Mayo Foundation Business Information, Profile, and History

Company Perspectives:

The three shields of Mayo's logo depict the three missions of Mayo--patient care, research and education, with patient care foremost but interdependent with the other two.

History of Mayo Foundation

The nonprofit Mayo Foundation oversees the largest and most renowned private medical center in the world, the Mayo Medical Center of Rochester, Minnesota. The heart of the center is the Mayo Clinic, a research and treatment leader in cardiology, endocrinology, gynecology, neurology, oncology, orthopedics, urology, and a number of other disciplines. The Mayo Clinic, however, is virtually inseparable from two nearby, highly reputed hospitals, Saint Marys and Rochester Methodist, both of which are entirely owned and governed by the Mayo Foundation. Since the mid-1980s, the Mayo Foundation has spearheaded a program to extend the unique Mayo medical system of total patient care far beyond southern Minnesota. Mayo Clinic Jacksonville (in Florida) and Mayo Clinic Scottsdale (in Arizona), both linked via satellite to Mayo Clinic Rochester, are two major outcomes of this nationwide expansion program. The Mayo Foundation also supports the Mayo Graduate School of Medicine, Mayo Medical School, the Mayo School of Health-Related Sciences, and the Mayo School of Continuing Medical Education. The foundation-owned Mayo Health System is a network of 14 community-based clinics and medical centers providing healthcare services to 54 communities in Minnesota, Iowa, and Wisconsin.

To visit the 12-building, pedestrian subway-linked Mayo 'campus' in Rochester--a city of around 70,000 whose local economy is dominated by the healthcare, hospitality, and computer industries (a major IBM plant is located on the outskirts of the city)--is to understand just how completely the dreams of Mayo's founder, William Worrall Mayo, have been realized. Each year, about 400,000 patients and their families flock to this medical mecca. Some do so for geographic reasons (85 percent of all Mayo patients are from the Upper Midwest); others, out of long-established habit (former U.S. Supreme Court Justice Harry Blackmun, for example, revisited Mayo each summer for a checkup from the 1950s, when he served as the clinic's general counsel, until his death at the age of 90 in 1999); and still others, because of a high recommendation from a relative or acquaintance. (Although Mayo still bears the image of a hospital for the elite, it requires no physician referrals or lengthy admissions process; more than 95 percent of its patients consistently report that they are 'satisfied' or 'very satisfied' with the care they have received.) All, without question, visit Mayo secure in the knowledge that it is home to some of the most advanced medical technology and one of the most respected groups of physicians in the world.

Mayo and Sons in Private Practice in the Late 19th Century

Mayo's long, rich history of excellence in medicine extends back to 1863, when Dr. William Worrall Mayo of Le Sueur, Minnesota, was appointed examining surgeon of Civil War enlistees for the state's southern district. The district's headquarters were located in Rochester, then a ten-year-old pioneer settlement with a population of less than 3,000. Born and raised in England, Mayo arrived in the United States in 1845 at the age of 26. His first job was that of chemist for Bellevue Hospital in New York City. A string of nonmedical jobs intervened before Mayo became apprenticed to a doctor in Lafayette, Indiana. Harold Severson noted that Mayo studied at the Indiana Medical College in LaPorte. 'This put him in a special category, for until the 1860s--and in some sections long afterward--a frontier doctor was almost any man who had the audacity to advertise himself as one.'

A bout with malaria in 1854 convinced Mayo that he needed to move to a more congenial climate. Ultimately, the doctor chose St. Paul, although his wife, Louise, was at first hesitant to relinquish her thriving Indiana millinery business. Once the move was completed, however, she quickly launched a new shop that was equally prosperous. Mayo, on the other hand, resisted settling or committing to one line of employment, for he was an inveterate explorer and jack-of-all-trades. Nonetheless, his medical calling resurfaced within a year or so, and he decided to become a country doctor in the picturesque town of Le Sueur. Louise agreed to sell her business and follow him.

