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Cleveland Clinic posts 30% operating income drop in 3rd quarter

The system's quarter closed with a $60 million reduction in net income to $227.6 million from $287.6 this time last year, financial documents show.

Beth Jones Sanborn, Managing Editor

Cleveland Clinic was stung by a dip in financial performance in third quarter 2017, with a more than 30 percent drop in operating revenue, and a $60 million drop in net income, according to financial statements released by the system.

Operating income dropped to roughly $39.7 million from $58.4 million third quarter last year due at least in part to noticeable increases in salaries, wages and benefits, supplies and pharmaceuticals. Salaries, wages and benefits swelled from $1.1 billion as of September 30, 2016 to $1.13 billion this September 30 this year.

[Also: Cleveland Clinic Abu Dhabi CEO Tomislav Mihaljevic to replace Toby Cosgrove as system leader]

Two other areas saw notable spikes: pharmaceutical costs rose $30 million from $221 million to $251 million. Supply costs increased by $7 million to for the period ending September 30, the documents showed.

There was a slight increase in revenue from $2.01 billion this time last year to $2.05 billion, but it was overshadowed by other shifts in budgetary categories. In the end, third quarter closed with a $60 million drop in net income to $227.6 million from $287.6 this time last year.

[Also: Alleged co-conspirator charged in $2.8 million Cleveland Clinic fraud]

The last six months have had at least one other hiccup for the juggernaut healthcare system, as a major fraud case came to light involving a former executive there, Gary Fingerhut. Though Fingerhut had been dismissed in 2015, he was charged this September with accepting an estimated $130,000 in payment from a shell company that allegedly defrauded the health system out of more than $2.7 million, according to the U.S. Department of Justice in Northern Ohio. His alleged co-conspirator was charged about a month later.

However, the system also turned a major page in its leadership history when they announced the successor to long-time and renowned CEO Toby Cosgrove. The system named the current CEO of their Abu Dhabi facility, Tom Mihaljevic, as the leader who will take the helm of Cleveland Clinic.

[Also: Select Medical, Cleveland Clinic Edwin Shaw rehabilitation hospital opens doors to patients]

Mihaljevic will step in as the new leader effective January 1, 2018.

Twitter: @BethJSanborn
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