Becker's Hospital Review

28 CFO / FINANCE Cleveland Clinic investing $1.3B in capital projects By Alia Paavola C leveland Clinic is investing $1.3 billion in capital projects in 2022, CEO and Presi- dent Tom Mihaljevic, MD, said in an an- nual State of Clinic address Jan. 26. "e most common question I am asked is, 'Where will Cleveland Clinic go next?' To me, it is not about where, but how we will grow. We build, partner and innovate with technology," Dr. Mihaljevic said. "is year, we are funding $1.3 billion in projects. Nearly half of that will be used to renew our current facilities." e projects that are in the works include: 1. Cleveland Clinic London hospital. Cleveland Clinic expects to open its 184-bed London hospi- tal this year. e project faced some delays caused by COVID-19 and social-distancing restrictions in the U.K. Cleveland Clinic is renovating a building in central London into an eight-story, 324,000-square-foot healthcare facility. 2. New Neurological Institute building. e neurological institute will consolidate outpa- tient neurological care on Cleveland Clinics' main campus. Currently, it is delivered in eight locations. e institute will offer digitized pa- tient evaluations, imaging, simulation training, infusion therapy and neurodiagnostics and have space for research. 3. New hospital in Mentor, Ohio. Dr. Mihalje- vic announced plans for the new hospital in Feb- ruary 2019. It is slated to open in 2023, he said during the Jan. 26 address. 4. Cole Eye Institute expansion. Cleveland Clin- ic's Cole Eye Institute will be expanded by more than 100,000 square feet to accommodate growth in patient visits and research. 5. Renovations at Fairview Hospital in Cleve- land. Cleveland Clinic will fund modernizations of the facility to address patient and caregiver needs. 6. Cleveland Clinic Weston (Fla.) bed tower ex- pansion. Cleveland Clinic Florida will expand the top floor of its Weston bed tower to meet demand. 7. Abu Dhabi oncology center. Cleveland Clinic is slated to open a new oncology center in Abu Dhabi this year, Dr. Mihaljevic said. It will serve as a hub for treatment and research. n Moody's: Medicare advance repayments, labor costs among hospitals' top credit woes in 2022 By Alia Paavola T here are several factors denting hospitals' profitability in 2022, but the largest will continue to be high labor costs, according to a January report from Moody's Investors Service. Because labor is the primary driver of health systems' expenses, Moody's said high labor costs and staffing shortages will be the biggest challenge to overcome. The "shortage will increase competition for such workers, prompting health systems to pay higher wages, expand benefit packages and spend more on recruitment and retention efforts. As a result, higher labor costs will be the main constraint on margin growth for health systems in 2022," Moody's said. Another challenge for health systems in 2022 is the scheduled repayment of Medicare advances, which will cut into liquidity, according to Moody's. "This U.S. government support contributed to record high levels of liquidity early in the pandemic, increasing days cash on hand by an estimated 30 to 40 days. As repayments are made, the impact on days cash on hand is like- ly to be similar, with most of the decline expected in calendar year 2022," Moody's said. Moody's pointed to several other factors that pose credit risks to hospitals, including the shift of care to lower-cost settings, which will contribute to suppressed emergency department volumes, and drug-pricing proposals that could limit 340B savings to eligible hospitals. Moody's also said the aging U.S. population will result in lower reimburse- ment rates as they shift from commercial insurance to Medicare. n Hoag separation will cost Providence 6% of operating revenue, Fitch predicts By Alia Paavola R enton, Wash.-based Providence will lose out on about 6 percent of its operating revenue because of its separation from Hoag Memorial Hos- pital Presbyterian in Newport Beach, Calif., Fitch Ratings said Jan. 28. The health systems on Jan. 10 announced they reached an agreement that would allow Hoag to become an independent entity after being affiliated with Providence for nearly 10 years. Hoag cited several reasons for wanting to end the affiliation, including that it undermined local decision-making and constrained its ability to meet the needs of local patients. The separation was effective Jan. 19, according to Fitch. Fitch said the separation has credit implications because Hoag provided about 6 percent of its operating revenues each year and 17 percent of the system's unrestricted cash and investments. n

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