Mayo supplemented his small and unstable income by farming, running a ferry boat, and serving as local veterinarian and justice of the peace. 'All these divergent activities,' wrote Helen Clapesattle, 'were not such deviations from the Doctor's professional path as they might appear; they helped immeasurably to spread his name and acquaintance up and down the Minnesota Valley.' Although always faced with competition, Mayo was able to expand his regular practice across three counties, earning himself in the process a reputation as a skilled and caring doctor.

Despite the attractions of Le Sueur, Mayo perceived more fertile prospects in Rochester after working there for a year, and, in 1864, he again relocated his family. This move marked the end of Mayo's itinerant path and the beginning of Rochester's development into a center for modern U.S. medical knowledge and treatment. Mayo staked his private, home-visit practice upon his own ingenuity, experience, and energetic personality. The clinical thermometer had yet to be invented, and the use of the stethoscope, not to mention anesthetics, was still in its infancy. Antisepsis, the technique of preventing infection, was a lofty and far-off goal; surgery of any kind was a procedure best avoided, if at all possible. Despite such handicaps, the medical profession was on the brink of rapid advancement and Mayo, according to Philip K. Strand, shortly became 'one of the most respected physicians in Minnesota.' This was in no small part due to Mayo's drive for excellence. 'A perfectionist who would not tolerate sloppy medicine,' says Strand, '[Mayo] went to great lengths to increase his own medical knowledge.' After barely five years of successful doctoring in Rochester, he realized that his training was inadequate for the high standards he wished to maintain. Therefore, he chose to take several months off from his practice to study in New York with some of the country's top surgeons. Upon his return, Mayo abandoned his primitive microscope in favor of the latest model, which he purchased by mortgaging his house.

In 1880 Mayo attempted his first critical operation, the surgical removal of an ovarian tumor. Only a handful of doctors in the East were then attempting and succeeding at this particular operation. It soon became Mayo's forte. Although still teenagers, Mayo's sons, William Mayo and Charles Mayo, were assisting in the operating room by this time. Dr. Will and Dr. Charlie, as they were later affectionately known, were to become the very essence of the Mayo Clinic. It was their partnership, as much as that with their father, that brought the term Mayos' Clinic into common usage by the turn of the century. There is no doubt that W.W. Mayo greatly guided and influenced his sons to follow in his footsteps. However, wrote Harriet W. Hodgson, 'Some think Louise Mayo deserved equal credit for Will and Charlie becoming physicians. An intellectual in her own right, she pursued interests in astronomy and botany, assisted her husband with surgery, applied splints, and listened to patients' complaints when Dr. W.W. was out on a call. ... Her medical education was gleaned from on-the-job training and persistent study of her husband's textbooks.'

1880s Through Early 1900s: Creation of the Mayo Clinic and the Multispecialty Group Practice

Aside from the maturation of the Mayo boys into full-fledged physicians during the 1880s, the decade also marked the beginning of hospitalized care in Rochester. On August 21, 1883, a tornado struck the town, causing widespread injury and havoc. In the aftermath, Mayo sought a place to house and care for the wounded. The most likely spot was the convent operated by the Sisters of Saint Francis, a local teaching order. With poorly trained, volunteer nurses and virtually no management structure, the improvised hospital was chaotic but nonetheless served its immediate purpose. It served another purpose as well: that of convincing convent head Mother Alfred that a permanent hospital should be built by the order to serve the Rochester area. Prior to the tornado, Mother Alfred actually had been approached by St. Paul Bishop John Ireland about founding a hospital, but at the time she rejected the idea because her nuns were educators and not nurses. Now, after witnessing a citywide emergency and seeing the capable response of W.W. Mayo and scores of volunteers, Mother Alfred became a strong proponent of the plan and beseeched Mayo to oversee the hospital upon its completion. Interestingly, she had difficulty convincing Mayo, for he was keenly aware of the public's perception of hospitals as places where the sick and indigent succumbed to death. Finally, Mayo agreed to the plan, with the stipulation that the Sisters should allot $40,000 for construction expenses. Six years later the first hospital in Rochester--and only the eighth in the entire state--was completed.

A three-story building with 27 beds, this was the original Saint Marys Hospital that, after numerous additions and modernizations, grew by its centennial into a 1,000-plus-bed facility in which an average of 130 surgeries were performed daily. During its first full year of operation, Saint Marys hospitalized some 300 patients while maintaining an enviably low death rate, attributable in large part to the diligent practice of Dr. Joseph Lister's technique of wet antisepsis. 'Eventually,' wrote Clapesattle, 'the message began to spread throughout the Midwest: Saint Marys Hospital is a place where people go to be healed.'

The original Mayo group practice quickly evolved into one in which Dr. Will Mayo (who received his medical degree in 1883) and Dr. Charlie Mayo (who received his five years later) served as the two attending surgeons while Dr. W.W. Mayo functioned as the consulting physician. Of the three, Will demonstrated the greatest ability and concern for handling the clinic's financial and administrative matters, which from the inception of Saint Marys were remarkably sound. So successful was the Mayo enterprise that two other physicians in the area opened a rival group named Riverside Hospital in 1892. Although it, too, thrived, the Riverside practice was moved to St. Paul within a few years. Around this same time, the Mayo Clinic began attracting outside medical talent. By the turn of the century, the practice numbered eight doctors, two of whom were women.

The tradition of Mayo innovation was already alive during these early days, for W.W. Mayo had instilled in his sons a strong emphasis on continuing medical education and scientific experimentation. This, in turn, resulted in the hiring of uniquely gifted and motivated colleagues who could extend the clinic's areas of expertise. In effect, the original group of partners assembled by the Mayo brothers represented a new concept in medicine, the multispecialty group practice. Will Mayo concentrated on diagnosing and treating pelvic and abdominal problems and Charlie Mayo focused on eye, ear, nose, and throat ailments. No member of the group was more brilliant, eccentric, or esteemed than Dr. Henry Plummer, a former intern at St. Marys who joined the clinic in 1901. Considered 'no less than a genius' by Dr. Will Mayo for his work with iodine solutions to treat thyroid disease, Plummer is equally revered by Mayo historians for his lasting contributions to the day-to-day operations of the clinic and Saint Marys. These include such inventions as a compressed air system to transport internal records; an intraclinic phone system; an envelope-coding system; and the system of underground walkways that link the Mayo Campus; as well as his architectural masterpiece, the Plummer Building.

By the early 1900s, W.W. Mayo had effectively retired to pursue his abiding interests of research, politics, and travel. He died in 1911, just a few months before his 92nd birthday and was paid tribute by the town he had helped to build. Saint Marys was now one of the largest and most advanced hospitals in the United States; more operations were being performed there each year than at any other facility in the country, including the prestigious Johns Hopkins in Maryland. The Mayo Clinic's reputation was now truly international, with famous physicians from Paris, Leipzig, Edinburgh, and elsewhere having made the trek to Rochester to learn firsthand from the 'country doctors' Will and Charlie Mayo, luminaries in their own right. Both men researched, wrote, and lectured extensively throughout their careers. In 1905 Will Mayo was named president of the American Medical Association; a decade later, Charlie received the same honor. Although vastly different in personality, the two formed a close bond, holding the same ideals of dedicated service and commitment championed by their father.

1919 Through Early 1980s: Early Decades As a Foundation

In 1914 the brothers oversaw the construction of the first building to bear the Mayo Clinic name and the first in the world designed specifically for a group medical practice. Now 75 strong, the Mayo partners were seeing an average of 30,000 patients annually. The following year the independently wealthy Mayo brothers, in an effort to preserve the education and research tradition they had founded, established a nonprofit endowment through the University of Minnesota, which they named the Mayo Foundation for Medical Education and Research. This foundation was funded by nearly $2 million from the brothers' personal savings. Eventually renamed the Mayo Graduate School of Medicine, this organization was the world's first formal graduate training program for physicians. Then in 1919, 'in an act without precedent in American medicine,' according to Mayo Clinic, 'the two brothers transferred all of the assets of the Mayo Clinic into an endowment to advance medical science (originally named the Mayo Properties Association, this endowment became the Mayo Foundation in 1964). Thus began Mayo's tradition of giving, an essential part of our position in world medicine.' Since the foundation was nonprofit, Mayo physicians from this point forward would be paid a salary and would not share directly in the proceeds of their practice. Funds left over after operating expenses were met were contributed to education, research, and patient care.

From 1919 until 1939, Dr. Will Mayo served as president of the foundation. Among the highlights of this era were the construction in 1922 of a state-of-the-art surgical pavilion, which doubled the capacity of Saint Marys; the beginning of air transportation to Rochester in 1928; and the public donation of Mayo Foundation House, the former residence of Dr. Will and his wife, so that it might be used as 'a meeting place for the exchange of ideas for the good of mankind.'

With the deaths of Charles in May and Will in July 1939, an enormous loss was felt around the country. Harold Severson reported that 'messages of condolences poured in from people in all walks of life--from President and Mrs. Franklin D. Roosevelt to a little old woman in Texas who sent a potted plant and a note to Mrs. Charlie Mayo expressing her deep sorrow on the death of the man who had been so kind to her years ago.' Harry Harwick, chief administrative officer since 1908, assumed the chairmanship of the foundation upon Will's death. He presided over a thrilling era of Mayo's development, which included the creation of the first post-anesthesia room (a forerunner of modern intensive care units) in 1942 and the awarding of the Nobel Prize in 1950 to two Mayo researchers for their synthesis of cortisone. Later, the foundation opened two more medical schools: the Mayo Medical School in 1972 and the Mayo School of Health-Related Sciences, which specialized in training students in allied health programs, in 1973. Other medical advances&mdashøo numerous to chronicle--continued to keep the Mayo name in the spotlight of world medicine into the early 21st century.

Mid-1980s and Beyond: Merging and Expanding in a More Competitive Era

Until the mid-1980s, the structure of the Mayo Foundation, including its longstanding alliance with Saint Marys Hospital, remained essentially unchanged. With improvements in healthcare, concurrent declines in patients' average hospital stays, rising medical costs, and tighter governmental controls, however, there was a much more pressing need for conserving resources and maintaining revenue levels. Therefore, the Mayo Foundation, Saint Marys, and a third entity, Rochester Methodist Hospital, entered into negotiations about integrating. On May 28, 1986, their organizational merger was complete and the newly expanded Mayo Medical Center was now the largest nonprofit medical concern in the country. At the time of the merger, combined revenues exceeded half a billion dollars, with pooled assets listed at around $1 billion. One proviso of the agreement was that Saint Marys would retain its separate legal identity as a Catholic hospital and continue to receive support from the Sisters of St. Francis.

Also in 1986, the Mayo Foundation began expanding outside of Minnesota. The Mayo Clinic Jacksonville opened in Florida that year, and Mayo Clinic Scottsdale opened in Arizona the following year. The foundation acquired St. Luke's Hospital in Jacksonville in 1987, thereby gaining the clinic-hospital pairing that worked so well in Rochester. Also in 1987 the original Mayo Clinic in Rochester went smoke-free, becoming one of the first medical facilities in the country to do so.

In addition to its expansion, Mayo also found new sources of income by providing specialized lab services to outside doctors and hospitals (through a unit called Mayo Medical Laboratories) and by launching such commercial enterprises as the Mayo Clinic Family Health Book and the Mayo Clinic Health Letter (which now carries 385,000 subscribers worldwide)--both of which were first published in 1983. In 1986 the foundation created another new unit, called Mayo Medical Ventures, which in addition to assuming responsibility for the publishing ventures, managed technology transfer agreements, patent applications, and licensing deals, and created pharmacies and a medical supply outlet in Rochester. In addition, Mayo began actively soliciting charitable contributions, whereas previously it operated as a self-funding organization. By 1992 outside philanthropy to Mayo totaled more than $58 million, approximately the same amount that was spent separately by the foundation on education and research.

The mid-1980s also saw the Mayo Foundation begin to participate in the burgeoning managed healthcare sector, which was bringing profound changes to the industry. In 1986 the foundation created a subsidiary called Mayo Management Services, Inc. (MMSI) to operate a Minnesota-based health maintenance organization (HMO) called Mayo Health Plan. Two years later, MMSI entered the plan administrative services sector when it began providing claims administration for St. Luke's Hospital in Jacksonville. In somewhat of a return to its general practice roots, the Mayo Foundation in 1992 began building a regional network of community-based clinics and medical centers--called the Mayo Health System--with the acquisition of Decorah Medical Associates in northeastern Iowa. By the late 1990s this system included 500 physicians, 7,600 allied health staff, and 13 hospitals with nearly 900 beds and was providing healthcare services to 54 communities in Minnesota, Iowa, and Wisconsin. The Minnesota portion of the Mayo Health System served as the core of the Mayo Health Plan HMO. Strategically, the Mayo Health System served in part as a conduit to the Mayo Clinic, since the primary care physicians in Mayo's new network were the doctors referring patients to its specialized facilities. The network's regional makeup also made sense as half of the patients who went to the Mayo Clinic lived within 120 miles of Rochester. In 1995 MMSI entered the commercial market, offering and administering a variety of customized, self-insured health plans. With the Mayo Health System as its core network, supplemented by providers outside the system, MMSI began managing health plans for such regional employers as Hormel Foods Corporation and the Ashley Companies.

The pressure on the Mayo Foundation to find alternative revenue sources was highlighted in 1993 when the foundation had an operating loss of $6.2 million, its first year in the red since the Great Depression. Contributing to the loss were higher patient care costs and lower Medicare reimbursement levels. In early 1994 the Mayo Clinic announced that it would cut 450 jobs in an effort to save $18.5 million. Through the remainder of the 1990s, the Mayo Foundation's earnings suffered from the growing number of patients who were covered either by Medicare or a managed care plan. Earnings fell 50 percent in 1998 from the previous year, to $86 million, in large part as a result of an estimated $85 million loss on Medicare patients. Meantime, during 1998, the Scottsdale operations were augmented with the opening in nearby Phoenix of Mayo Clinic Hospital, a five-story facility with 178 beds and complete emergency room/urgent care services. The Scottsdale system thereby included both a clinic and a hospital, as well as a regional network of seven primary care centers similar to the Mayo Health System.

As the 21st century neared, the Mayo Foundation continued to seek out alternative ways of generating revenue and of simply making the Mayo Clinic name more widely known. In 1998 the foundation partnered with Winn-Dixie Stores, Inc. to begin installing Mayo Clinic kiosks featuring free health information in more than 600 grocery stores and pharmacies owned by the Jacksonville-based chain. The two organizations had a longstanding relationship, highlighted by Winn-Dixie having donated the land on which the Mayo Clinic in Jacksonville was built. Also in 1998, in a partnership with a leading housewares retailer, the Mayo Clinic/Williams-Sonoma Cookbook was published. By this time the Mayo Foundation also had established a web site, the Mayo Clinic Health Oasis, to provide specialized medical information to consumers. The site generated strong traffic but little revenue because advertising and sponsorship opportunities were not being aggressively pursued. In late 1999, however, the foundation entered into a joint venture with a San Francisco-based private equity company, the Shansby Group, to develop an interactive web site that was intended to compete more aggressively in the burgeoning online healthcare sector. The aim was not to practice medicine on the Internet; Dr. Patricia Simmons, chair of the foundation's Internet steering committee, told the Minneapolis Star Tribune, 'I'd look at this as an activity that will fill the gap between having an encyclopedia of health information and having a real thorough medical visit with a physician. We will tailor the information to help people manage their own health.' The joint venture, of which Mayo retained majority control, was the foundation's first major for-profit venture. Having stayed on the cutting edge of the medical field for more than 100 years, it now appeared that the Mayo Foundation was not willing to let the electronic revolution pass it by.

Principal Subsidiaries: Mayo Management Services, Inc.; Mayo Medical Laboratories; Mayo Medical Ventures.

Principal Operating Units: Mayo Clinic Rochester; Mayo Clinic Jacksonville; Mayo Clinic Scottsdale; Saint Marys Hospital, Rochester; Rochester Methodist Hospital; St. Luke's Hospital, Jacksonville; Mayo Clinic Hospital, Phoenix; Charter House, Rochester; Mayo Health System.

Principal Competitors: Allina Health System; Ascension Health; Catholic Health Initiatives; Catholic Healthcare Partners; Columbia/HCA Healthcare Corporation; Detroit Medical Center; Health Management Associates, Inc.; HEALTHSOUTH Corporation; Henry Ford Health System; The John Hopkins Health System; Memorial Sloan-Kettering Cancer Center; Mercy Health Services; Methodist Health Care System; New York City Health and Hospitals Corporation; Rush System for Health; Scripps; SSM Health Care System Inc.; Tenet Healthcare Corporation; UCSF Stanford Health Care; Universal Health Services, Inc.

Chronology

• Key Dates:

• 1863: Dr. William Worrall Mayo takes a job in Rochester, Minnesota, as an examining surgeon for the Union Army.
• 1864: Mayo locates permanently in Rochester.
• 1883: A tornado hits Rochester, leading the Sisters of Saint Francis to persuade Mayo and his physician sons to build and staff a hospital.
• 1889: Saint Marys Hospital opens in Rochester with 27 beds.
• 1914: Construction of the first building bearing the Mayo Clinic name and the first in the world designed specifically for a group medical practice.
• 1915: The Mayo brothers establish the Mayo Foundation for Medical Education and Research (later called the Mayo Graduate School of Medicine), the world's first graduate training program for physicians.
• 1919: The Mayo brothers transfer the assets of the Mayo Clinic to a nonprofit foundation, initially called the Mayo Properties Association.
• 1964: The Mayo Properties Association is renamed the Mayo Foundation.
• 1972: The Mayo Medical School opens.
• 1973: The Mayo School of Health-Related Sciences opens.
• 1983: The Mayo Clinic Family Health Book and the Mayo Clinic Health Letter are first published.
• 1986: The Mayo Clinic, Saint Marys Hospital, and Rochester Methodist Hospital are integrated to form Mayo Medical Center, the largest nonprofit medical concern in the country; Mayo Clinic Jacksonville opens, marking the foundation's first endeavor outside Minnesota; subsidiary Mayo Management Services, Inc. (MMSI) is created to operate a Minnesota-based HMO, Mayo Health Plan; Mayo Medical Ventures is formed.
• 1987: Mayo Clinic Scottsdale opens and St. Luke's Hospital in Jacksonville is acquired.
• 1992: Foundation begins building a regional network of community-based clinics and medical centers, the Mayo Health System.
• 1995: MMSI enters the commercial market, offering and administering a variety of customized, self-insured health plans.
• 1998: Mayo Clinic Hospital opens in Phoenix, near Scottsdale; foundation partners with Winn-Dixie Stores, Inc. to install Mayo Clinic health information kiosks in more than 600 grocery stores and pharmacies.
• 1999: Foundation enters into a joint venture with the Shansby Group to develop an interactive healthcare web site.