Fitch Ratings senior director Kevin Holoran recently stated that 2022 was the worst operating year in history for nonprofit health systems, with the majority of these systems reporting heavy losses. However, the losses are shrinking, and some systems are reporting gains in 2023. For instance, the Cleveland Clinic reported a net profit of $335.5 million in the first quarter of 2023, compared to a loss of $282.5 million for the same period in 2022. The healthcare system also noted that its quarterly revenue was $3.5 billion. In addition, the Cleveland Clinic has a strong financial position, with 321 days of cash, making it well situated for the future.
Similarly, Massachusetts General Brigham reported a profit of $361 million in the second quarter of 2023, which is an improvement from the loss of $867 million for the same period last year. The system’s quarterly revenue was $4.5 billion, up by 11% year over year, and its operational losses decreased significantly to $8 million from $183 million last year. Likewise, Providence, based in Renton, Washington, reported a 5.1% increase in revenue to $7.1 billion in the first quarter of 2023, with a corresponding decrease in operating losses from $510 million in the first quarter of 2022 to $345 million in the first quarter of 2023.
However, these health systems also face ongoing labor shortages and increasing labor costs and supply costs, all of which are contributing factors to their operational losses. Nevertheless, they are working diligently to reduce costs. Interestingly, Kaiser Permanente, based in Oakland, California, reported a first-quarter operating income of $233 million, which is a vast improvement compared to an operating loss of $72 million for the same period last year. The system remains committed to advancing value-based care for the rest of the year and has seen more than 120,000 year-over-year growth in its health plan membership.
While some regional health systems such as SSM Health, based in St. Louis, and UCHealth, based in Aurora, Colorado, have reduced their losses, other systems like CommonSpirit Health, based in Chicago, are still struggling. CommonSpirit Health reported significant year-over-year operating losses of $658 million in the first quarter and $1.1 billion for the nine-month period ending March 31. This system cited labor costs as a challenge despite reducing its contract labor expenses. Additionally, the system had to recover from a cybersecurity incident last year, which also impacted its financial stability.
In summary, while hospitals have a long way to go to recover from the pandemic, the recent move in the right direction is welcome.