Dive Brief:
- Mayo Clinic reported $149 million in operating profit in the first quarter on revenue of $4.3 billion, an almost 5% increase from $142 million in operating profit recorded in the prior-year period.
- The Rochester, Minnesota-based academic medical system posted growth in outpatient visits, surgeries, admissions and patient days compared to last year. However, total operating expenses increased 9% year over year, driven by an almost 8% growth in labor expenses and an 11% growth in supply and services costs.
- The increase in operating income comes after Mayo’s operating profit was cut in half over 2022 due a rise in labor costs, especially for contract labor.
Dive Insight:
Mayo called its first quarter results a “strong start” to the year, bolstered by increased volumes, investment gains and improved expense management.
The nonprofit posted a $433 million increase in net assets during the first three months of the year, compared with a $227 million decrease during the same period in 2022.
Cash and investments reached $17.7 billion by the end of the first quarter, increasing $331 million since the end of last year. Though the health system cut pension and disability expenses by $80 million compared with the prior-year quarter, salary and benefit costs still made up nearly 60% of total expenses.
A Kaufman Hall report found nearly half of U.S. hospitals ended 2022 with negative margins as labor expenses increased. Erik Swanson, senior vice president of data and analytics at Kaufman Hall, said high labor expenses were unlikely to abate this year, and health systems need to better manage their employees and work with post-acute care settings to maximize patient volumes.
Some hospital operators — including HCA Healthcare and Universal Health Services — reported improved labor costs in the first quarter. Though it posted an operating loss of $658 million in the quarter ended March 31, CommonSpirit also said salary and benefit costs fell.
However, Kaiser Permanente, which also reported net income of $1.2 billion, said a “highly competitive labor market” contributed to growing expenses.
