Even as COVID-19 rages on, many health systems have strengthened their financial footing this year.
The combination of patients returning for medical care and continued government support have boosted some operating margins past 10%, a significant shift after what had been a challenging 2020. And while the ongoing COVID-19 surge has hit some states particularly hard, others aren't seeing the same caseloads, which makes it easier for hospitals in those areas to resume normal operations.
"Some of that pent-up demand because of the uncertainties back in 2020 is coming forward in 2021 and we're seeing that return of volumes," said Rick Kes, a partner and healthcare senior analyst with RSM. "Obviously, that's been good financially for the healthcare providers in 2021."
Many of the strong performers this year so far are concentrated in the Midwest and Northeast, where COVID-19 cases are relatively less common. Rochester, Minnesota-based powerhouse Mayo Clinic posted an 11.3% operating margin in the quarter ended June 30, having generated $451 million in operating income on almost $4 billion in revenue. The Mayo Clinic's operating margin was 3% during the same period last year.
The Mayo Clinic's volumes in the first half of 2021 have surged from the same period in 2020, which isn't surprising as that stretch includes the pandemic's first wave and mandated procedure suspensions. Surgeries are up 3.4% in the first half over the same period in 2019, indicating that the company is chipping away at pent-up demand. Admissions and outpatient visits are still down from 2019, however.
The Mayo Clinic's strong performance is the result of long-term, strategic investments in patient care, research and education, Chief Financial Officer Dennis Dahlen, said in a statement. The health system is spending $387 million on capital improvements in the first half of the year to increase its capacity to serve patients, he said.
The Cleveland Clinic in Ohio was another strong performer in the first half of the year, having posted a 10.5% operating margin in the quarter ended June 30. The not-for-profit system lost money in the comparable 2020 period, posting a negative 8.6% margin.
Cleveland Clinic has multiple initiatives aimed at luring patients back for care, Chief Financial Officer Steven Glass said in a statement. The system is also holding on discretionary expenses, he said.
Indiana University Health posted an 11.3% operating margin in the quarter ended June 30, compared with a 7.5% margin in the prior-year period. Surgeries were up 35% at the Indianapolis-based health system in the first half of 2021 compared to the same period in 2020, and discharges were up 10.7% in that time.
The University of Pittsburgh Medical Center posted a 5% operating margin in the first half. While not as high as its peers, that's a big jump for the Pennsylvania not-for-profit system, which had experienced margins hovering at break even in recent years. The performance also beat UPMC's 1.5% operating margin in the first half of last year.