The health system posted a 5.6% operating margin in the second quarter to fuel a sharp turnaround from a duration of financial strain.
Cleveland Clinic turned in a much stronger financial performance in the second quarter, underscoring how the health system is regaining stability after years of industry-wide pressures.
The nonprofit reported operating income of $255.3 million, translating to a 5.6% operating margin and representing a sharp improvement from the $45.3 million (1.2% margin) posted in the same period last year. Operating revenue reached $4.5 billion, up more than 15% year-over-year, as patient volumes and insurance revenues both climbed.
Cleveland Clinic noted that much of the improvement was driven by growth in outpatient services and the addition of new Medicare Advantage risk-sharing contracts that began at the start of 2025. Insurance premium revenue rose by about $146 million, while net patient service revenue grew nearly 10%, supported by higher inpatient case mix and steady outpatient demand. Total patient encounters increased 2.7%, with outpatient visits up 6% and outpatient surgical cases up 3.9%.
Expenses also rose in the quarter, climbing about 10% due to swelling pharmaceutical costs, inflationary pressures, and costs tied to new delegated-premium contracts. Still, Cleveland Clinic held personnel cost growth to 4.6% as it continued to reduce reliance on agency staffing, which has been a priority for many hospitals and health systems striving to control labor expenses.
Beyond operations, investment income played a major role in fortifying results. Strong market returns helped generate nonoperating gains of $507.8 million, a significant jump from $142.4 million in the second quarter last year. Altogether, Cleveland Clinic recorded net income of $763.2 million, good for a 15.1% total margin and well beyond the $187.8 million managed in the same period in 2024.
At the midpoint of the year, the system has gained and maintained momentum. For the first six months, Cleveland Clinic reported operating income of $308.1 million, compared to $95.5 million in the first half of 2024, with revenue growth continuing to outpace expense increases.
The balance sheet remains stable, with 309 days of cash on hand and modestly higher long-term debt at $4.8 billion.
While leadership will need to keep navigating inflation, workforce pressures, and the costs of new care models, the second-quarter performance demonstrates the benefits of Cleveland Clinic’s diversified revenue streams and disciplined expense management.
Following a stretch of margin strain, the health system now finds itself with more breathing room and a stronger financial foundation heading into the remainder of the year.
Jay Asser is the CEO editor for HealthLeaders.
KEY TAKEAWAYS
Cleveland Clinic posted a second quarter operating income of $255.3 million, up from $45.3 million over the same period last year.
Revenue rose 15% year-over-year, fueled by outpatient growth, higher inpatient case mix, and $146 million from new Medicare Advantage risk-sharing contracts.
Investment gains of $507.8 million boosted net income to $763.2 million, delivering a 15.1% total margin and leaving the system on firmer financial ground heading into the second half of 2025.