What CFOs Should Note About Mayo Clinic’s Explosive Q2 Earnings

Two focused strategies helped Mayo achieve its 8.9% margin.

Mayo Clinic ended the second quarter with an operating income of $449 million, a 8.9% margin. This is a major improvement for the health system which sat at a $300 million operating income (5.9%) during the same time last year.

The Rochester, Minn. based system has seen its second quarter revenue increase by 12.1% each year, bringing it to $5 billion. Stable patient volumes and increased donor contributions drove the system’s growth, despite an increase in expenses.

The Breakdown

Mayo’s labor costs have increased by 7% year over year to $2.6 billion, which accounted for 56.9% of total second-quarter expenses. These labor costs are attributed to staff growth to serve higher patient volumes as well as a 4% annual salary increase for health staff. Supplies and service expenses also rose 13.3% to $1.6 billion.

The system also ended the second quarter with a net income of $613 million, an increase from $47 million in the second quarter of last year. These numbers come after factoring in non-operating items like philanthropy and investment returns. 

"Our strong second-quarter results enable the organization to invest in its staff, enhance its physical and digital infrastructure, and advance its strategic goals to cure, connect and transform healthcare," the health system stated in its financial report.

As of June 30, 2024, Mayo reported its days of cash on hand were 361, up from 358 on Dec. 31 and 346 on June 30 last year.

It should be noted that the system’s financial results come off a recovery year in which it reported a “mission-sustaining” 6% operating margin. That year Mayo announced the largest capital investment in the system’s history, Bold. Forward. Unbound. in Rochester, which sets out to innovate with digital technologies and novel care concepts.

The CFO Scope

There are several strategies CFOs can take away from Mayo’s second quarter results, the first being to focus on volume growth and efficiency initiatives. Leaders should continuously prioritize these efforts along with managing patient length of stay, readmissions and the care continuum.

Keeping an eye out for growth opportunities is always a good idea, and CFOs should strategize where they can. Mayo made several expansion moves including more than doubling the size of its Phoenix campus, expanding its Florida hospital, and opening a new research facility in Rochester for technological development.

There’s one more lesson CFOs can take from Mayo’s results: investing in staff. Investing in staff can help work toward a positive organizational culture, mitigate burnout and aid in staff retention. Mayo ushered in about 14,000 staff members into new roles last year and saw a 4.9% increase from 2022. Overall Mayo spent $10.5 billion on staff and benefits in 2023, including $30 million in community programs.

CFOs should ensure they stay on top of the interconnectedness of their health system to be better able to pinpoint where certain challenges affect operations. Don’t be hesitant to collaborate with CMOs and Revenue Cycle and other departments to get the full picture and to ensure thoughtful, innovative strategy across the board.