Halfway through its 2024 fiscal year, Ascension has turned its operations around to the tune of about half a billion dollars.
The nonprofit system reported income from recurring operations of $230.9 million (3% recurring operating margin) for the quarter ended Dec. 31, up from a $322 million loss (-4.1% recurring operating margin) during the same period a year prior. Over the most recent six-month period, it reported a $40.4 million income from recurring operations (0.3% recurring operating margin), up from a $409.4 million loss (-2.9% recurring operating margin).
Those second-quarter and first-half numbers exclude $192.4 million and $195.6 million of net impairment and nonrecurring losses, which Ascension wrote are largely tied to a joint venture affiliation deal with Henry Ford Health System it announced in October. The system recognized the noncash write-down within its Ascension Michigan market during its second quarter.
Ascension attributed the stronger operating numbers to continued post-pandemic stabilization and the realization of an economic improvement plan targeting volume growth, more favorable rates and pricing and cost levers. These, along with nonoperating gains, brought the system to a $359.5 million net income for the quarter.
“We remain focused on improving hospital operations, ensuring sustainability for the future and making purposeful decisions that improve the health of individuals and the communities we are privileged to serve,” Liz Foshage, executive vice president and chief financial officer at Ascension, said in a statement. “Our Q2 quarterly results are a demonstration of this commitment and a signal that we continue to move in the right direction.”
Ascension’s total operating revenue is up 4.9% year over year over a six-month period. Through the same periods, overall equivalent discharges increased by 0.4% and total admissions by 0.5%. Those changes increased to 1.1% and 1.2% when measuring on a same-facility basis.
Alongside the volume changes, Ascension management highlighted a 5.3% increase in year-to-date net patient service revenue and a 4.8% increase per equivalent discharge. It attributed these to a favorable shift in payer mix from Medicaid to commercial and Medicare payers, a consistent acute case mix index and receipt of the lump sum repayment of 340B Drug Pricing Program revenues.
Additionally, “while reimbursement rates have provided limited mitigation to escalating costs over the last two fiscal years, recent managed care negotiations with commercial payers have yielded larger increases, improving [net patient service revenue] rates,” management wrote in the financial filing.
Ascension’s six-month total operating costs rose 2.1% year over year with cost per equivalent discharge rising 1.7%. Containing these inflation-fueled increases have been the focus of Ascension’s economic improvement plans, management wrote, which have included improvements in average length of stay, workforce stability and the outsourcing of lab services that began in the second quarter of 2023.
The system’s investments returned a net $477.5 million in the second quarter of 2024 and $43.4 million in the first half of 2024, both of which were substantial improvements over the preceding year’s respective net losses of $6.2 million and $798.6 million.
All told, Ascension flipped its second-quarter bottom line from a $348.4 million deficit to a $359.5 million income. Year to date, it remains $238.1 million in the red, as opposed to almost $1.2 billion down as of the same period a year prior.
Ascension is among the country’s largest health systems with 139 hospitals and 40 senior living facilities. The Catholic giant employs roughly 132,000 people across 19 states and the District of Columbia and reported a $2.7 billion net loss and (-5.6%) recurring operating margin during its full 2023 fiscal year.
Ascension’s report helps paint a picture of growth and improved efficiency across some of the country’s largest nonprofit providers. Cleveland Clinic pulled its full operating margin from -1.6% to 0.4% while Kaiser Permanente improved from -1.3% to 0.3%. Fellow Catholic system CommonSpirit Health’s adjusted operating margin has also risen year over year from -5.4% to -0.9% during the first two quarters of its current fiscal year.