Cleveland Clinic Health System ran into the red during the first quarter of 2022 due to a surge of COVID-19 cases that drove higher costs but lower overall patient volumes, according to financial statements published Thursday.
The nonprofit reported an operating loss of $104.5 million (-3.4% margin) during its most recently closed quarter, a decline over the $61.7 million operating income (2.2% margin) it had notched a year prior.
Including investment losses and other nonoperating items, the 20-hospital system saw its net income decline more than $500 million year over year to a $282.5 million deficit in the opening frame of 2022.
"The COVID-19 pandemic has presented financial challenges for the system,” Cleveland Clinic management wrote in the filing. “The system continues to incur incremental supply costs and other expenditures for COVID-19 preparedness in an effort to provide safe and effective patient care. Nationwide labor shortages have created staffing challenges that have resulted in increased overtime costs and premium pay for employed caregivers as well as an increase in the utilization of agency nurses and other temporary personnel to meet the demand of patient activity.
“The system has taken, and continues to take, actions to mitigate the effect of the pandemic on its financial condition and results of operations; however, predicting the course of this pandemic and its effect on future operations cannot be determined at this time,” management wrote.
Net patient service revenue and total operating revenue were both up year over year, with management noting rate increases on its managed care contracts that went into effect.
Management wrote that its operating revenues for the quarter were still impacted by lower volumes, such as the postponement of nonessential surgeries and procedures during January.
Cleveland Clinic’s acute admissions decreased 3.8% year over year, total surgical cases decreased 3.1% year over year and outpatient evaluation and management visits increased by 2% year over year, according to the filing.
The larger issue was a 14.3% year-over-year increase in total operating expenses, which was comprised of a 16.6% increase in salaries, wages and benefits. Supplies expenses were also up 7.8% alongside other areas such as purchased services, administrative services, facilities expenses and others.
Cleveland Clinic saw no help from its investments, returns from which were $455.7 million lower than in the first quarter of 2021. Flat derivative gains and a more than $10 million year-over-year decline in other net nonoperating gains and losses also did little to blunt the system’s omicron losses.
These rough three months come in the wake of a bounce-back year for Cleveland Clinic, which reported $746.2 million in operating income and a $2.2 billion net profit across 2021.
The system is in good company, however, as a slew of other large nonprofits including Advocate Aurora, Mayo Clinic and Providence reported hundreds of millions in losses for the opening quarter of 2022.