Mayo Clinic operating profit jumps to $1.1B as staffing woes recede

Pay increases helped Mayo Clinic recruit more workers and stabilize staffing levels last year, just as demand for some services recovered from pandemic setbacks.

The changes helped boost Mayo’s annual operating profit to nearly $1.1 billion, according to financial results released Wednesday.

Strong financial performance will help fund the clinic’s ambitious $5 billion expansion at its Rochester campus over the next several years. Mayo says it’s also investing once again in worker wages, with most staff receiving a 4% minimum increase in base pay starting next month.

“We do have a few residual pockets of staff shortages, but our attrition rate is back to pre-pandemic numbers,” Dennis Dahlen, chief financial officer at Mayo Clinic, said in an interview.

“We were able to successfully recruit and increase our retention as well, but the recruiting aspect was probably the main driver of the increased staff stability,” Dahlen added. “The enhanced salary increase in early 2023 played a role in that.”

Last year, Mayo cared for more than 1.3 million patients from over 130 countries. They made about 5.2 million outpatient visits in 2023 — the highest one-year tally since before COVID-19 arrived and knocked down patient volumes.

“It felt a little bit like 2019 again,” Dahlen said. “The patients were coming without constraints.”

Mayo Clinic is Minnesota’s largest employer with about 49,000 workers. With operations in Arizona, Florida, Iowa and Wisconsin, as well, the clinic overall employs about 80,000 people.

Last year, Mayo spent $10.5 billion on staff salaries and benefits. The sum covered salary increases of at least 6% for most workers — the biggest across-the-board pay jump at the clinic in more than two decades.

Whereas Mayo had to spend about $160 million on contract and temporary labor to fill staffing gaps during 2022, the expense was largely eliminated last year, Dahlen said.

Pay increases of at least 4% will kick in starting next month. Staff at the lower end of the compensation range will see larger bumps, from 5% to 10%. Mayo says it’s also adopting a new compensation model for staff in registered nursing roles, including pay accelerators for education, work setting and responsibilities, and years of experience.

“Mayo Clinic is committed to investing in its staff as they bring the organization’s mission to life by inspiring hope, promoting health and always putting the needs of the patient first,” the clinic said in a statement.

The clinic in 2023 received more than $1 billion in philanthropic support for the fifth consecutive year. Philanthropy as well as strong investment returns have helped the clinic’s endowment double over the past decade to $6.6 billion at the end of last year.

In 2023, Mayo Clinic posted operating income of $1.08 billion on $17.9 billion of revenue, for an operating margin of about 6%. The earnings were up about 82% over 2022, when Mayo’s earnings were dampened by labor costs and staffing problems were felt across the industry.

Last year was just the second time the annual operating profit at Mayo topped $1 billion. The results didn’t quite match the clinic’s record $1.2 billion in operating income during 2021.

“We’re pleased with the results, but we’re not organized for financial return,” Dahlen said. “Every dime, every nickel of profit that Mayo Clinic generates goes right back into the foundation and really just ignites health care transformation.”