Cleveland Clinic anticipates $200M-plus operating loss in 2022, CEO says

Cleveland Clinic CEO and President Tom Mihaljevic, M.D., told employees that the nonprofit system “anticipates an operating loss of over $200 million” for 2022 but will continue to target growth.

Speaking in his annual “State of the Clinic” video, which was published publicly Wednesday morning, the executive attributed the shortcoming to industrywide labor supply shortages, wage increases and inflation-driven jumps in pharmaceutical and supply costs.

Noting that more than half of all hospitals lost money during 2022, Mihaljevic said the organization plans to cut back where possible and pursue a more efficient operating model.

“Managing through the current reality is no different than what any of us would do at home: when costs go up, we reduce spending and use fewer resources,” he said in the video presentation. “This year we put forward a plan to serve more patients efficiently. Some administrative hiring has been put on hold and discretionary expenses reduced. These decisions are for the greater good.”

Cleveland Clinic has “hired a record number of caregivers” to address staffing shortfalls and will continue to offer monetary incentives for nurse referrals, the executive noted.

Mihaljevic also framed the operating struggles as a collective responsibility and encouraged employees from top to bottom to brainstorm ways in which facilities and resources could be better used.

“Like managing our own households, it is expected for everyone to contribute,” he said.

Despite the losses, Mihaljevic said Cleveland Clinic intends to continue expanding via a combination of organic growth at existing locations, mergers and acquisitions and digital capabilities such as virtual visits, which he noted have grown fivefold.

“As other organizations struggle to expand, we are growing for the right reasons,” he said. “Each of us would want the best care for our loved ones, but many families do not have access to Cleveland Clinic. This makes growth an ethical imperative.”

Alongside financial and strategic updates, the 40-minute State of the Clinic presentation included highlights of individual employees, patient stories, clinical research initiatives and previews of new facilities currently under construction.

As of the end of its third quarter, Cleveland Clinic had tallied more than $300 million in cumulative operating losses and over $1.5 billion in net losses.

The nonprofit had reported $746 million in operating income and $2.2 billion in net income for the entirety of 2021. During that year’s State of the Clinic address, Mihaljevic shared that Cleveland Clinic had “served more patients than ever” and was rewarded with “our finest financial performance, remarkably, during the pandemic.”