State of Cleveland Clinic - Still Growing Despite Income Loss

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Cleveland Clinic saw a substantial drop in operating income in 2016 -- nearly 50 percent over the previous year. With over $243 Million in operating income, however,  the hospital system's balance sheet is still in the black, said clinic CEO Toby Cosgrove in  his annual State of the Clinic address, Wednesday.

Cosgrove painted a picture, to over 600 employees, of an organization that is continuing to grow in size and through medical innovations, while facing shrinking revenue from the government which pays for the bills Medicare and Medicaid patients.

“It’s more expensive to deliver the care. We saw drug prices for example go up 19 percent and we have just seen it more expensive to deliver care as we are dealing with more older patients and sicker patients,” he said.

The Clinic is not only the largest employer in Cleveland, it's now the largest employer in Ohio with over 51,000 employees, he said.

With facilities across the state, in Florida, Las Vegas and Canada, the clinic continues to enlarge its global footprint. It just closed a deal to build a 205-bed hospital in London slated to open in 2020. Some of the profits from the international locations, such as Abu Dhabi in the United Arab Emirates, have been reinvested back in Cleveland and Cosgrove expects similar results from London.

“We think its going to be economically good for us. It's probably the most international city in the world and it certainly will expand our brand,” he said.

Cosgrove told the clinic employees that the London facility is directly behind Buckingham Palace. 

Locally, the health system operates thirteen hospitals and numerous outpatient and surgical centers. Non-profit hosptials are requred by the Internal Revenue Service to give back to the local community. The community benefit dollars are invested in local research, education, and some clinical services.  The community benefit number reported by the clinic also includes money used to cover shortfalls in reimbursements from the government for health insurance.  The most recent number provided by clinic officials for Northeast Ohio was $675 million in community benefit in 2015.

 Cosgrove also touched on national health-care issues facing the hospital system in an interview after the speech with the news media. The clinic and other hospital systems are facing an uncertain future with likely changes to the Affordable Care Act, he said.

He stressed that he is happy to have a seat at the table as part of President Trump’s business leader advisory group.

“I don’t think we are going to see repeal. I think it’s going to be more like repair. I think we’ll see some changes in the health-care bill. I don’t think there will be catastrophic repeal," he said.

If the ACA is repealed, Cosgrove estimates some 20 million people would be left without health insurance.

Cosgrove said he has also given input to President Trump about the recent executive order banning travelers from seven majority-Muslim countries.  In those discussions, he stressed the importance of people coming to the U.S. for treatment and training.

“I think they realize it was not implemented well and they listened and we’ll have to see what they take back."


*This post has been updated to reflect that the clinic's operating income loss in 2016 was nearly 50 percent over the prevous year- not more than.

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