- CommonSpirit Health said it recorded higher labor and supply costs in its fiscal second quarter ended Dec. 31, resulting in an operating loss of $81 million and a negative 0.9% margin. The loss compared to operating income of $363 million in the same period a year ago, when the organization benefited from an infusion of federal relief funding, the healthcare system reported on Tuesday.
- Other nonprofit healthcare providers, including Kaiser Permanente and Baylor Scott & White, have relayed a similar message in recent days as pressure from escalating staffing costs tied to a nationwide labor shortage dragged on operating income.
- CommonSpirit, one of the nation's largest nonprofit system with 140 hospitals in 21 states, also disclosed an agreement it signed this month to acquire two hospital facilities, one in western Kansas and one in northern Colorado, for $135 million. The facilities will be managed by Centura Health under an existing joint operating agreement.
CommonSpirit, formed in 2019 by the combination of Catholic Health Initiatives and Dignity Health, said it took a number of steps to expand its staff and support its employees during the quarter as it contended with a nationwide shortage of healthcare workers. The organization said its top priority was ensuring its sites had enough personnel to meet the demand for care in its communities.
Those efforts included accelerating hiring and onboarding processes, retraining and moving staff between care sites, using contract employees and increasing incentive and retention programs for current workers. The hospital system also rapidly expanded wellness and support programs to address the fatigue many of its employees are experiencing.
CommonSpirit also said it has reclassified assets and liabilities previously held for sale in North Dakota and Minnesota. The nonprofit in November said it was in talks with an undisclosed potential buyer for those operations. An earlier plan to sell the facilities to regional operator Essentia Health also fell through, following opposition from nurses and other medical workers.
The deal to buy the Kansas and Colorado hospitals is expected to close by the end of CommonSpirit's fiscal year.
The need to add staff — plus higher-than-normal contract labor costs, a large number of personnel who were out sick along with increased incentive and overtime pay — all boosted labor expenses in the quarter, CommonSpirit said. Labor expenses per adjusted admission climbed 12.3% in the period.
Higher labor and supply costs as well as increased patient length of stay were partly offset by growth in patient volumes, improved productivity and higher acuity, the company said. Net patient and premium revenue rose 9.3% from the prior year’s quarter on the rebound in patient volume. Same-store adjusted admissions gained 1.5% from a year ago, outpatient visits increased 5.1%, and emergency department visits climbed 16.6%.
Supply costs surged 11.6% because of rising inflation and the need to buy more supplies to address higher acuity patients and the omicron surge, the provider said. CommonSpirit noted it has mitigated the increase in supply costs during the COVID-19 pandemic by coordinating purchasing across the organization and finding more U.S.-based suppliers.
The start of the quarter was marked by the end of the delta variant’s surge, while the end of the three-month period saw a rapid increase in cases caused by the omicron variant, CommonSpirit said. While omicron caused less severe disease than delta, it still led to a significant number of hospitalizations.
The hospital system, together with Morehouse School of Medicine, announced during the quarter the development of three undergraduate and four graduate medical education sites intended to address two of the most pressing challenges in health care: a shortage of diverse clinicians and the need for more equitable health care, CommonSpirit said.
The provider said it's expanding its relationship with Creighton University and is making a significant investment in the school’s campus in Arizona to provide up to 100 full-tuition scholarships to underrepresented students over the next 10 years.