Delos Cosgrove, MD, president and CEO of Cleveland Clinic, explained in this year's "State of the Clinic" address that although Cleveland Clinic's finances in 2011 "have never been stronger," mergers and acquisitions will be a key component to expanding the health system's financial growth.
Dr. Cosgrove said Cleveland Clinic's revenue last year hovered around $6.5 billion. Statistics on net income were not provided.
While the health system's revenue figure is similar to previous years, financial growth drivers are changing. For example, like several other hospitals and health systems across the United States, Cleveland Clinic is seeing an increase in Medicare, Medicaid and self-pay patients and a decrease in commercially insured patients. Additionally, both commercial and government reimbursements are below the inflation rate for healthcare.
It is unlikely Cleveland Clinic will be able to grow its volume much to boost revenue, as Cleveland's and Cuyahoga County's populations have dropped significantly over the past several years, Dr. Cosgrove said. Instead, the health system will focus on three main growth drivers: market share, increasing and expanding services, and mergers and acquisitions.
Mergers and acquisitions will have the biggest impact on the Cleveland Clinic because they offer the most potential for financial growth, Dr. Cosgrove said. Roughly 40 percent of hospitals are still not a part of a health system.
Dr. Cosgrove pointed to Cleveland Clinic's two most recent acquisitions: Medina (Ohio) Hospital in 2009 and North Coast Cancer Care in Sandusky, Ohio, in 2011. These two transactions increased Cleveland Clinic's revenue by $120 million in 2011 — roughly 83 percent of the health system's $144 million in total increased revenue in 2011. However, Dr. Cosgrove said the $144 million in revenue growth "on a $6 billion organization is not a great deal." A heightened focus on mergers will increase Cleveland Clinic's scale and its ability to attract high-quality physicians and other staff, he added.
Cleveland Clinic management also expects the Patient Protection and Affordable Care Act and other components of the changing healthcare environment will reduce the health system's revenue by $237 million by 2016. Dr. Cosgrove said savings can be achieved by looking at alternative forms of reimbursement, such as bundled payments, as well as researched cost-cutting measures. "For example, we've looked at individual procedures," Dr. Cosgrove explained. "A great example of this is what has happened in urology, where [we] decreased the cost of doing a prostatectomy by 23 percent [between 2009 and 2011] simply by looking at the details of the procedure and the time the patient spent in recovery in the hospital."
Overall, Cleveland Clinic's present-day financials remain on solid ground, as it has 255 days cash on hand, an increase of 4 percent from 2010. "[Our cash on hand] positions us in a great way to be able to deal with increasing challenges and continue to provide fabulous care for this community," Dr. Cosgrove said.
Dr. Cosgrove said Cleveland Clinic's revenue last year hovered around $6.5 billion. Statistics on net income were not provided.
While the health system's revenue figure is similar to previous years, financial growth drivers are changing. For example, like several other hospitals and health systems across the United States, Cleveland Clinic is seeing an increase in Medicare, Medicaid and self-pay patients and a decrease in commercially insured patients. Additionally, both commercial and government reimbursements are below the inflation rate for healthcare.
It is unlikely Cleveland Clinic will be able to grow its volume much to boost revenue, as Cleveland's and Cuyahoga County's populations have dropped significantly over the past several years, Dr. Cosgrove said. Instead, the health system will focus on three main growth drivers: market share, increasing and expanding services, and mergers and acquisitions.
Mergers and acquisitions will have the biggest impact on the Cleveland Clinic because they offer the most potential for financial growth, Dr. Cosgrove said. Roughly 40 percent of hospitals are still not a part of a health system.
Dr. Cosgrove pointed to Cleveland Clinic's two most recent acquisitions: Medina (Ohio) Hospital in 2009 and North Coast Cancer Care in Sandusky, Ohio, in 2011. These two transactions increased Cleveland Clinic's revenue by $120 million in 2011 — roughly 83 percent of the health system's $144 million in total increased revenue in 2011. However, Dr. Cosgrove said the $144 million in revenue growth "on a $6 billion organization is not a great deal." A heightened focus on mergers will increase Cleveland Clinic's scale and its ability to attract high-quality physicians and other staff, he added.
Cleveland Clinic management also expects the Patient Protection and Affordable Care Act and other components of the changing healthcare environment will reduce the health system's revenue by $237 million by 2016. Dr. Cosgrove said savings can be achieved by looking at alternative forms of reimbursement, such as bundled payments, as well as researched cost-cutting measures. "For example, we've looked at individual procedures," Dr. Cosgrove explained. "A great example of this is what has happened in urology, where [we] decreased the cost of doing a prostatectomy by 23 percent [between 2009 and 2011] simply by looking at the details of the procedure and the time the patient spent in recovery in the hospital."
Overall, Cleveland Clinic's present-day financials remain on solid ground, as it has 255 days cash on hand, an increase of 4 percent from 2010. "[Our cash on hand] positions us in a great way to be able to deal with increasing challenges and continue to provide fabulous care for this community," Dr. Cosgrove said.
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