Schafer: For Mayo and other nonprofits, operating in the black is about survival, not greed

We have to once again talk about how it just isn't possible to have a greedy nonprofit, never mind what presidential candidate Bernie Sanders might think.

"Mayo Clinic executives have decided to strip away access to health care from tens of thousands of rural Midwesterners — putting profits over people," Sanders complained just before Christmas, in a Twitter post that also promised to end "corporate greed."

The big thing he gets wrong here is that Mayo is not a for-profit corporation.

It's a public charity under the federal tax code, and if you talk to Mayo people they might call it a "foundation," a term Chief Financial Officer Dennis Dahlen used in our conversation last week.

A campaign pledge to end charitable greed can't be much of a vote-getter.

Let's be clear about this: A nonprofit, any nonprofit, has to make sure it doesn't lose money or it won't be around very long. In its last reported year, Mayo made about $706 million on the line that seems closest to the for-profit concept of income from operations, on $12.6 billion in revenue.

Mayo uses business thinking and business processes when making budgets, deciding what technology to invest in, and so on, Dahlen said, more or less confirming the obvious.

But nobody can get any of the money left over at the end of the year. Nothing goes to Mayo shareholders, LLC members or partners, because there aren't any. There are no dividends, distributions of profits, profit-sharing payments, shares to buy back and so on.

People can make what seems like a lot for working at Mayo, including about $3.5 million for its CEO, according to the latest available figures. But that would be small beer for the people who are in health care management for the money.

The executive who ran the big hospital company HCA Healthcare got a total of $21.4 million for one year of work, as of last report. The CEO and founder of publicly held Universal Health Services made even more. And nobody hoping to be CEO at Minnetonka-based UnitedHealth Group seems likely to take a job at either of those places, because they might not pay enough.

The context for how Mayo Clinic could even get called greedy is consolidation in its rural health system, including in Minnesota.

One reason that Mayo Clinic got bigger into rural health to begin with was to generate more of the complex cases, people who really need specialized services, to funnel into its big medical center. Without enough patients, its whole program breaks down, because the model is a synergistic blend of attracting the most challenging patient cases that in turn attract the most skilled people who might also be interested in doing the most ambitious research while teaching the next generation of promising medical students.

Year after year of operating losses in trying to make all that work, however, can't be tolerated.

One fact out of a recent story about Mayo Clinic's closing down in Springfield, about an hour's drive west of Mankato in southern Minnesota, seemed telling. At the time Mayo announced this move in early December, its Springfield hospital so far for the year had only nine inpatients. Just nine.

But people in rural areas have to ask, if a big and wealthy nonprofit like Mayo won't stick around, who will?

There's clearly a community benefit to serving rural families, part of what a nonprofit is supposed to do, said Lynn Blewett of the University of Minnesota's School of Public Health. She hopes policymakers will demand more from health care nonprofits.

While she stopped short of blasting Mayo, her point really boiled down to this: From a distance, who could even tell if a big system like Mayo is organized as a for-profit or nonprofit? What they are all doing is competing like crazy for patients, revenue, market share, reputation and staff.

"It's the nature of health care, part of the screwed-up nature of it," Blewett said.

As of now, she said, there's far more documentation of rural health care's problems than good ideas from our big nonprofits on what to do.

"Nobody has a vision for that," she continued. "If we can't afford all these hospitals, even though in the old days somehow we did, so then what?"

In the strategic plan for Mayo that the board sees, Essentia Health, Allina Health System and other major players in our state are probably named as main competitors. But I'm certain it also lists Johns Hopkins, the Cleveland Clinic, UCLA Health and other top-shelf academic health systems around the country. Dahlen acknowledged that Mayo does compete with those big-name institutions for talent, but I'm guessing it's a far more fundamental rivalry.

Mayo's managers worry about competition because they would be fools not to.

Dahlen described a management process at Mayo that does superficially resemble capital allocation in corporations, in that the organization tries to put its people, technology and know-how into the things that will generate good results. Again, it's what you would expect.

A local nonprofit with a community food shelf and some after-school programs for teenagers is doing the very same thing. All nonprofits, from storefront operations run by volunteers to big ones with net assets in the billions of dollars, have constraints.

The job of Dahlen's counterpart at the big hospital company HCA Healthcare is focused on maximizing shareholder returns, he said, while "mine is focused on the perpetuation and sustainability of Mayo Clinic for future generations," to continue its traditional mission.

Dahlen also used the term "stewardship," a wonderful word for the careful conservation of assets entrusted to the foundation.

It's interesting to remember that Mayo once was a regular, for-profit medical practice. Right at 100 years ago, though, the founding Mayo family turned it into a nonprofit.

If Mayo's leaders ever stop being careful stewards, it won't make it another 100 years.