CommonSpirit Health kicked off its 2027 fiscal year with a $544 million operating loss as decreasing acuity, dampening payer mix and other expenses outpaced the large nonprofit’s strong volumes and improving operating efficiency, according to financial results for the quarter ended Sept. 30.
That operating loss excludes $65 million non-routine special charges incurred by the health system—most notably severance costs and other fees tied to its strategic, multi-billion-dollar decision to end a long-term revenue cycle contract with Tenet Healthcare—during the quarter, and reflect a -5.3% operating margin. The system had reported a $396 million operating loss and -4% margin during the same period a year prior.
Earnings before interest, taxes, depreciation and amortization (EBITDA) was $77 million in the quarter, also a dip from the prior year’s $129 million.
“Our first-quarter performance reflects steady operational progress, even amid persistent cost and reimbursement headwinds, as patients continue to choose CommonSpirit for quality care,” Chief Financial Officer Michael P. Browning said in a release.
CommonSpirit, already one of the country’s largest health systems, said it grew its quarterly operating revenue 5.3% year over year to $10.3 billion. The uptick included a 2.8% year-over-year increase in adjusted admissions as well as $165 million in net income from the California provider fee program, as opposed to no such benefit recorded the year prior. At the same time, the organization said its revenues were affected by “revenue yield challenges” and increases in self-pay, Medicare and Medicaid among its payer mix—both issues cited in recent financial reports from other major health systems.
Meanwhile, CommonSpirit’s operating expenses (before special charges) rose 6.6% year over year to nearly $10.9 billion. Much of the increase was tied to higher volumes as well as salary inflation, the latter of which came even as the organization improved its labor productivity (hospital full-time equivalents per adjusted admission decreased by 1.4%) and cut down its contract labor spend.
CommonSpirit’s results also included $115 million of net nonoperating income, substantially less than the year before due to “market fluctuations” affecting its investment returns. That left a bottom-line net loss of $496 million for the quarter and, as of Sept. 30, 160 days of cash on hand.
Management, in the filing and an accompanying press release, noted that the quarter’s numbers land as the system continues to execute on a sweeping operating performance improvement plan. That effort includes work to boost volumes through a focus on its care network, revenue realization efforts surrounding denials and managed care negotiations, standardizing department staffing models to trim labor costs and potential service line rationalization “for those markets where performance is currently below requirements.”
“We are making deliberate, near-term investments to unify our electronic health record, enterprise resource planning and revenue cycle platforms, while advancing responsible AI adoption to strengthen our system for the long term,” Browning said. “Keeping patients at the center of everything we do requires disciplined expense management and fair, timely reimbursement for the care we deliver.”
“Financial sustainability is what makes our mission possible,” added President and CEO Wright Lassiter III in the release. “Through disciplined operations, we are supporting our team members, strengthening our ministry and protecting access to compassionate, high-quality care across the communities we serve.”
CommonSpirit Health comprises about 2,600 care sites, including 132 hospitals, and more than 160,000 employees across 24 states. In the most recent fiscal year ended June 30, it reported $42.4 billion in total operating revenue and a $430 million operating loss (-1% operating margin) before special charges, an improvement from the prior fiscal year.