Dive Brief:
- Cleveland Clinic finished the 2017 third quarter with $39.7 million in operating income, down 32% from the same period last year, according to recently released bondholder documents.
- Operating expenses rose 3.3%, fueled by salary and wage and benefit increases and higher pharmaceutical and supply costs. These expenses were larger than the total inpatient admissions growth of 3.2%.
- Overall net income dropped to $227.6 million from $287.6 million in the previous year’s third quarter.
Dive Insight:
Revenues in the third quarter of this year totaled $2.05 billion, up from $2.01 billion in the 2016 third quarter. Cleveland Clinic said the growth was partly due to larger patient volumes, including a 4% increase in acute admissions, compared with a year ago.
While Cleveland Clinic is still turning a profit, it’s facing similar issues as many hospitals across the nation. Over half of U.S. hospitals lost money on operations last year as they restructure care delivery systems to meet the demands of value-based reimbursement, Cleveland Clinic CEO Toby Cosgrove said earlier this year. For all of 2016, Cleveland Clinic saw its operating income plummet 71% to $139.9 million, from $480.2 million in 2015.
Some hospitals have been less lucky. Quorum Health reported a net loss of $29.2 million in the third quarter of this year versus a loss of $7 million last year. Revenues dropped to $499.3 million, largely due to hospital divestitures and revenue loss from the California Hospital Quality Assurance Fee program.
Tenet Healthcare also took a beating in the third quarter, reporting a $366 million net loss and adjusted EBITDA of $507 million. The system attributed the downturn to a $30 million punch from Hurricanes Harvey and Irma plus $10 million lower-than-expected revenues from the Texas Medicaid Waiver and Florida Medicaid programs. Tenet also experienced a $55 million decline in California Provider fee revenue.
Still, the provider did see patient volume growth though it did not eclipse the operating expense growth. Cost controls, operating costs and patient volume numbers will be important trends to watch as hospitals react to the "new normal" of the industry next year.