Dive Brief:
- Cleveland Clinic is expecting a more than $200 million operating loss in 2022, president and CEO Tom Mihaljevic said Wednesday during the nonprofit system’s annual address to employees.
- Mihaljevic attributed the loss to industrywide headwinds, including workforce shortages, higher labor spending and inflated supply and drug costs, along with paused healthcare services during the COVID-19 pandemic.
- The expected loss is a stark contrast to 2021, when Cleveland Clinic recorded its strongest financial performance ever with operating revenue of $12.4 billion and an operating income of $746 million.
Dive Insight:
More than half of all hospitals lost money last year, Mihaljevic said, noting in the address that Cleveland Clinic is working to reduce its expenses to manage the disruption.
The 6,500-bed system is putting some administrative hiring on hold, reducing discretionary expenses and looking to pare down travel and consultancy fees. It’s also hiring a “record number of caregivers” to help with labor shortfalls, Mihaljevic said.
Costs rose last year for many hospitals, but facilities aren’t always able to pass costs onto patients. For example, Medicare and Medicaid reimbursement is fixed.
Cleveland Clinic has looked for other ways to recoup costs. In November, the operator announced it would begin billing patients’ insurance for portal messages that take providers five or more minutes to answer. The policy, which could run payers as much as $50 per message, stoked controversy, though Mihaljevic said Wednesday in a news conference following his address that it is a logical way to compensate providers for their time, according to Cleveland.com.
Despite the pressures, the CEO said Cleveland Clinic will continue to expand through organic growth at existing locations, dealmaking and virtual care. The nonprofit is in the middle of various building projects, including the opening of Mentor Hospital in July, the expansion of the Cole Eye Building on the main campus and breaking ground for the Neurological Building in May.
Cleveland Clinic has yet to release a full financial report for last year, but it recorded a $1.5 billion net loss during the first nine months of 2022. Patient revenue couldn’t keep up with mounting labor, supply and drug expenses. In addition, labor costs increased at a fast clip, up more than 16% year over year to total $5.7 billion through September.
