Cleveland Clinic Posts $911M Net Income In 2023 On Investment, Volume Growth

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Dive Brief:

• The Cleveland Clinic reported $64.3 million in operating income for 2023 on Thursday, reversing course after posting a $211.3 million operating loss in 2022.
• The nonprofit health system grew operating revenue by 11.4% year over year to $14.5 billion in 2023 on increased demand for inpatient and outpatient services. Annual operating revenue growth outpaced a 9.1% annual increase in operating expenses.
• Cleveland Clinic logged $846.9 million in nonoperating gains during 2023, primarily driven by positive investment returns. The systems reported a 9% return on investment activity in 2023 compared to a 9% investment loss in 2022.

Dive Insight:

Cleveland Clinic is the latest nonprofit health system to report positive financial turnarounds in 2023. Last month, Mayo Clinic and Kaiser Permanente posted multi-billion dollar net gains for 2023.

Nonprofit health systems were battered by cost pressures in 2022, including labor shortages and record-high inflation. Credit agencies have held mixed opinions about when — and even whether — nonprofit providers could expect to make a full financial recovery.

Fitch Ratings predicted last year that health systems’ financial recovery would be uneven in 2023 and 2024. The agency said health systems’ financial success was linked to their ability to manage the pace of expense growth, particularly labor costs.

Cleveland Clinic reported an excess of revenues over expenses of $911.2 million for the year —  a 5.9% margin — compared to a loss of $1.2 billion in 2022. 

The system, which operates 22 hospitals and 275 outpatient care facilities, kept expense growth below the rate of revenue growth in 2023 by growing patient volumes.

Inpatient hospital admissions increased 8% year over year, while clinic and outpatient visits increased by 9%. Both inpatient and outpatient surgical volumes increased by more than 7% in 2023 compared to the year prior. 

Expenses rose 9.1% during the year, primarily due to higher patient volumes and increased salaries, wages and benefits, supplies expenses and pharmaceutical costs. The system said it continues to experience labor shortages. However, it has reduced staffing agency utilization costs from 2022 peak levels.