Mayo Clinic projects $900M shortfall, implements cost-cutting measures

After reporting a record-setting $1 billion in operating income in 2019, Mayo Clinic predicts new systemwide pay cuts and furloughs won't stop the Rochester, Minn.-based health system from facing a $900 million shortfall this year.

The projected shortfall, which will be covered by Mayo Clinic's reserves, comes as the health system is currently operating at 35 percent capacity, with surgery capacity even lower at 25 percent, Mayo Clinic Chief Administrative Officer Jeff Bolton told MPR News. In mid-March, Mayo Clinic halted elective surgeries and procedures to prepare for a surge in COVID-19 patients, a decision that "eliminated most of our revenue," Mayo Clinic said April 10. 

While Mayo Clinic previously said it would protect full pay and benefits through April 28, after that date the system will have to institute pay cuts and temporarily furlough staff to address significant reductions in revenues. The pay and work reductions, which will take effect in May, affect staff at Mayo's hospitals in Minnesota, Florida and Arizona. The cost-cutting measures will last until the end of 2020.

Mayo Clinic CEO Gianrico Farrugia, MD, will take a 20 percent pay cut beginning this month, according to MPR News. Ten percent salary cuts will affect physicians and senior administrators, while other salaried employees will see a 7 percent reduction in pay. Mayo also instituted a hiring freeze, laid off contract employees and paused some construction projects, according to the report.

Read the full report here.

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