Cleveland Clinic reports it lost more than $200 million last year
The Cleveland Clinic lost more than $200 million last year the hospital CEO announced Wednesday during the annual state of the Clinic address.
President and CEO Dr. Tom Mihaljevic attributed the losses to health care services that were put on hold during the pandemic, labor shortages and associated higher wages and inflation that affected supply and pharmaceutical costs.
"What we are experiencing ... is tremendous, tremendous increase in cost, primarily labor cost," Mihaljevic said, during a press conference after the address.
Labor costs increased between 15% and 30%, he said. The cost of energy and pharmaceuticals and other supplies was also up.
"We are in an industry that creates a tremendous social impact and social benefit but runs, in the best of years, with a very low margin," he said. "If you are facing an increase in every single component of your cost base, that goes [up] 15 to 20, 30%, and you're running at a 3 to 5% profit on a good year, the math becomes pretty simple, unfortunately."
The amount of money reimbursed to hospitals by government health insurance plans Medicaid and Medicare are expected to rise. But those reimbursement rates still lag the cost increases facing the hospital, he said. The blended reimbursement is expected to increase by 2.5%, he added.
Last year was particularly difficult for many hospitals, Mihaljevic said. More than half lost money despite patient demand for services, according to a report by the consulting firm Kaufman Hall.
But Mihaljevic said he was confident the Clinic would weather the storm.
"We have been able to fulfill our mission for more than 100 years, despite wars, recessions, pandemics and the tragic fire of 1929," he said. "Cleveland Clinic is persistent in good times and in hard times. We stayed true to our goals, even when it is most difficult and have never compromised our care."
As the world moves beyond the COVID-19 pandemic, the health care sector is facing new challenges, Mihaljevic said.
Across the country, Americans face declining health, more health care workers are burned out and leaving the field, the majority of hospitals are taking financial losses and health care inequities are threatening to widen in local communities, he said.
Amidst those challenges, the Clinic has tightened its belt, Mihaljevic said.
"Discretionary expenses, such as travel consultancy fees, have been greatly reduced," he said. "Administrative hiring was reduced because we had to prioritize the hiring of those who are directly involved in inpatient care."
Mihaljevic stressed that the Clinic has not withdrawn any aspects of patient care.
"We've cared for a record number of patients. We continue to contribute to our community. We have not backed off of any commitments that we have made to our community," he said.
The challenges the Clinic faced last year were not unique to the system, Mihaljevic said.
"This post-COVID year in very many ways has been much tougher than in the worst years of the pandemic for caregivers who've been caring for all of you and your loved ones during COVID," Mihaljevic said. "They're tired, they're stressed, and now, a year after COVID, they've been put under tremendous, tremendous strain... But despite all of that, they've been doing a phenomenal, phenomenal job."