- CommonSpirit Health on Friday said higher expenses, especially for labor, and revenue challenges including an unfavorable shift in payer mix and declining acuity contributed to an operating loss of $1.3 billion in the fiscal year ended June 30. Last year, operating income was $998 million.
- The Chicago-based Catholic hospital operator, one of the nation's largest health systems, reported a negative 3.8% margin in the latest period, compared to a positive 3% margin a year earlier. Adjusted revenues increased 3.5% to $34.42 billion from a year ago, while adjusted operating expenses were up nearly 10% to $35.46 billion.
- Staffing remains a "pressing issue" across the industry, CommonSpirit said, and healthcare fatigue and burnout continues to be a major challenge.
A healthcare worker shortage that has driven up use of pricier contract labor to keep care sites adequately staffed has been a key factor squeezing hospital margins this year, and the pressure does not appear to be letting up.
The American Hospital Association sounded an alarm this spring, warning that escalating expenses for labor, drugs, supplies and equipment were straining hospitals' finances and challenging their ability to provide care. The median hospital operating margin tracked by Kaufman Hall has been negative for seven consecutive months, and Fitch Ratings recently revised the sector's outlook to "deteriorating" from stable.
In another sign of the stress facing hospitals, Michigan's BHSH System this month said it planned to cut 400 management jobs in the face of significant financial pressures. Beaumont Health and Spectrum Health recently merged to create BHSH.
CommonSpirit said it faced challenges in the second half of its fiscal year that are affecting many health systems, especially those serving mostly Medicare and Medicaid beneficiaries. They include longer patient stays due to a lack of post-acute care resources, higher contract labor expense and overtime pay, inflationary pressures on supplies, volumes that remain below pre-pandemic levels and an end to federal COVID-19 relief funds.
Salary and benefit expenses increased 13.5% over the prior year, and supply costs rose nearly 10%.
The health system said it is taking steps to find cost savings, lower contract labor costs and improve employee retention. It has established programs focused on staff retraining and wellness and is working to accelerate hiring. To address the patient length of stay issue, it is working with hospitals and has expanded relationships with skilled nursing facilities.
The organization has also developed new graduate medical education relationships and residency programs, expanded partnerships with academic institutions and launched plans for a broad internal nursing residency program.