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Cleveland Clinic takes financial hit in 2018

By GINGER CHRIST • Feb 28, 2019 at 9:00 PM

CLEVELAND —  The Cleveland Clinic saw its operating income take a hit in 2018, dropping 19 percent to $266 million, according to numbers released this week.

CEO Dr. Tom Mihaljevic attributed that decline to the continued increase in the cost for providing care and decline in reimbursement rates.

"We have to fight to keep costs low and care affordable for patients," Mihaljevic said Wednesday during his State of the Clinic address at the InterContinental Hotel.

The system's revenue rose 6 percent last year to just shy of $9 billion.

In late June Fisher-Titus Health ended its relationship with Cleveland Clinic after five years that brought more services and offered more health care professionals to local patients.

Fisher-Titus and Cleveland Clinic Heart and Vascular Institute parted ways effective Nov. 29.

“We understand the important relationships patients have formed with the Cleveland Clinic physicians who provide care at the Snyder/White Heart & Vascular Center,” former CEO Matt Gross said in a prepared statement at the time. “Patients can continue to see their Cleveland Clinic physicians in their offices at Fisher-Titus through November, but will need to contact their providers for information regarding future physician services through Cleveland Clinic. 

“We appreciated the support that the Cleveland Clinic has provided us over the past five years at our Heart and Vascular Center,” Gross said.

“As the health care world continues to change, we continuously assess each service line and make the necessary business decisions to ensure our long term viability as a local community health system.”

Cleveland Clinic board member Victoria Vinci said the hospital will continue to serve its patients, it just might be at a different location that they’re used to going to.

“We have begun the process of communicating this update with our patients,” she said at the time.

To combat the rising cost of healthcare, Mihaljevic plans to continue the system's focus on operational efficiencies, particularly in its new properties and as it expands. The Clinic in January integrated two Florida-based health systems — Indian River Medical Center and Martin Health System — into its system.

To that end, the Clinic is establishing a Center for the Study of Healthcare Delivery to study the processes of healthcare delivery, to make sure care is coordinated and that tests given are timely and not redundant. Through standardized care, the system can reduce costs, Mihaljevic said.

However, he stressed that the Clinic is a not-for-profit hospital, focused on patient care, not profits.

"We're not here to make money. We're here to serve our patients," Mihaljevic said after the address.

The Clinic plans to double the number of patients it serves — to 4 million — in the next five years, he said.

"We feel that we have an ethical need to expand the quality of care that we know how to provide to as many people as possible," Mihaljevic said. "In tomorrow's healthcare, the biggest change in our strategy is to become a proactive healthcare organization."

That growth will come from a focus on telemedicine and on population health, he said.

"Digital growth is going to be by far the largest," Mihaljevic said.

The Clinic also will reach new patients through its expansion efforts in and out of the state. Cleveland Clinic Abu Dhabi is growing 30 percent each year, and the 200-bed Cleveland Clinic London is slated to open in two years.

The Clinic also plans to begin work this year on a new hospital in Mentor, expanding its presence in Lake County. Mihaljevic said it was too early to estimate what the capacity of the new facility would be, but confirmed it would offer both inpatient and outpatient care.

"Responsible stewardship will allow us to grow, and we will grow both physically and digitally. We'll invest in our home base and our core infrastructure here in Ohio," Mihaljevic said during the address.

He said there are parts of the Clinic's main campus "that desperately need more space and more availability."

The Clinic plans to invest this year in its neurological institute, which is in one of the oldest buildings on campus, in the Cole Eye Institute and in Fairview Hospital.

The system also is in the process of upping its minimum wage in the U.S. The system in January increased its minimum wage to $14 per hour for most of its hourly workers, excluding some local union employees. By 2020, the health system will increase that rate to $15 per hour.

Beyond that, the Clinic is focused on improving employee safety as violence against healthcare workers continues to increase, he said.

"It's an epidemic nobody talks about," Mihaljevic said. "It's been getting worse. This has not happened overnight."

Last year alone, the Clinic confiscated 30,000 weapons from patients, mostly in the emergency department. He attributed the increase, in part, to the opioid epidemic and to related mental-health concerns.

The Clinic has added panic buttons to employee badges, installed metal detectors and offered employees police escorts to the parking garages, among other security measures.

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