Hospitals seeing worst margins since beginning of pandemic, Cleveland Clinic posts near $1B loss

Editor's Note

In this National Hospital Flash Report, published in August 2022 by healthcare consulting company Kaufman, Hall and Associates, LLC, experts say “that 2022 is shaping up to be the worst year financially for US hospitals and health systems since the beginning of the COVID-19 pandemic,” Becker’s Hospital CFO Report August 29 reports.

Hospitals and health systems saw “gradual improvement in recent months,” but inflated labor costs, aggressive staff hiring, and prolonged hospital stays from sicker patients in July “reverse any gain hospitals saw this year,” the report noted.

An increasing number of patients choosing ambulatory surgery centers over hospital settings is another trend contributing to diminished margins, and health systems are lacking “the federal funds to offset the damage” brought by these margins, according to the report.

Kaufman Hall Senior Vice President of Data and Analytics Erik Swanson said that "2022 has been, and will likely continue to be, a challenging year for hospitals and health systems, but it would not be prudent to focus on short-term solutions at the expense of long-term planning."

Becker’s on August 30 also reported on Cleveland Clinic’s recently released financial report, which showed that the health system reported a net loss of $786.9 million in the second quarter of 2022, compared to a net income of $904.4 million in the same quarter in 2021. In a statement, Cleveland Clinic attributed the negative margins to “increased overtime costs and premium pay for employed caregivers as well as an increase in the utilization of agency nurses and other temporary personnel to meet the demand of patient activity," in addition to other nonlabor expenses inflated by supply chain challenges.