The Cleveland Clinic Health System's operating margin dipped from 5.5 percent during the second quarter of 2013 to 4.8 percent in the second quarter of this year, as inpatient admissions declined by 4.7 percent and operating expenses rose by 1.3 percent.
Still, the health system reported an excess of $235.4 million in revenues over expenses for the second quarter of 2014, up from a surplus of $110.4 million in 2013. The system reported $78.9 million in operating income for the three months ended June 30, down from $90 million in operating income during the second quarter of 2013. Higher total operating expenses stemmed from pharmaceutical costs, salaries, wages and benefits. Although inpatient admissions were down year-over-year, outpatient observations increased by 17.9 percent, which led to combined admissions and observations being relatively flat. The system's overall net patient service revenue increased by $4.2 million (0.3 percent) year-over-year.
For the six months ended June 30, the system reported $120.7 million in operating income, resulting in a 3.7 percent operating margin — compared with $168.6 million in operating income and a 5.2 percent operating margin during the first six months of 2013. The lower operating income during the first half of this year was mostly due to lower inpatient admissions and surgical cases (which decreased by 5.4 percent and 1.6 percent, respectively). Total operating expenses also increased by 1.5 percent during the first six months of this year, compared with the first half of 2013, primarily because of higher pharmaceutical costs, salaries, wages and benefits.
However, the system saw outpatient observations increase by 19.4 percent year-over-year for the six months ended June 30, and net patient service revenue went up by $2 million (0.1 percent). Overall, the system reported a surplus of $322.3 million for the first half of this year, compared with a $364.3 million excess of revenues over expenses during the first six months of 2013.