Though held in check by inflation, Cleveland Clinic’s first-quarter operations trickled past last year’s tally thanks to a jump in volumes and revenues.
The nonprofit system reported this week a $50.2 million operating gain (1.3% operating margin) as opposed to the prior year’s $32.3 million (0.9% operating margin). Operating revenues rose 10.2% year over year to nearly $3.9 billion while operating expenses followed close behind with a 9.8% increase.
Cleveland Clinic enjoyed “strong demand for both inpatient and outpatient services” during the quarter, management wrote in commentary on its operations. Compared to the prior year, acute admissions rose 6.7%, total surgical cases by 3.7% and outpatient evaluation and management visits by 3.9%.
The system’s 9.4% increase in net patient service revenue was also boosted by rate increases among Cleveland Clinic’s managed care contracts that went into effect with the new year. Additionally, management wrote, “over the last few years, the system initiated national, regional and local revenue management projects designed to improve patient access throughout the system while striving to ensure the safety of patients, caregivers and visitors.”
The system had to up its spending to keep pace with the increased volumes, though management said the year-over-year expense growth was also fueled by “inflationary trends that increased salaries, wages and benefits, supplies expenses and pharmaceutical costs.” Ongoing labor shortages have forced the system to maintain increased overtime and premium pay as well as agency nurse utilization, though the latter has been diminished from 2023’s highs “due to various workforce strategies implement by the system to reduce its reliance,” they said.
Still, salaries wages and benefits spending was up 10.2% year over year, purchased services was up 15.6%, medical supplies by 7.9% and pharmaceutical costs by 14.8%, according to the filing.
Cleveland Clinic’s only decline compared to the prior year’s quarter came within its nonoperating activities, where investment returns dipped from $314.2 million to $275.2 million. Taken with the other operating and nonoperating items, the system was left with a $332.8 million bottom line about on par with the first quarter of 2023’s $335.5 million.
Cleveland Clinic has 21 hospitals and a total of almost 300 care locations on three continents, though most of its acute care footprint is in its home state of Ohio. As of March 31, it has 309 days of cash on hand.
The nonprofit reported a 0.4% operating margin on over $14 billion of revenue across 2023—a step up over 2022’s -1.6% operating margin that CEO and President Tom Mihaljevic, M.D., said is lower than he’d like given the year’s record patient volumes. At the time, the executive said the system is making major investments into recruitment and retention as well as workforce safety and that there is no intention of paring Cleveland Clinic’s community investments or service lines in order to appease its balance sheet.
The volume and revenue trends outlined in Cleveland Clinic’s filings fall in line with the first-quarter results of other major nonprofits. Within the last week, Kaiser Permanente, Mass General Brigham and CommonSpirit Health each reported year-over-year operating improvements, though the latter is still working its way out of the red.