before post-retirement adjustments), which had been dragged down by hundreds of millions in investment losses.
“Mayo Clinic is pleased with the strong start represented by these first quarter results,” management wrote in a discussion accompanying the financial statements. “Strong volumes, investment gains and favorable expense management all contributed to the quarter’s performance.”
Revenues at the nonprofit rose 8.8% year over year to $4.3 billion. Net medical service revenue comprised 85% of that total and was up 8.9% year over year.
Driving the service revenue gains were outpatient visits, surgical case, admission and patient day volume metrics that all increased over first-quarter 2022 and first-quarter 2021 numbers, “reflecting sustained strong demand for services,” management wrote.
Operating expenses landed at more than $2.4 billion, a 9% year-over-year increase from a year ago. Salaries and benefits comprised 59% of the spending, up 7.7% over the prior year’s first quarter. Supplies and services, which made up 33.9% of operating expenses, rose by 11.3% year over year.
Mayo Clinic tallied $237 million in net unallocated investment return during the quarter and credited the investments for its $331 million increase in cash and investments since the end of the 2022 fiscal year. The system said it has $17.65 billion in total cash and investments as of March 31.
Rochester, Minnesota-based 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. The organization 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.
Volume and revenue gains have become the story of the quarter for health systems, though not all have found themselves on the right side of zero.
For instance, while Kaiser Permanente reported a $72 million operating income (0.3% operating margin), CommonSpirit Health logged a $658 million operating loss (-8% operating margin) due to a combination of high expenses, rising acuity and worsened payer mix.