Mayo Clinic: Transparency, Deception, and Ice Cream

The Mayo Clinic in Minneapolis has held the top spot on the U.S. News and World Report hospital rankings for the past two years. That’s an impressive accomplishment. But one despite the closure of community hospitals that negatively impact rural Minnesota towns.

Citing staff shortages, reduced inpatient censuses and ongoing financial challenges, Mayo decided to move all inpatient services from the hospital in Albert Lea, Minnesota, including labor and delivery, to a town more than 20 miles away. In response to pleas for reconsideration, Mayo Clinic Vice President Bobby Gastout callously remarked that 23 miles is not ideal — but “people are driving 23 miles to get their favorite ice cream.”

A grassroots group, Save Our Hospital, galvanized the community by answering “we like our ice cream and inpatient care in Albert Lea.”

So how will our country, from the Midwest to here where I’m writing in Kitsap County,  Washington ensure health care access doesn’t continue to come second to profits?


Price transparency must be mandatory at non-profit hospitals if runaway healthcare costs are to be contained. Behemoth institutions are decimating rural areas after a decade-long buying spree. A study in Health Affairs magazine found nearly half of rural counties in the United States are without hospital-based OB services, a change affecting more than 2.4 million women. According to the University of North Carolina’s Center for Health Services Research, 83 rural hospitals have closed since 2010. Hospital systems complain they are crumbling under the weight of lower reimbursements, rising bad debt from high-deductible plans, and dwindling admissions.

However, communities are entitled to see the proof in the pudding.

While touting $13 million in losses over two years as the central force behind the closure decision, in reality, Mayo misrepresented their facts and figures according to tax returns posted by ProPublica. Dr. Mark Ciota, CEO of MCHS-Albert Lea, reported the hospital lost $4.6 million in 2015, but the nonprofit’s IRS 990 form showed a net income of $2.56 million. In 2016, the Albert Lea hospital projected a loss of $8 million, though residents eagerly awaited release of Mayo’s tax returns to separate fact from fiction. Mayo conveniently overhauled its tax reporting process and filed a group return, a format which obscured financial performance of individual campuses, including Albert Lea.  Allen Baumgarten, a Minneapolis-based independent healthcare analyst, utilizes public records to calculate hospital profits and losses — he estimates the Austin-Albert Lea campus generated a net income of $1.2 million in 2016.

Earlier this year, Dr. John Noseworthy, CEO of Mayo Clinic, feigned financial woes, complaining Mayo had to “prioritize commercially insured patients” over those on Medicaid and Medicare in the interest of long-term survival. Yet they had no reservations investing in the Destination Medical Center Project, a 20-year, $5.6 billion economic development initiative which will position Rochester (actually Mayo) as a global center to provide high-quality medical care to the wealthy across the world. Astonishingly, third quarter earnings show Mayo operating income more than doubled from $86 million to $182 million, with total revenue increasing 9 percent, from $2.72 billion to $2.97 billion.  In 2016, international investment income was $2.7 billion, while close competitors, Cleveland Clinic and Johns Hopkins, produced less than half that amount.

Mayo benefits handsomely from public tax revenue while exempted from paying city, state, or federal taxes in exchange for “improving” healthcare access for struggling communities. While no one is questioning legality of these investments, ethically the loss of rural hospitals is hard to reconcile when Mayo pours $1.34 billion into offshore tax havens to reduce their tax liability.

Ice cream may melt on a 23-mile drive, but ill and injured people may actually die traveling that same distance. Movements like “Save Our Hospital” are garnering national attention with good reason, as they are David bravely taking on Goliath.

To ensure access in rural communities, non-profit hospital institutions should provide transparent pricing to patients and share financial performance data with communities. Benjamin Disraeli said, “there are three types of lies – lies, damn lies, and statistics.” Mayo has fractured trust by misrepresenting operating losses in Albert Lea to justify hospital closure, Dr. Noseworthy condoned prioritizing patients based on their pocketbooks while third quarter earnings went through the roof, and hospital leadership condescendingly compared driving 23 miles in labor as being equivalent to buying ice cream.

Places like Mayo are systematically dismantling rural care facilities without accountability for the generous tax exemptions they receive. The loss of one more rural hospital this year will be a loss for the entire nation. The battle for affordable, accessible, and high-quality health care is one worth fighting. Rural health care is far more important than ice cream.

Niran Al-Agba (@silverdalepeds) is a third-generation primary care physician in solo practice in an underserved area in Washington State who blogs at peds-mommydoc.blogspot.com.

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11 replies »

  1. Steve, covering OB Services May be difficult but it is extremely worthwhile. I refuse to believe there is no option to avoid long travel distance to access care.

  2. Yes. Barry, these areas are looking at the feasibility of the micro hospital model. Free standing ERs are fine too.

  3. I wonder how much o U.S.maternal mortality is a function of poverty, both rural and urban, plus patient non-compliance as compared to the quality and availability of healthcare.

