Cleveland Clinic executives applauded the operator’s financial rebound in an annual State of the Clinic address, but signaled it would continue lean operations to chase sustained profitability.
“We sustain and advance Cleveland Clinic's mission by serving patients and managing our resources,” said Tom Mihaljevic, Cleveland Clinic CEO and president, during the Wednesday address. “It is possible to use fewer resources while touching more lives.”
Cleveland Clinic exceeded its revenue projections for 2023, drawing in over $14 billion in revenue on more than 14 million annual patient interactions, according to Mihaljevic.
The Ohio-based nonprofit reported an operating margin of 0.4% for the year — an improvement on the prior year’s performance, when the Clinic reported an operating margin of -1.6% on a $1.2 billion net loss.
However, the results were not strong enough to rid the executive of cost concerns.
“In the past, these results would assure a healthy financial foundation for Cleveland Clinic, but all hospitals, including us, are challenged by inflation,” Mihaljevic said. “The rising cost of wages, supplies and pharmaceuticals has greatly outpaced nominal increases in reimbursement.”
Nationwide, nonprofit hospitals have struggled with the conditions Mihaljevic referenced. Since 2020, hospitals have grappled with uneven patient demand for services and rising costs associated with providing care. They have typically reported losses or narrow profit margins. At the outset of this year, the three major credit rating agencies — Fitch Ratings, S&P Global Ratings and Moody’s — were divided on the forecast for the industry, predicting negative to stable outlooks.
Given the precarious external environment, Mihaljevic said Cleveland Clinic will invest in “smart growth” opportunities, including expanding its real estate footprint and investing in automation.
The system has expanded patient services by 53% since 2018, and now operates 300 locations across three continents, according to Mihaljevic. Cleveland Clinic will renovate and expand its Cleveland-based Cole Eye Institute by the end of 2025, and open a new neurological hospital in 2026.
Investments in digital tools and automation are also predicted to reduce costs of delivering care, Mihaljevic said. The CEO highlighted the operator’s Florida-based “Hospital at Home” virtual care program, which Mihaljevic said was the future given its accessibility and affordability.
The Clinic has also invested in a series of automation initiatives to increase labor productivity, including an artificial intelligence scribe backed by Nuance to assist with summaries of patient interactions and a partnership with AI operations company Palantir to automate bed-planning and staffing management decisions.
The company will continue to invest heavily in the recruitment and retention of frontline caregivers, with Mihaljevic calling recruitment the greatest challenge in the current healthcare environment.
Cleveland Clinic’s turnover rate currently sits 4% lower than the industry average, according to the system. The health system attributed the figure in part to a successful apprenticeship program which creates a “pipeline” for in-demand roles in pharmacy, epilepsy and sleep, and ophthalmology.