Mayo Clinic posts $728 million in income despite pandemic

Mayo Clinic saw one of its strongest financial years in a decade during 2020 with patient care revenue recovering from an early pandemic hit and demand surging for COVID-19 tests from the clinic's large commercial lab.

The results included $182 million in federal funding to support hospitals struggling with financial damage from the pandemic. The clinic actually received more than $300 million last year through the federal CARES Act, but made good on an earlier pledge and returned a total of $156 million.

Mayo Clinic Laboratories performed 3.1 million COVID-19 tests overall, which helped the lab's revenue grow by more than 20%.

"It was a more successful year than we would have ever thought possible 11 months ago," said Dennis Dahlen, the clinic's chief financial officer, in an interview Monday.

Mayo Clinic is Minnesota's largest employer with operations that span five states. Financial results released to bondholders Friday show the clinic posted operating income of $728 million for the year on $13.9 billion of revenue.

Revenue was up just 1.5% compared with 2019, which is a lower annual growth rate than normal. The slower pace reflects how the pandemic kept many patients away for several months, Dahlen said.

Outpatient visits came in at about 4.28 million for the year, down 13% from 4.9 million visits in 2019. Hospital admissions were down 10% to 116,942.

Even so, the clinic was plenty profitable.

While operating income was down more than 20% from the previous year, the one-year total for earnings exceeded income during seven of the most recent 10 years, Star Tribune figures show. Investments and philanthropy really made the year stand out, with Mayo's net income hitting $2.467 billion for 2020, up from the previous year's $2.28 billion.

"It was a year in which the staff responded to an amazing challenge put in front of us, and did so incredibly successfully," Dahlen said. "We've had two terrific years in a row from a financial perspective."

Mayo posted record operating income in 2019 and was on pace early last year for more growth, Dahlen said. Things changed dramatically when COVID-19 hit the state and forced an unprecedented statewide suspension of nonemergency procedures.

Between March and May, Mayo saw a $600 million reduction in patient revenue.

Gov. Tim Walz ordered the delay in medical procedures so hospitals could care for an expected surge of pandemic patients at a time of short supplies in personal protective equipment. Hospitals were allowed to start resuming the procedures in May. By June, Mayo already was seeing signs of financial recovery.

The federal CARES Act directed billions to hospitals, including a total of $338 million at Mayo. The clinic decided to keep a sum roughly equal to the federal funds used in March, April and early May, Dahlen said, and opted to return the rest as the financial picture stabilized.

"We didn't know what we were facing," Dahlen said of the period during early spring. "We were leaning in on the test-development phase, making sure we completed the research on how to create tests to detect COVID. And we were keeping our staff safe in April, guaranteeing salary and benefits through April despite the fact that we were essentially closed."

As Minnesota in March was reporting its first cases of COVID-19, Mayo Clinic Laboratories scrambled to launch a COVID-19 test when diagnostic capacity across the U.S. was severely limited.

For years, the clinic has operated a large lab business in Rochester that receives thousands of samples every day from health care providers treating patients in 80 different countries. Those customers ordered a large number of COVID-19 tests last year, Dahlen said, and the clinic found new customers, as well.

More demand came in the spring as Walz launched a "moonshot" initiative to expand the state's coronavirus testing capacity through a partnership with Mayo and the University of Minnesota.

For the year, Mayo Clinic Laboratories saw earnings jump by 69% to about $197 million on revenue of $998 million.

"It does reflect the fact that Mayo Clinic Laboratories played a significant part in the testing environment, really for the nation, during 2020," Dahlen said. "The rest of our lab volumes were impaired for the year in total."

Overall last year, the lab served 4.5 million unique patients, the clinic said, and received specimens from over 4,000 domestic hospitals.

Benefactors in 2020 provided the clinic with $587 million in philanthropic gifts of outright support, an increase of 6.9% over 2019. Total philanthropy secured including future gift commitments was $1 billion.

Philanthropic gifts from many years ago means Mayo Clinic has oil and gas interests that are a perennial source of "other" revenue. In 2020, the clinic saw $46 million in revenue from oil and gas producing activities.

Cafeteria revenue last year slipped by 30% to $26 million.

Overall employment stands at 71,350, including workers at hospitals and clinics in Arizona, Florida, Iowa, Minnesota and Wisconsin.

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck