Mayo plans $648M Phoenix expansion

Citing increased patient need, Mayo Clinic in Arizona will nearly double the size of its Phoenix campus with a fiveyear building project set to cost $648 million.

The construction project, which officials say will add 2,000 jobs by 2029, is the largest expansion in not-for-profit Mayo Clinic’s 30-year history in Arizona.

The construction is not expected to disrupt patient care at the north Phoenix campus, Mayo Clinic in Arizona CEO Dr. Wyatt Decker said.

An increased need for complex patient care is driving the massive expansion, he said.

“We feel our niche is in the very, very sick, very complicated or very rare,” Decker said. “We focus on where we add the most societal benefit.”

Examples of complex patient care include rare, advanced or difficult-totreat cancers, organ transplants, cardiovascular diseases and medical mysteries. Mayo Clinic in Arizona also does half of all the solid-organ transplants that occur in the state and is the

fifth-largest transplant center in the

United States.

The capital improvement project, announced Wednesday, will include, among other elements, a six-story patient tower that will increase the number of patient beds from 280 to 374 by 2023.

The expansion also will add a new emergency department, an outpatient surgery center and a 1,000-space underground patient parking garage, among other improvements to its 210acre campus located near Loop 101 and 56th Street in north Phoenix.

The project will add 1.4 million square feet of building space to the existing 1.7 million, officials said.

“My question is, who is going to fill all those beds, and are they going to change their payer mix to include more Medicaid and Medicare Advantage patients?,” said Jim Hammond, CEO and publisher of the Hertel Report, a newsletter about health care that focuses on Arizona.

“It would seem they are betting on more traditional Medicare and commercial insurance — they must think that market is going to grow.”

At a time when the trend is toward more outpatient care, adding hospital beds may not seem like a good choice. But Decker said the local bed count has long been low compared with other major medical centers like Stanford, Duke and Washington University.

“We see tremendous demand for our services even while some hospitals are struggling to fill beds,” Decker said. “In the pool that we compete in, we are actually quite small . ... We often get lumped in with large community hospitals, but we are really not a community hospital. We love serving the community, but we’re focused on the most complex medical procedures and care that are available anywhere.”

In one example of that kind of care, the clinic recently designed a titanium hip and part of a pelvis for a patient who had a rare osteosarcoma. Osteosarcoma is a type of cancer that begins in cells that form bones. In rare instances, it occurs in soft tissue outside the bone.

“We took the osteosarcoma out, and there was no off-the-shelf hip prosthesis that would work with this person,” Decker said. “This was a gentleman from New Mexico who had been told there was no solution. We designed a custom implant, put it in, and today he rides, mountain bikes, has kids and lives a normal life.”

Mayo’s planned expansion comes at a time of lagging revenue growth for non-profit and public U.S. hospitals. Revenue pressures on hospitals include lower reimbursement rates, a shift to outpatient care, increased merger and acquisition activity and increased ambulatory competition, according to an Aug. 28 report from Moody’s Investor Services.

But Decker said Mayo Clinic in Arizona is financially sound. For one thing, people are more aware of Mayo Clinic’s consistently high rankings in a range of hospital-quality measures, including U.S. News & World Report and the Centers for Medicare and Medicaid Services, he said. Mayo Clinic in Arizona was on the U.S. News & World

Report “Best Hospitals Honor Roll,” which includes what the magazine ranks as the nation’s top 20 hospitals.

“We have seen approximately 8 percent growth of our patient volume each year,” he said. “The word is out that you can get some of the best care in the world here in Phoenix.”

About half of Mayo Clinic in Arizona’s reimbursement payments come from government sources. Mayo does not see as many Medicaid (called the Arizona Health Care Cost Containment System, AHCCCS, in Arizona) patients for community care as other local hospitals because community care is not Mayo’s focus, Decker said.

AHCCCS is a government insurance program for low-income people.

“We figure out if we can serve an AHCCCS patient in a unique way,” Decker said. “We do organ transplants regularly for AHCCCS patients. For community care, we don’t see as many AHCCCS patients because that is not our mission. We do serve the poor, we offer charity care and offer AHCCCS patients for things that only us and a few others provide.”

In a prepared statement, Arizona Gov. Doug Ducey said Mayo’s announcement is a sign that the state’s health-care and bioscience industry is thriving.

“Not only will those of us in Arizona be served by expanded services at Mayo Clinic, but it will further secure Arizona as a global destination for excellence in health care,” Ducey said.

Mayo Clinic in Arizona has 6,500 employees, including 650 physicians at its Phoenix and Scottsdale campuses. The construction project is expected to add 2,000 employees, including 200 more physicians, Mayo officials said.