CommonSpirit Health reported Thursday a $356 million operating gain (3.5% operating margin) for the three months ended Dec. 31—its first quarter on the right side of zero since the summer of 2022—thanks to substantially higher volumes, shorter stays and other efficiency programs launched by the Catholic giant.
Similar to that last positive quarter, however, normalizing operations for the California provider fee program brought the system back down to an operating loss of $87 million (-0.9% operating margin).
Still, the Chicago-based nonprofit notched a $1.1 billion bottom line ($736 million as adjusted) and celebrated improvements over the immediately preceding quarter that Chief Financial Officer Dan Morissette attributed to the organization’s “collective hard work.”
These efforts, per a press release and the financial filing, included work with health plans to reduce prior authorization denials and hasten service reimbursements, expansions to CommonSpirit’s ambulatory presence and workforce retention programs. CommonSpirit said these initiatives will pay off beyond the end of the current fiscal year (June 30).
“We remain focused on further improving our financial performance by exploring growth opportunities, sound investment strategy and cost containment,” Morissette said in a release. “We are also taking steps to reverse some of the financial trends which have been exacerbated by both inflationary pressures and payers' continued unwillingness to be better partners. And, as always, we are making these adjustments while ensuring that we provide the care and services that are essential to the communities we serve.”
In the most recent quarter, normalized for the California provider fee program, CommonSpirit logged $9.35 billion in operating revenues and $9.44 billion in operating expenses. These were both up for the normalized revenues and expenses of $8.19 billion and $8.63 billion a year prior when the system had operating losses of $440 million.
Across the first six months of its ongoing fiscal year, CommonSpirit has now logged as-recorded and normalized operating losses of $46 million and $340 million, improvements over the prior year’s respective $395 million and $642 million six-month losses. Year-to-date excess of revenues over expenses were $480 million and $186 million as adjusted, versus the prior year’s deficits of $159 million and $406 million.
In the filing, CommonSpirit’s management highlighted a year-over-year normalized net patient and premium revenues increase of 11.9% for the most recent quarter, which was attributed to higher volumes, improved payer mix and the government’s lump sum 340(b) program settlement.
In regard to the former, the system reported a 6.9% year-over-year increase in same-store adjusted admission and a 3.3% rise in same-store outpatient visits. The average acute length of stay also dropped 4.2%, from last year’s 4.98 days to 4.77 days in the most recent quarter.
The quarter’s 14.1% year-over-year decline in as-recorded total operating expenses was headlined by labor spend, though spending reductions landed across the board. Here, CommonSpirit trimmed salaries and benefits spend by $413 million despite reporting 3,754 additional full-time equivalents, and reduced its as-recorded salaries, wages and benefits as a percent of net patient and premium revenue from 57% to 50.1%.
Outside of operations, CommonSpirit’s $899 million of net investment income drove a net $823 million total for nonoperating income during the quarter, a $151 million year-over-year improvement. Across six months those respective measures were $610 million and $526 million, for a $290 million improvement.
Year to date, the system’s bottom line now stands at a $431 million profit, as opposed to the $166 million net loss of the year before.
Chicago-based CommonSpirit Health is among the largest nonprofit health systems in the country. It currently operates 142 hospitals and more than 2,250 care sites and facilities in 24 states and employs more than 150,000 people.
Earlier this month its Dignity Health division cut a deal to sell two San Francisco hospitals to UCSF for a reported $100 million.
CommonSpirit’s report comes shortly after fellow large nonprofits Cleveland Clinic and Kaiser Permanente announced operating improvements during their fiscal years ended Dec. 31. The Ohio-based system pulled 2022’s -1.6% operating margin up to 0.4%, whereas Kaiser rose from a -1.3% operating margin to 0.3%.