Cleveland Clinic’s latest acquisition boosts quarterly performance

Dive Brief:

  • Cleveland Clinic bounced back into the black in the first quarter of 2021, reporting operating income of nearly $62 million, a turnaround from its $40 million loss from operations during the same period last year.
  • Though patient volume is still trailing what executives had expected, a recent acquisition helped boost patient volume during the first quarter. Acute inpatient admissions would have actually decreased for the quarter without the Feb. 1 acquisition of Mercy Medical Center, a sizable hospital that serves southeast Ohioans.     
  • Overall, including non-operating activity, the Ohio-based system was able to rebound after a sizable loss in 2020. The system reported first quarter net income of $350 million, including investments. Last year, the system reported an $831 million loss.  

Dive Insight:

After weathering a tumultuous year, hospital operators have continued to report mixed results as some were able to better navigate the pandemic than others.

After reaching a peak in January, COVID-19 cases have continued to fall as vaccination rates have steadily increased. However, the effects of the pandemic have continued to drag on some quarterly results for hospital operators.

Ascension, one of the nation’s largest health systems, reported a nearly $17 million loss from operations for the quarter that ended in March due to low patient volumes. Sutter Health, a large system in Northern California, also posted an operating loss for the first quarter and warned breaking even by year end would be ambitious.   

The global pandemic took hold in mid-March of last year as providers were forced to curtail elective services, causing volumes to fall off a cliff.

Though even a year later, when electives have come back online, volume rebounds have not been as dramatic as some might expect, given they’re being compared to a quarter from a year prior that saw unprecedented declines.

Cleveland Clinic noted emergency room visits are down nearly 10% compared to the prior-year period. However, surgical cases increased 6.5% for the quarter while inpatient admissions were up 1%, aided by the Mercy acquisition. 

But even with the turnaround, Cleveland Clinic’s operating margin was still relatively slim at 2.3%. 

Kaufman Hall, a consultant group for the hospital industry, noted hospital margins have been thin compared to pre-COVID levels. 

“Overall margins remain low and fluctuations month-over-month convey continued uncertainties for hospitals, as they work to recover from a profoundly challenging pandemic,” the group said previously.

Cleveland Clinic said it received $162.4 million of federal provider relief payments in April and will use those funds in the second quarter. It’s unclear how much of the funds Cleveland will recognize as they are required to follow shifting terms and conditions laid out by the government.