Cleveland Clinic’s net loss topped $1.5 billion in the first nine months of 2022, as the nonprofit continues to face inflationary pressures and rising salary and labor expenses.
In the third quarter alone, the 20-hospital system reported a more than $469 million loss, compared to its net income of $422 million at the same time last year.
Hospital operators are continuing to report rising losses in a tricky operating environment, with staffing shortages and inflation pressuring finances. High expenses and labor costs, paired with fewer patient discharges, have hospitals facing negative margins at the close of 2022, according to a recent report from Kaufman Hall.
One major driver of Cleveland Clinic’s loss was weak investment returns. The Ohio-based system’s investment losses totaled almost $1.3 billion in the first nine months of 2022. In comparison, Cleveland Clinic gained $1.1 billion from investments in the same period last year.
Volume is also still recovering from COVID-19. “The recovery of patient activity through the third quarter of 2022 has been slow as patients served have remained below expected levels,” the system said in its financial statement. Cleveland Clinic said it will continue to monitor bed capacity, as patient occupancy was down to 75.3% in the first nine months of 2022, compared to 76.4% in the same period last year.
Operating expenses were also up 16% in the first three quarters of 2022, contributing to Cleveland Clinic’s negative 3.3% operating margin.
Cleveland Clinic chalked the growth in expenses primarily up to higher personnel costs, arguing that nationwide labor shortages have created staffing challenges resulting in increased overtime costs and premium pay for employees, along with an increase in travel nurses and other temporary personnel.
The system’s salaries, wages and benefits were up more than 16% to $5.7 billion in the first three quarters of the year.
“Supplies, pharmaceuticals and other non-labor expenses have also increased due to recent inflationary trends and supply chain challenges,” according to Cleveland Clinic’s financial statement.
The nonprofit reported total nine-month revenue of $9.5 billion, up more than 4% year over year.
Earlier this year, credit rating agency Fitch downgraded its outlook for the nonprofit hospital sector to “deteriorating” due to elevated expense pressure.
In November, Washington-based Providence posted a nine-month operating loss of $1.1 billion, while in September, Chicago-based CommonSpirit posted a $1.3 billion operating loss at the end of its fiscal year.