Dive Brief:
- CommonSpirit Health logged a $396 million operating loss for the quarter ended Sept. 30, as the nonprofit provider continued to battle cost challenges.
- It’s the third quarter in a row that CommonSpirit has posted an operating loss. Management pinned its financial challenges on payer denials and delays, as well as reimbursement rates that the system says haven’t kept pace with inflation.
- Still, CommonSpirit said it has made some progress toward righting its finances. The nonprofit said it grew patient volumes and got a better handle on expenses, including salary costs, during the quarter.
Dive Insight:
CommonSpirit is one of the nation’s largest Catholic health systems, operating 138 hospitals across 24 states. The health system reported $10.3 billion in operating revenue for the quarter, a 9.6% increase over the year prior.
The system attributed the increase in revenue in part to increased patient volumes, which were driven by capacity initiatives. For example, CommonSpirit continued to build out its “one digital front door” program, which allows patients to seamlessly search for and schedule appointments.
In California, Arizona and Nevada, enhanced scheduling options for certain providers drove approximately 4,670 appointments, according to the earnings report.
CommonSpirit’s adjusted admissions in turn increased 6% year over year, while its acute average length of stay was lower than the same period the year prior. CommonSpirit also grew outpatient visits by 3.7% year over year. However, emergency department visits declined by 1.9%.
Operating expenses were a mixed bag. Overall, costs climbed 8.2% year over year to total $10.5 billion during the quarter. But salaries, wages and benefits as a percentage of patient revenue fell slightly year over year, as the system decreased its reliance on contract labor.
Supply costs continued to be a pain point, particularly related to pharmaceuticals, surgical and medical supplies. The system plans to reduce costs by renegotiating supply chain contracts.
Looking ahead, CommonSpirit said it will undergo a “transformation journey” to accelerate its path to profitability and offset the impact of contentious payer relations and the possible fallout from federal changes to healthcare policy.
The plan, which was first announced in October, addresses eight areas: digital and IT optimization, business operations, clinical operations, physician enterprise, revenue optimization, growth, capital position and human capital management.
“The project aims to accelerate meaningful improvement in operating and financial performance and accelerate the transition to a more sustainable cost structure and operating model,” management said.
CommonSpirit’s CEO, chief operating officer and chief administrative officer will sponsor the project and an executive steering committee will leader the day-to-day implementation. The organization promises that the work will “look at every aspect of operations across CommonSpirit” to identify improvement opportunities.
Management is expected to share more details about CommonSpirit’s performance and plans for the future during a call with investors, scheduled for Dec. 3.
