Cleveland Clinic is starting 2023 on the right side of zero, reporting Tuesday a first-quarter operating income of $32.3 million (0.9% operating margin) and a net income of $335.5 million.
Though the nonprofit system had reported a $1.2 billion net loss across 2022, the first quarter’s numbers continue the upward momentum Cleveland Clinic enjoyed at the end of last year.
Like many health systems have reported in recent weeks, the performance is also a substantial bounce back from the first quarter of 2022 when the omicron wave dragged Cleveland Clinic to a $104.5 million operating loss (-3.4% operating margin) and a $282.5 million net loss.
On a year-over-year basis, total unrestricted revenues grew 15.7% by way of a 13.3% rise in net patient revenue, to $3.1 billion, and a 37.3% increase in other restricted revenues, to $425.3 million.
For net patient revenue, a combination of strong demand and 2022’s elective postponements helped Cleveland Clinic realize double-digit percentage volume increases; admissions rose 12%, total surgical cases increased 15.9% and outpatient evaluation and management visits jumped 15.9% year over year, the system reported. The system also said it benefited from rate increases on its managed care contracts and, for other unrestricted revenues, increases in outpatient pharmacy revenues tied to greater utilization.
Total operating expenses, meanwhile, increased 10.9% year over year “primarily due to higher patient volumes and inflationary trends that increased salaries, wages and benefits [10.3% increase], supplies expenses [11% increase] and pharmaceutical costs [24.2% increase],” Cleveland Clinic wrote.
The other key difference from the first quarter of 2022 was the system’s investment performance. Cleveland Clinic saw a $314.2 million return in the most recent period versus a $212.5 million investment loss the prior year.
The 20-hospital system reported 321 days of cash on hand and current and long-term debts totaling $5 billion as of March 31.
In January, CEO and President Tom Mihaljevic, M.D., said the nonprofit was prioritizing hiring efforts to offset labor shortages and would be keeping an eye out for opportunities to reduce expenses. This included a pause on “some” administrative hiring, he said.
Cleveland Clinic narrowly joins the ranks of Sutter Health, Kaiser Permanente, Intermountain Health and Mayo Clinic as nonprofits reporting an operating gain in 2023’s opening frame. Providence and CommonSpirit Health have landed on the other side of the spectrum with hundreds of millions in reported operating losses.