COVID-19 weighs on Cleveland Clinic’s financial performance year to date

Dive Brief:

  • Cleveland Clinic posted an operating loss of nearly $108 million for the first nine months of the year, after reporting operating income of nearly $268 million during the same period a year ago. Total revenue fell more than 2% due to the suspension of electives, while operating expenses increased almost 3%.
  • The recognition of $352 million in grants from congressional relief packages, including the Coronavirus Aid, Relief and Economic Security Act, helped offset the decrease in revenue. However, Cleveland Clinic has applied for funding from the Federal Emergency Management Agency for COVID-19 response efforts and will continue to pursue grants and other financial help from the government, per the filing.
  • Net income in the first nine months of the year plummeted to $49.3 million from $1.3 billion in 2019 as nonoperating losses, including investment income down more than a third, also posed a drag to performance. 

Dive Insight:

The sector is getting a clearer picture of the pandemic’s full effect on health systems as operators continue to report results that encapsulate almost a full year of performance. The impact of the novel coronavirus is weighing heavily on health system financials, though federal funds are helping keep some in the black. 

But hospital operators, including Ohio-based Cleveland Clinic, are headed for a difficult winter. Cases continue to soar heading into the holiday season, giving rise to concerns holiday gatherings may continue to stoke the spread of the virus and further strain hospital capacity down the line. Cleveland Clinic has a substantial footprint in Northeast Ohio, a region experiencing accelerating cases and deaths like many states across the country. Cases have reached new heights in the state, according to the New York Times case tracker, which noted an average of 8,495 new cases per day, a 68% increase from the average of the prior two weeks. 

In mid-November, Cleveland Clinic suspended non-essential surgeries that require a bed at its Ohio facilities as it experienced a significant increase in the number of COVID-19 patients. The procedures are expected to be rescheduled, and outpatient surgeries will continue, the system said.

Still, the impact of the novel coronavirus has weighed heavily on operations. Patient volumes in all key metrics are still down through the first nine months of the year and will likely continue as some electives have been suspended. 

Inpatient admissions, including acute and post-acute admissions, are down 7.4% through Sept. 30 year-to-date. Surgical cases and ER visits also sagged nearly 18% and 16%, respectively. Clinic visits are down 10%.

Cleveland Clinic reported a net patient revenue shortfall of more than $890 million through September year-to-date, and has incurred more than $190 million in COVID-19 preparedness costs. That includes building up equipment and supplies to prep for a surge in COVID-19 patients, establish testing capabilities and setting up a pandemic surge facility, dubbed Hope Hospital.

Other major nonprofit operators have also noted that clipped volumes continue. Ascension recently reported in its first fiscal quarter that it’s caring for fewer, but sicker, patients. Rochester, Minnesota-based Mayo Clinic also noted the virus is eating into its financial performance, though it’s stayed in the black.