CommonSpirit Health ends fiscal year with $1.4B operating loss, 2,000 job cuts

Catholic healthcare giant CommonSpirit Health has reported a $1.4 billion operating loss (-4.1% operating margin) and a net loss of $259 million for its 2023 fiscal year, which ended June 30, according to financial statements released Thursday.

The nonprofit, which currently operates 145 hospitals across 24 states, had logged a $1.3 billion operating loss (-3.8% operating margin) and a $1.8 billion deficit of revenues over expenses during its prior fiscal year.

This time around, the organization enjoyed patient volumes that “reached pre-pandemic levels in many of the health system’s markets” but was dragged by “private and government reimbursements [that] did not keep pace with increased costs of providing care to patients,” CommonSpirit said in a release accompanying the latest financial filings. The most recent year’s operating performance also included a $160 million adverse impact from a fall 2022 cybersecurity breach that affected numerous locations.

“Like the rest of the healthcare industry, CommonSpirit continues to be affected by inflation, the continued labor shortage and challenging dynamics with payers,” CommonSpirit Chief Financial Officer Dan Morissette said in a release. “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.”

Though the system’s filings largely disclose full-year results, its accompanying press release highlighted a “strong financial performance” during the final quarter of the fiscal year, in which efforts surrounding labor cost reduction, higher revenue yield, streamlined length of stay and other value initiatives yielded an EBITDA margin of 4.7% (compared to the full year’s 1.8%).

Included among these was a fourth-quarter workforce reduction of "approximately 2,000" full-time positions eliminated across ancillary, support and overhead functions, the health system said.

"This was partially offset by an increase in clinical staff due to higher volume levels achieved during the fourth quarter of 2023," the system wrote in its financial statements.

CommonSpirit recorded $34.5 billion in total operating revenues across fiscal 2023, a 1.8% year-over-year increase.

Net patient and premium revenues—normalizing for funds to be received under California's provider fee program—rose 0.6%. Same-store, normalized net patient and premium revenues rose 2.6% but fell 1.7% on a per-adjusted admission basis.

On a same-store basis, adjusted admissions rose 4.4% year over year, emergency department visits increased by 2.2% and outpatient visits dipped by 0.5%. Same-store adjusted patient days and acute average length of stay, respectively, increased by 0.9% and declined by 3.3%.

Total operating expenses at CommonSpirit rose 2% from the prior year, with same-store salaries and benefits increasing by 3.2%. However, salaries and benefits per adjusted admission decreased by 1.1%, “primarily due to lower contract labor … and improvements in productivity and length-of-stay, partially offset by inflation.” Same-store supply spending increased by 1.9% while normalized same-store purchased services and other expenses rose by 6.1%.

CommonSpirit increased its total community benefits by $129 million during 2023 for a total (including unpaid Medicare costs) of just over $5 billion.

The biggest difference in CommonSpirit’s year-to-year bottom line came from its nonoperating results. Net investment income in fiscal 2023 was more than $1 billion as opposed to fiscal 2022’s $971 million net loss. Alongside other items, total nonoperating income for the year landed above $1.1 billion.

As of June 30, CommonSpirit had 164 days of cash on hand and 49.2% debt to capitalization. Those same balance sheet items were 176 days and 45.1% a year prior.

Chicago-based CommonSpirit Health is among the largest nonprofit health systems in the country. It currently operates 145 hospitals and more than 2,200 care sites and facilities in 24 states and employs more than 150,000 people.

CommonSpirit’s operating losses join those recently reported by fellow Catholic nonprofit giants like St. Louis-based Ascension and Renton, Washington-based Providence. The former disclosed last week a $3 billion operating loss and $2.7 billion net loss for its recently closed fiscal year, while the latter notched a $547 million operating loss and $232 million net loss as of the midpoint of its current fiscal year.