St. Louis-based nonprofit hospital operator Ascension Healthcare finished its 2023 fiscal year ended June 30 with a net loss of $2.7 billion and an operating loss of $3 billion, as it struggled to overcome high operating costs and sustained revenue challenges.
Though Ascension experienced improvements in overall patient volumes — outpatient surgeries and emergency room visits increased year over year by 4.3% and 2.7%, respectively — expenses continued to rise, and inpatient admissions decreased 1.4%, partly attributable to lower COVID-19 volumes.
Total operating expenses increased $1.2 billion, or 4.1%, compared to the prior year period, totaling $30 billion.
The nonprofit said costs would have been higher had it not issued a slew of cost containment initiatives, including outsourcing lab testing. Unfavorable payer rates were also a hurdle, according to Ascension, with commercial rates not keeping pace with inflation, and Medicare sequestration also reducing rates, providing limited relief to mitigate escalating cost pressures.
In a discussion of the year end results, executives said the operator’s experience was “similar to other U.S. healthcare providers.” In recent filings, nonprofit operators including the Mayo Clinic and Providence Health & Services have similarly reported rebounding patient volumes and continued cost pressures related to inflation.
“The American healthcare system is experiencing unprecedented operational and financial challenges, and Ascension is no exception to these larger trends,” said Ascension CFO Liz Foshage. “The after effects of the COVID-19 pandemic, continued healthcare worker staffing shortages, ongoing supply chain challenges and persistent inflation were headwinds we faced throughout the last fiscal year.”
In an effort to improve margins, Ascension reported it will capitalize on a trend toward outpatient services and invest in ambulatory networks, according to the filing.
Ascension has already made similar investments, including launching Ascension Rx in 2020, which provides retail pharmacies and a nationwide mail order distribution center. The operator plans to continue to expand its footprint of offerings by creating new ambulatory surgery centers, imaging and outpatient physical therapy sites.
The operator also expects to divest Our Lady of Lourdes Memorial Hospital in Binghamton, New York and Gulf Coast Health System in Mobile, Alabama.
“Due to the ongoing industry-wide challenges impacting healthcare providers, business conditions have indicated the carrying value of certain assets within Ascension’s Markets may not be fully recoverable,” management noted.
In a report earlier this month, Fitch Ratings suggested that nonprofit hospitals might make such sales to improve profitability, writing that exiting financially challenging markets could be an “additional lever” to turn to improve operations.