Cleveland Clinic’s operating income improved substantially in the third quarter of 2020, but not enough to make up the loss it reported earlier in the year, leaving the system with a $107 million operating loss for the nine-month period ending Sept. 30.
This resulted in an operating margin of -1.4% through September, compared to an operating income of $267.6 million (a 3.4% operating margin) for the like period last year.
The Clinic attributes that to a 2.2% decrease in total unrestricted revenues (driven by the suspension of nonessential procedures between mid-March and May 4) and a 2.7% increase in operating expenses.
The system has recognized $351.6 million of Coronavirus Aid, Relief, and Economic Security (CARES) Act Provider Relief Fund payments and $9.3 million of Employee Retention Credits, which partially offset the decrease in revenue.
Looking at just the third quarter of 2020, the Clinic’s operating income of nearly $134 million was higher than the $115 million for the third quarter of 2019.
This was a significant turnaround from the second quarter, in which the Clinic posted an operating loss of $201.8 million. At the time, Steven Glass, the system’s chief financial officer, said he expected that to be the worst quarter of the year.
From January through September of 2020, compared with 2019, the Clinic reports that acute admissions decreased by 7.4%, total surgical cases dropped by 17.8% and outpatient evaluation and management visits decreased by 10%, which all contributed to the overall operating loss for those nine months.
The financial report notes that net patient revenue benefited from rate increases on the Clinic’s managed care contracts that became effective this year.
Overall, the Clinic’s excess of revenues over expenses for the first nine months of 2020 was $49.3 million, compared with $1.27 billion for the like period in 2019.
Other notes from the report:
- COVID-19 and the British government’s social distancing restrictions have slowed construction on the Clinic’s London facility, which had been slated to open in spring 2021. Now the system is planning to complete construction by September of next year and welcome patients in early 2022.
- Last summer the Clinic announced plans to build a new 400,000-square-foot Neurological Institute building on its main campus and expand the Cole Eye Institute to add more than 100,000 square feet of space. For each, the financial report noted that “the system is re-evaluating the scope and timeline for this project due to the COVID-19 pandemic. A portion of the construction costs are expected to be raised through fundraising efforts and donations.”
- The Clinic is also re-evaluating the scope and timeline for its plans to build a small hospital on 47 acres of vacant land in Lake County, announced early last year. This Mentor Hospital is still in the planning and design phase with the size of the facility and scope of services yet to be determined.
- “The Power of Every One,” a philanthropic campaign launched in 2014 with the goal of raising $2 billion by the Clinic’s 100th anniversary next year, has received pledges, cash and other assets of approximately $2.1 billion, as of Sept. 30.