Ascension reports −2.9% operating margin in H1 2023, says improvement plan is beginning to make headway

Ascension reached the midpoint of its fiscal year with a $410 million year-to-date operating loss—a step forward for the Catholic system after reporting a $671 million operating loss during its first quarter.

The St. Louis-based organization’s −2.9% operating margin is also an improvement over the −6.6% operating margin of the immediately preceding six months ended June 30, 2022.

It’s also a step back from the $31 million operating income and 0.2% operating margin it had reported during the first six months of fiscal 2022 (ended Dec. 31, 2021)—though Ascension’s management stressed that it has seen “notably less” government pandemic support in fiscal 2023 than it had the years prior.

“While the System continued to experience an uneven volume recovery and additional operating expense impacts resulting from the inflationary environment, Ascension remains primarily focused on stewardship consistent with our mission through the implementation of various economic improvement plans,” management wrote in a recently released second-quarter financial statement.

Ascension leadership recently detailed its $2.5 billion economic recovery plan at the J.P. Morgan 2023 Annual Healthcare Conference in January.

Ascension’s latest report outlined a “slight” year-to-year bump in overall volumes. The increases were most apparent across its surgical (up 2.8% year over year) and emergency room visits (up 3% year over year), but were tempered by lower admissions (down 3.4% year over year on a same-facility basis) the system attributed to reduced COVID-19 inpatient volumes.

Ascension’s first-half total operating revenue rose by $115 million (0.8%) compared to the same period in the prior year. That increase was exceeded by a $524 million (3.7%) rise in expenses.

“Consistent with the overall healthcare provider industry, sustained inflationary pressures have contributed to expense growth in recent periods,” Ascension's management wrote.

Cost per equivalent discharge rose 2.8% year over year during the first half of fiscal 2023, the system wrote. Six-month total salaries, wages and benefits rose $127 million (1.8%) year over year, though management noted that these expenses had decreased by $148 million (2%) compared to the immediately preceding six months “demonstrating progress achieved through the economic improvement plans.”

Ascension lost $798.6 million on its investments during the most recent six months, compared to more than $1 billion in net investment return the year prior.

All told, Ascension wrapped up the period with a $348.4 million net loss for the quarter and a $1.2 billion net loss for the first half. It had logged a $949.5 million and $1 billion net income during the respective periods one year prior.

The system has 218 days of cash on hand and a 321% cash-to-debt ratio.

“Ascension’s balance sheet and liquidity levels remain strong with sufficient liquidity to continue to provide care for patients, despite the economic challenges resulting from the prolonged pandemic and recent economic conditions including investment market volatility,” management wrote.

Ascension consists of roughly 2,600 sites of care, including 138 hospitals across 19 states and the District of Columbia. It employs about 134,000 associates and 34,000 providers.

The Catholic system closed its 2022 fiscal year ended June 30, 2022, with an $879.1 million operating loss and a net loss of more than $1.8 billion on the back of $28 billion in total revenue.