Dive Brief:
- CommonSpirit Health cut its operating losses in the three months ended Dec. 31 by working with payers to speed the rate of reimbursement for services and implementing cost containment measures, according to earnings released on Thursday.
- The Chicago-based health system reported an operating income of $356 million for the quarter. Normalized for the California provider fee program, CommonSpirit logged an operating loss of $87 million. In the same period last year, CommonSpirit reported an operating loss of $440 million.
- CommonSpirit said supply and salary inflation continues to vex the system. Salaries and benefit expenses increased $413 million, or 9.3%, year over year, primarily due to higher salary costs.
Dive Insight:
CommonSpirit has posted losses recently, citing inflationary pressures and relations with payers as roadblocks to profitability. In its first quarter 2024 earnings, the nonprofit posted a $738 million loss.
Chief financial officer Dan Morissette said in a statement that the operator has taken steps to rebound, focusing on CommonSpirit’s investment strategy, growth opportunities and cost containment.
“We are also taking steps to reverse some of the financial trends which have been exacerbated by both inflationary pressures and payers’ continued unwillingness to be better partners,” Morissette said. Those steps include working with health plans to reduce prior authorization denials, according to the second quarter filing.
CommonSpirit recorded $304 million in net income for the six months ended Dec. 31 from the California provider fee program, which provides supplemental payments to California hospitals that serve Medi-Cal and uninsured patients.
Not normalized for the California program, the nonprofit logged an operating loss of $46 million. Including the fee program, CommonSpirit logged an operating loss of $340 million over the six month period.
CommonSpirit recorded increased demand for services during the second quarter. Same-store adjusted admissions rose 6.9% while outpatient visits rose 3.3% compared to the prior year period. Net patient revenue and premiums increased $921 million on a same-store basis compared to the same period last year.
This month, the nonprofit also announced the sale of two California-based hospitals for $100 million. In August, CommonSpirit completely exited its Centura venture with AdventHealth. Centura, a management company that oversaw hospitals in Utah, Colorado and Kansas, struggled to keep pace with rising prices during the COVID-19 pandemic. CommonSpirit’s exit from Centura had no material impact on its finances, according to Thursday’s filing.
CommonSpirit’s earnings before interest, taxes, depreciation and amortization increased to $927 million during the quarter, from $47 million in the prior year period.
The operator said it took steps to reduce its expenses, but costs continued to press its balance sheet.
In addition to increased labor expenses, supply costs also rose $64 million, or 4.7% year over year, primarily due to an increase in patient volumes and higher than anticipated inflation and pharmaceutical costs.
CommonSpirit cited high provider fees and medical fees as a pain point. Purchased services and related fees rose 10.4% year over year to total $245 million.