  4. Hey, you could be Texas and have the worst maternal mortality in the country, so it could be worse.

  5. Massachusetts has long ranked either 1st or 2nd highest in healthcare spending per capita. Reasons include much higher prices commanded by the dominant Partners Healthcare System which owns both Massachusetts General and Brigham & Women’s Hospital among numerous others. Also, a much higher than average percentage of routine care is delivered in expensive teaching hospitals, especially in Southeastern MA (Boston region). With the dominance of Partners, the consolidation cat is already out of the bag in MA and has been for a long time.

  6. I am aware that Massachusetts has a mandatory review process for any further consolidation of its large healthcare institutions, ala its State sponsored universal health insurance. It is likely to be copied by other states. Maryland has had a form of it for many years. Maryland has had a maternal mortality ratio that left the State rank ordered a 41st or worse since 1987. Massachusetts has ranked either 1st or 5th during the same period of time.

  7. The middle class is spending a higher and higher percentage of its income on housing and health care. They are doing this because dystrophic government policy has essentially ruined wealth through compound interest and wealth through small entrepreneurship. The effects on health care one can guess: Inability to pay deductibles and co-pays; more take-up of Medicaid; more loss of insurance and use of ERs for primary care; more loss of housing and living in trailers, etc.

    If the market area of a hospital includes many such middle class citizens, they are not going to be able to survive the financial demands of state and JCAHO or seismic inspections.

  8. I can’t comment on the financial obfuscation by Mayo, but 23 miles does not seem a long way to drive for hospital access – we have to do it all the time here in NC. Even single-pay systems need to justify how many hospitals are needed and what can be afforded. Rural clinics are a good idea as is emergency ambulance and life flights. A birth is not necessarily a medical emergency.

  9. I have been on both sides of this as we have taken over and fixed other hospitals, both rural and inner city. We have certainly seen other large hospital chains wipe out small rural hospitals by taking our paying patients and not investing capital back in those rural hospitals. We have also seen those small hospitals failing as they didn’t have the money to keep up the capital investments they needed. There are a number of things odd about their 990 (Why the big increase in revenues between 2012 and 2013? Why the big increase in liabilities?) so I would be a bit leery about it. A consultant paid for by the Save Our Hospital group reported that their EBIDA was pretty negative, suggesting things really aren’t so rosy. Even if the numbers you report end up being correct, they are showing a less than 1% profit. They won’t be able to keep up with maintenance and new capital purchases. The place will slowly die with these numbers.


    As I think I said before, good luck covering OB services in smaller rural hospitals. Not many people want to work in those places. Even if they are willing to work at them, they don’t want to have to live within 20 minutes so they can cover OB. They don’t want to be on call all of the time either.


  10. There are three, state-by-state, prolonged duration, separate data sets for maternal mortality incidence: 1987-96, 2001-2006, & 2005-2014. Each can be rank ordered, lowest (best) to highest (worst), and subdivided according to clustering characteristics into 6 clusters. This strategy is remarkable stable among the three data sets. Putting aside the usual issues of individual state statistics, the best and worst of the combined data-set clusters reveal certain unusual attributes. Among the lowest cluster ranking of each data set, there are only two states that occur in all three data sets: Alaska and Massachusetts. There are 5 other states that occur in the first or second cluster of all three data sets: Connecticut, Iowa, Minnesota, Oregon and Rhode Island.
    Regardless of rural accessibility issues (largely universal health insurance related), the principal deficit characterizing healthcare reform could be defined as the absence of a community by community driven strategy to assure the equitable availability of enhanced Primary Healthcare for each citizen. The tools for rural maternal health are known, but the solutions for Mississippi and Georgia (the only two states in the worst cluster of all three data sets) along with all the other states must begin with enhanced Primary Healthcare, especially for women, their children, the disabled, and the homeless.
    The market share tactics for the major medical centers to assure their economic stability have no means to also assure that equitably available, enhanced Primary Healthcare is offered to the citizens of each community. Rural southern Minnesota is surely a microcosm of the larger picture.

  11. I would be interested in knowing what the average inpatient occupancy rate was at the Albert Lea hospital as well as the average OR capacity utilization rate and the average cancellation rate of OR procedures. Also, how did the payer mix break down between Medicaid, Medicare, private commercial insurance and self-pay / uninsured?

    Even though I live in a well populated county 35 miles outside of New York City, when our son was born in 1977, I had to drive my wife 13 miles in the middle of the night to reach the hospital. I didn’t think that was unreasonable. So, my question is how far should rural patients reasonably be expected to drive to reach a hospital that can treat them? How many critical access hospitals are we supposed to subsidize while we complain at the same time that systemwide healthcare costs are way too high?

    Everybody knows that Mayo cost shifts to commercial payers to make up for the shortfall between their costs and payments from Medicare and Medicaid. Are they supposed to do that to an even greater extent to subsidize rural hospitals? Driving longer distances for everything from supermarket shopping to getting the kids to school to commuting to a job to healthcare is one of the negative tradeoffs of living in a rural area. The benefits are low cost housing, more property, wide open spaces and much less traffic which a lot of people appreciate.

    When particular rural areas lose population, and you combine that with the secular tread of more procedures being moved out of hospital inpatient settings, something has to give. Maybe some of these rural hospitals can be converted to stand-alone ER’s or perhaps micro hospitals with 7-10 beds each.