Cleveland Clinic operating income drops by 71%

Revenues were up at the Cleveland Clinic in 2016, but higher expenses put a damper on operating income, which fell 71 percent from the year before.

In its annual release to bondholders, the 14-hospital system said revenues were up 12 percent in 2016 to a total of $8 billion. At the same time, expenses increased by 19 percent, from $6.1 billion in 2015 to $7.3 billion, driving the drop in operating income from $480.2 million to $139.9 million.

The growth in expenses was largely attributed to three areas: pharmaceutical (up 23 percent), labor (up 19 percent) and supplies costs (up 13 percent).

Accounting for nonoperating gains, net income was down by more than $100 million, dropping from $618.2 million in 2015 to $513.5 million in 2016.

Total net assets increased to just over $8 million and liabilities were up to $6.4 million.

The clinic also reported a rise in charity care costs, increase from $65 million in 2015 to $87 million in 2016, but this figure isn’t included in net patient service revenue.

Overall, the system reported a change in the payor mix among its patients. The share of Medicare patients increased to cover one-third of Cleveland Clinic’s net patient service revenue in 2016. 8 percent of net patient service revenue in 2016 came from Medicaid beneficiaries (up from 6 percent) while 57 percent came from managed care or private insurance, a drop from 60 percent in 2015 even though the overall revenue from that payor source increased year-over-year.