Dive Brief:
- The Cleveland Clinic was in the red for the third quarter of 2023, with the Ohio-based operator reporting a $127.4 million total loss and a $14.9 million operating loss last week
- However, operating losses were slimmer than the same period last year, when the health system posted a $28.3 million operating loss. During the third quarter, demand for patient services pushed operating revenue 10.1% higher than the year prior, outpacing a 9.6% increase in quarterly operating expenses.
- Cleveland Clinic reported a $4 million operating loss during the first nine months this year, an improvement compared to the $316.3 million operating loss of the prior year.
Dive Insight:
Like other nonprofits, Cleveland Clinic faced financial challenges last year. The system, which operates 21 hospitals, reported a $1.2 billion net loss in 2022 as the cost of supplies, pharmaceuticals and salaries and wages climbed. Investment losses also impacted the system, with non-operating losses totaling $1 billion last year.
In subsequent quarters, the health system reported rising patient revenues and increased demand for services. The health system returned to the black in the first half of the year, posting net income in both the first and second quarters.
In the third quarter, the system’s total losses improved year over year. During the third quarter of 2022, the system posted a total loss of $469.2 million.
Cleveland Clinic’s system’s third quarter financials were dampened by increased expenses and investment losses.
Operating expenses increased to total $3.4 billion. Executives attributed expense growth in part to inflationary trends, which pushed up salaries, wages and benefits, supplies and pharmaceutical costs. Salaries, wages and benefits expenses increased 8.1% year over year to total $2.1 billion.
“Nationwide labor shortages have created staffing challenges that have resulted in increased overtime costs and premium pay for employed caregivers as well as an increase in the utilization of agency nurses and other temporary personnel to meet the demand of patient activity,” the system said in a release.
The system added that agency personnel costs have continued to remain elevated, though they are below 2022 peak levels as the system introduced initiatives to increase recruitment and retention of full-time employees.
Inpatient acute admissions for the system increased 5.8% in the third quarter of 2023, while total surgical cases increased 2.8%. Increased managed care rate adjustments and agreements with third-party payers also contributed to the higher revenues, according to the release.
Investment losses continued, but slowed compared to the prior-year period. The system reported over $120 million in investment losses during the third quarter. Non-operating totaled $112.6 million in the third quarter of 2023, compared to a non-operating loss of $440.9 million in the prior year period.
