Rather than the nearly 50% drop in operating income the Cleveland Clinic stomached in 2016, president and CEO Dr. Toby Cosgrove instead focused on quality metrics, education, research and innovation during his annual State of the Clinic address on Wednesday morning, Feb. 15.
Cosgrove began his address by congratulating staff for national rankings and quality improvements, as well as highlighting the Clinic's opportunity to work with the current administration as it shapes the future of health care policy.
Then, citing businessman Nido Qubein, Cosgrove said, "Our present circumstances really don't determine where we can go. They merely determine where we're starting."
The speech stood in stark contrast to last year's, in which he touted 2015 as the best financial year in the health system's history.
In 2016, however, the Clinic posted $243 million in operating income (a 49.5% decrease from 2015) on $8 billion in operating revenue. Overall system revenues were up about 11% from the previous year.
That still represents a operating margin of about 3%, down from 6.7% last year, but a rebound from the 1.8% operating margin it had for its third quarter of 2016, according to unaudited financial statements.
Cosgrove attributed the financial drop to more expensive care, older and sicker patients, insufficient reimbursement rates and more. He said he doesn't expect to see a "substantial drop" ahead, and the Clinic is off to a "very fast start" so far in 2017.
"I think we'll continue to have a positive operating income," Cosgrove said. "I also think that it's going to be harder and harder to do that, because we're getting paid less for what we do and what we do is more expensive."
Without recent cost savings of more than $634 million, last year's operating income would have been just $122 million, according to the Clinic.
Cosgrove said he was asked "out of the blue" to participate in discussions around federal health care policy reform. During discussions to draft and create the Affordable Care Act, he was a part of a group of a dozen individuals who met for an hour in the White House, giving him about three minutes of input, he said.
"I think the nice part of what's happened recently is we now have a seat at the table," Cosgrove said. "And it's an opportunity for us to begin to represent the health care industry and to particularly represent the patients."
Overall, Cosgrove called 2016 a "very successful" year for the Clinic, despite changes that are "unprecedented in their size, speed and scope."
He recognized that the forces rapidly reshaping health care have resulted in significant stress among caregivers and, in some cases burnout, a problem he highlighted last year and that the Clinic is working to address.
"Demands on all caregivers have never been greater," he said. "At the same time, the Cleveland Clinic's opportunities have never been greater."
"2016 was a tough year for Cleveland Clinic finances" originally appeared in Crain's Cleveland Business.