Cleveland Clinic Health System’s operations lost $183.5 million during the quarter ended June 30 thanks to a 15.1% increase in the nonprofit’s operating expenses, according to financial statements published Monday.
The system’s -5.9% operating margin is a turnaround from the 10.5% margin ($339.5 million gain) during the second quarter in 2021 and only made worse by $603.5 million in accompanying nonoperating losses.
The 20-hospital system reported a “soft recovery” in volumes from the winter’s omicron surge. Acute admissions dipped 4.1% year over year while total surgical cases rose 1.9% and outpatient evaluation and management visits increased 2.9%.
These helped Cleveland Clinic notch a 1.1% year-over-year increase in net patient service revenue and a 2.5% year-over-year increase in total operating revenues when excluding federal relief payments (otherwise a 2.7% decrease in operating revenues).
Chief among the Cleveland Clinic’s $435.7 million increase from last year’s total operating expenses were its personnel costs.
Salaries, wages and benefits rose $263.2 million year over year, a 15.8% increase, with the system highlighting national labor shortages and new full-time equivalent employees it hired to staff its newly opened London Hospital.
Still, Cleveland Clinic’s expense increases landed across the board and included an 11.5% increase in supplies expense, an 11.7% bump in pharmaceutical costs, a 26.2% rise in purchased services and other fees and a 48.4% jump in administrative services.
Nonoperating results were dominated by $627.5 million of investment losses, more than wiping out the second quarter of 2021’s $565.8 million investment gain.
Overall, Cleveland Clinic reported a net deficiency of $786.9 million for the second quarter and $1.07 billion for the year’s first half. It had seen increases of $904.4 million and $1.26 billion during the same periods in 2021.
A procession of nonprofit systems has released quarterly reports plagued with higher expenses and hundreds of millions in investment losses. Cleveland Clinic’s -5.9% operating margin puts it on the lower end of the scale alongside names like Providence, Mass General Brigham and Sutter Health, all of which saw operating losses in the most recent quarter.
The pain is likely to continue into the next quarter as well. A report published this week by Kaufman Hall on hospitals’ July financials outlined “some of the worst margins since the beginning of the COVID-19 pandemic.” Fitch Ratings also warned earlier this month of persistent pressure from labor shortages and economywide inflation expected to continue through the end of the year.