Cleveland Clinic’s operating income plummets 80% in Q2

• Cleveland Clinic saw revenues inch up 2% to $2.21 billion in the second quarter of 2018, from $2.16 billion in the same period last year, but increased expenses sent operating income spiraling down by 80%.
• The nonprofit health system finished the quarter with operating income of $25.1 million versus $130.5 million in Q2 2017, according to recently released financial statements.
• After accounting for nonoperating gains, Cleveland Clinic reported net income of $80.7 million for the period, down 73% from $303.3 million the previous year.

The picture of strong revenues and declining operating income is one seen across the healthcare industry as hospitals and health systems juggle smaller inpatient volumes and lower reimbursement with rising labor and operating costs.

Earlier this week, Banner Health showed a 33% drop in net income for the first six months of 2018, despite a 5.9% jump in revenue. Rising expenses also offset revenue gains at Kaiser Permanente, which saw net income down 21% in the first half of this year.

Nonprofit hospitals continue to outspend their revenue growth, and that widening gap is among the difficult headwinds putting them “on an unsustainable path,” according to a Moody’s Investors Services report from this week.

At Cleveland Clinic, net patient revenue increased $106.6 million, or 5.7%, in the second quarter of this year, compared with the same period the prior year. However, the system saw a 1.2% decline in same-facility inpatient acute admissions and 2% drops each in same-facility surgical cases and emergency department visits.

Expenses grew 8% year over year from about $1.9 billion to $2.02 billion, fueled by increased costs of salaries, wages and benefits, supplies and pharmaceuticals.

To address the challenge of these rising expenses, the health system said it’s developing and implementing cost management and containment plans under its Care Affordability initiative, which launched in 2013 to promote more affordable patient care models.

The second quarter saw the completion of several capital projects, including a $34 million family health center in Lakewood, Ohio, and a $32 million family health center and surgery center in Coral Springs, Florida. Cleveland Clinic also completed and opened a $49 million emergency department at Akron General Medical Center in northeast Ohio.

https://www.healthcaredive.com/news/cleveland-clinics-operating-income-plummets-80-in-q2/531364/