Despite volume, efficiency gains, CommonSpirit posts $365M quarterly operating loss

CommonSpirit is still running its operations well in the red but says it’s in a better place than last year due to a combination of higher volumes, shorter stays and more efficient spending.

The 142-hospital system reported this week a $365 million operating loss (-3.9% operating margin) for the three months ended March 31 but a $282 million bottom line.

Now three-quarters of the way through its 2024 fiscal year, the system is reporting a year-to-date $705 million operating loss (-2.6% operating margin) and $468 million excess of revenues over expenses (after normalizing for revenues received during the 2023 calendar year under the California provider fee program).

All of those numbers are more favorable for CommonSpirit than those reported at the same time in 2023. For that year’s third fiscal quarter, the system had logged a $470 million operating loss (-5.6% operating margin) and $45 million net loss (all after normalization). Across nine months, it had lost over $1.1 billion from its operations (-4.4% operating margin) and an overall $451 million (all after normalization).

“We are pleased to see the continued improvement in our financial performance,” CommonSpirit’s Chief Financial Officer Dan Morissette said in a statement. “Our teams are squarely focused on maximizing our opportunities for growth, while simultaneously minimizing our costs. By making these strategic adjustments, we are ensuring that our mission to provide care to all in our communities, especially the underserved, will continue today, tomorrow and for decades to come.”

Operating revenues during the quarter came to nearly $9.3 billion, up year over year from $8.5 billion (after normalization).

Here, the system highlighted a 6.9% year-over-year increase in adjusted admissions and a 4.5% increase in same-store adjusted admissions for the quarter. Adjusted patient days rose 3.3%, though average length of stay dipped from 5.04 days to 4.91 days “primarily due to continued length-of-stay reduction efforts.” Same-store outpatient visits increased 2% and emergency room visits rose 3.9%.

Further, the quarter’s same-store (normalized) net patient and premium revenue per adjusted admission increased 2.6% year over year. Per-patient revenue was also pushed along by a “slightly” improved payer mix, with CommonSpirit reporting a smaller portion of its gross revenue coming from Medicaid payments.

That said, the health system’s expenses remained ahead of its revenues this quarter with a year-over-year increase from $8.9 billion to $9.6 billion.

Salaries and benefits expenses rose 6.8% on a same-store basis and 2.2% on a same-store per adjusted admissions basis. Same-store supplies spending rose 6.8% “primarily due to volume increases, higher than anticipated inflation and higher pharmaceuticals.” Same-store (normalized) purchased services rose 2.9% due to, among other factors, higher physician fees.

CommonSpriit’s $647 million of nonoperating income during the quarter included $690 million net income from its investments. The system reports 162 days of cash on hand and just over $19 billion in total debt.

“Also in the third quarter, CommonSpirit maintained its momentum on expanding its ambulatory footprint, driving essentiality in its markets and enhancing its workforce retention programs,” the system wrote in a release. “We expect both short- and long-term results on all of these efforts.”

The Chicago-based nonprofit employs over 150,000 people, spanning about 2,250 care sites and 142 hospitals across 24 states. It closed its most recent fiscal year with a $1.4 billion operating loss (-3.8% operating margin) and thousands of cut jobs.