Dive Brief:
- CommonSpirit Health last week reported a $1.4 billion operating loss and a $259 million net loss for its 2023 fiscal year ended June 30, as rebounding patient volumes were not sufficient to offset rising expenses due to labor costs and unfavorable reimbursement rates from payers.
- The Chicago-based nonprofit health system, which operates facilities across 24 states, reported total operating revenues of $34.5 billion, an increase from $33.9 billion the prior year, and expenses of $35.9 billion, an increase from $35.2 billion the prior year.
- The Catholic health system disclosed it had laid off approximately 2,000 full-time positions during the fourth quarter. Impacted roles were mainly ancillary, support and overhead positions, according to earnings documents.
Dive Insight:
CommonSpirit reported rebounding patient volumes that reached pre-pandemic levels in some markets, with same-store adjusted admissions growing 4.4% year over year.
However, same-store revenue per adjusted admission fell 1.7% year over year, primarily due to reduced higher acuity COVID-19 volumes and slight shifts in the payer mix, the health system reported.
The system also faced expense pressures. Labor costs continued to challenge the system, with same-store normalized salary per full time employee increasing 2.5% year over year. But CommonSpirit reported that its recruitment and retention initiatives had pared back reliance on expensive contract labor. Additionally, the health system noted it had not renegotiated rates with payers to reflect inflationary conditions.
In a release accompanying the earnings, CFO Dan Morissette said CommonSpirit’s operational challenges were not unique. Major nonprofit health operators have reported feeling the sustained impacts of inflationary pressures in financial filings this summer. Most recently, Ascension Healthcare posted an operating loss of $3 billion for the 2023 fiscal year on high expenses, and Intermountain Health reported operating income had fallen 35% for the first half of this year as costs climbed.
“Like the rest of the healthcare industry, CommonSpirit continues to be affected by inflation, the continued labor shortage and challenging dynamics with payers,” Morissette said. “Given those headwinds, we continue to focus on initiatives and opportunities that allow us to pursue growth, reduce costs and increase efficiency, while at the same time investing appropriately in developing the workforce of the future.”
The health system introduced a financial improvement plan in hopes of turning around performance. Initiatives focus on volume growth, including implementing a referral system, expanding transfer centers and developing programs to enhance physician capacity.
The layoffs were also cited as part of the health system’s move toward operational efficiency. The reduction in force is the second this year. In the third quarter, CommonSpirit announced an undisclosed number of layoffs impacting leadership, administrative and other non-patient-facing roles at the division and national levels.
