Dive Brief:
- Prior to the onset of the novel coronavirus, Mayo Clinic was cruising along with a healthy operating margin of 6.7% during the first two months of the quarter. But by the close of the period, the operating margin was squeezed to just 0.9% while net operating income fell off a cliff, free falling 88% to $29 million compared to the first quarter of 2019.
- Due to contracting services and the near closure of its outpatient business in response to the pandemic, revenues for the quarter declined nearly 4% while expenses rose 3% compared to the prior-year period. The fluctuation in the financial markets also caused a downturn in Mayo's investment portfolio, leading to an overall net loss of $623 million for the Rochester, Minnesota-based nonprofit health system.
- The system also runs COVID-19 testing, and said it is now able to administer 8,500 molecular diagnostic tests and 20,000 serologic tests, which look for antibodies to the virus in those that may have been previously infected, daily. So far, Mayo has performed more than 220,000 molecular tests for patients around the country including more than 50,000 for patients in the state of Minnesota.
Dive Insight:
Mayo Clinic is the latest hospital operator to report it first quarter results have been battered by the pandemic.
The system, which took in more than $1 billion in operating income in 2019, joins other major hospital operators that reported a dip in volumes amid the public health crisis, including HCA and CommonSpirit.
The second quarter is not likely to look better, according to Fitch Ratings, which issued an ominous report predicting it would be the "worst on record" for most nonprofit hospitals.
Yet, some of the for-profit hospital operators see May as the beginning of the recovery. Both Tenet and CHS executives seemed upbeat about the prospects for this month, noting it was the start of resuming elective procedures that had been put off.
Despite the hospital sector as a whole taking a major hit from the pandemic, big wealthy systems like Mayo have significant rainy day funds. Mayo reported cash and investments of more than $10.6 billion as of March 30 with 252 days cash on hand.
In April, Mayo issued a voluntary notice about how the virus was taking on its business, noting reduced salaries for executives and physicians, furloughs and a hiring freeze, among other efforts.
In its first quarter report, Mayo detailed the ways in which it's tackling the novel coronavirus on the medical front, including leading a program, approved by the FDA, that gives severely sick COVID-19 patients plasma from those who were previously sickened but have since recovered from the virus.
Mayo said it's preparing the program's first safety report on the first 5,000 patients to receive the infusion. As of May 12, more than 9,300 patients have been infused, Mayo said.
