Cleveland Clinic posted increased operating income and revenue in its third quarter compared to the same period last year, it reported in unaudited financial statements.
The Ohio-based health system reported its operating income reached $133.9 million for the quarter ending Sept. 30, up about 16% from its operating income of $115.2 million in the third quarter of 2019. That was on revenue of $2.72 billion for the quarter, up from $2.65 billion it posted during the same quarter a year earlier, due in part to CARES Act Provider Relief Fund payments.
Still, the 18-hospital system has been roiled by COVID-19, which has caused a decline in patient revenue and increases in expenses.
The system posted $6.5 billion in net patient service revenue for the first nine months of the year, a drop from $7 billion in the same period in 2019. At the same time, the system’s expenses grew to $7.1 billion for the first nine months, a slight increase over the $6.9 billion it spent in 2019.
A big driver for the increase in expenses has been its supply chain, on which Cleveland Clinic spent $820 million in the first nine months. That was up about 7% from $768 million for the same period in 2019. Hospitals across the country have faced higher expenses for supplies such as personal protective equipment and devices such as ventilators and critical drugs.
The health system posted a $49 million profit for the first nine months of the year, a massive decline from the $1.2 billion it generated in the same period in 2019. The system reported an operating loss of $107 million for the first nine months, but that loss was offset in part by returns on investments.
Cleveland Clinic reported that it has enough liquidity to stay afloat but has had to suspend some elective procedures as the pandemic ramps up again. They reported they received $650 million in lines of credit from several banks in the second quarter. They also reported investment returns of $447 million.
Cleveland Clinic reported net patient service revenue shortfalls of more than $890 million compared to its budgeted amount year-to-date and incurred “more than $190 million in COVID-19 preparedness and readiness costs,” the earnings report said.
Among these are PPE, setting up testing capabilities and the Hope Hospital, a temporary facility to treat COVID-19. “These costs include equipment, labor and supplies to prepare for a surge in COVID-19 patients, obtain personal protective equipment for caregivers, establish testing capabilities and set up the Hope Hospital.”
The pandemic is likely to continue to impact finances for the rest of the year. Cleveland Clinic reported that a few weeks ago it postponed nonessential surgeries that require a hospital bed at many Ohio hospitals to preserve capacity to fight the virus.
“Essential surgeries and outpatient services are continuing as scheduled,” the earnings report said. “The system will continue to monitor the pandemic and hospital occupancy.”
Cleveland Clinic did get relief funding to help offset the losses. It recognized $352 million in payments from the $175 billion CARES Act fund.
The system also got $849 million in payments under the Centers for Medicare & Medicaid Services’ Accelerated and Advance Payments program. The payments have to be repaid, and, so far, Cleveland Clinic has paid off $648 million of the loan.