- Nonprofit giant Cleveland Clinic posted operating revenue of $ 3.1 billion in the third quarter, up 13% year-over-year, as patient net income increased due to an influx of patient activity. Ohio University Medical Center revenue was also boosted by increased revenue from outpatient pharmacies, as the use of outpatient and specialty drugs increased.
- Many systems experienced expense growth that was significantly greater than revenue growth in the quarter ended September 30. The Cleveland Clinic did not reverse the trend but moderated it slightly, with spending increasing 14% year-on-year to $ 2.7 billion, with higher patient volumes requiring greater spending on staff and supplies.
- Cleveland Clinic’s operating profit edged up to $ 148 million, although its operating margin of 4.8%, up from 4.9% in the same period last year, remained relatively stable . However, more moderate returns on investment resulted in a nonprofit’s net income of just $ 422 million, down 30% year-over-year.
In March 2020, S&P revised its outlook for the U.S. nonprofit healthcare sector from stable to negative due to the threat of the COVID-19 pandemic. The rating agency brought it down to stable in June of this year due to the recovery in revenues and balance sheet stability, a bright spot for the industry.
However, pandemic pressures weighed heavily on nonprofits in the quarter ended September 30, as spending slumped operating revenues for systems like Providence Health, CommonSpirit, and Kaiser Permanente, which spent more overtime and staffing, pharmaceuticals and medical supplies to meet increased volumes.
The trend was common but not universal: The Minnesota-based Mayo Clinic is an outlier, reporting a robust 8% operating margin as revenue growth has remained well above costs.
The Cleveland Clinic operates 19 hospitals and a number of outpatient and outpatient surgery centers, as well as physician offices. Its network is most concentrated in northeastern Ohio and Florida, although the system also operates centers in Toronto, Las Vegas and Abu Dhabi.
The highly infectious delta variant put a strain on many hospital operators, including the Cleveland clinic during the quarter, with many reporting a further increase in hospitalizations. The Cleveland Clinic saw its daily admissions peak in December, although the system opted to resume most non-essential surgeries in January.
The summer surge has been particularly acute in the Florida nonprofit area, where the system has chosen to maintain some restrictions on not emerging outpatient procedures and care to ensure adequate staffing and bed capacity.
Although most non-essential services have resumed, patient numbers have yet to return to budgeted levels, Cleveland Clinic management has revealed. But the system reported healthier patient activity in the third quarter of 2021 compared to the same period last year.
Inpatient admissions increased by 11%, patient days by 18% and emergency room visits by 26% year-over-year. Outpatient surgeries also increased by 14%, although inpatient surgeries tended to decline by 2.1%.
But spending also rose, with salaries, wages and benefits up 14% in the quarter as the Cleveland Clinic recruited more staff, both full-time and temporary, to provide adequate staff. for the outbreak. The expenditure on supplies and pharmaceutical costs also increased, respectively by 9% and 12%.
Although the summer surge eased in September, experts are wary of another seasonal increase in cases during the winter months as the weather and the holiday season push more people to congregate there. inside. In an attempt to prevent this outcome, the FDA has given the green light boosters to all adults a week before the Thanksgiving holiday.
In its third quarter results, the Cleveland Clinic said it expects COVID-19 to continue to put pressure on its operations in various areas. System expects COVID-19 to contribute to significant cost pressure in the payer environment due to decreased business insurance and increased reliance on government programs; shrinking patient volumes, resulting in more services being delivered in low-cost environments, such as virtual or home care; greater competition for physicians; and workforce attrition due to low patient numbers.
The latter concern has been in the spotlight as nonprofit and for-profit systems report acute work tensions and staff turnover, as labor unrest and the exhaustion bubble. professionals are in the foreground after more than a year and a half of COVID-19. Kaiser narrowly avoided what would have been a historic strike earlier this month when union members and management reached a tentative deal.
The Cleveland Clinic also revealed it has renegotiated contracts with the payout giant UnitedHealthcare, which is the largest private insurer in the United States covering some 50.4 million people. The two reached a deal in October, which means the system will remain networked for Medicare Advantage, Medicaid, and employer-sponsored plans from UnitedHealthcare in Ohio, Florida and Nevada.
Losing the UnitedHealthcare contract would have been a big blow to the system: in 2020, UnitedHealthcare accounted for around 11% of Cleveland Clinic’s net patient services revenue.