If you want to see a microcosm of the hospital industry, look no further than the Cleveland Clinic. Bob Herman reports that the not-for-profit academic health system's operating income plunged a whopping 71% in 2016 to $139 million, according to new audited documents.
Three big reasons why: higher labor costs but fewer inpatient admissions and surgeries, soaring drug costs, and high-deductible plans. The Cleveland Clinic has sounded the alarm on high deductibles for a couple years now, telling bondholders that those "balances continue to grow and are more difficult to collect than traditional insurance payors."
Yes, but: Cleveland Clinic's operations suffered, and those are all real problems. But after factoring in investment returns, the system still netted more than a half-billion dollars in income. It's rural hospitals, not academic or suburban ones, that are struggling the most right now.