CommonSpirit Health reported an operating gain of $135 million (1.3% operating margin) for its second financial quarter ended Dec. 31, turning around the prior year’s loss with higher volumes, faster churn and more efficient labor spending.
The results, announced Friday, come as the massive nonprofit grapples with “considerable challenges” surrounding inflationary expenses and securing adequate payments from insurers, it said.
“Our team members’ efforts to provide care in more efficient and effective ways have significantly contributed to this quarter’s financial improvements,” Chief Financial Officer Dan Morissette said in a release. “While this progress is encouraging, we must continue strengthening our financial foundation, ensuring that we can deliver high-quality care to all members of our communities, particularly those who are most vulnerable.”
In the prior year’s second quarter, CommonSpirit recorded a $356 million gain—though adjusting that to normalize net income from the California Provider Fee Program dragged the system to an $87 million operating loss (-0.9%) operating margin.
Across the first six months of CommonSpirit’s current fiscal year, the system still sits at a $196 million operating loss, as opposed to the prior year’s as-recorded $46 million loss and as-adjusted $340 million loss.
Net income for the most recent three- and six-month periods came to $100 million and $367 million, respectively, versus the prior year’s $1.2 billion and $480 million.
Reported operating revenues for the quarter came in at $10.1 billion, up from 2023’s as-adjusted $9.3 billion, with nearly half of that difference hailing from net patient and premium revenues gains.
Here, CommonSpirit pointed to a 2.8% year-over-year rise in patient volumes on an adjusted admissions basis, a 4.2% rise in outpatient visits and a slight dip in length of stay from 4.76 days last year to 4.7 days. CommonSpirit also highlighted a slight year-over-year improvement in payer mix across six months of gross revenue.
Operating expenses for the quarter rose from 2023’s $9.4 billion to $10 billion. Year over year, quarterly spending on salaries and benefits rose 4.2% (1.3% per adjusted admission), supply spending rose 11.1% and spending on purchased services and other items rose by 6%.
Within nonoperating items, CommonSpirit logged a net investment loss of $102 million for the quarter but an investment income of $516 million across six months, both of which are below the prior year.
In a release on the numbers, the system painted its financial performance during the quarter as a step in the right direction compared to the prior year and the immediately preceding quarter. Still, the system noted that it “continues to face considerable challenges ensuring receipt of its entitled revenue and cash flow for services provided. Revenues continue to be impacted by challenges with payers on denials and timely payments, as well as payment increases that do not keep up with inflation.”
The release also outlined two strategic initiatives aimed at boosting care continuity and organic growth: Patient Connection Centers, "which use efficient resources to increase patient access and physician productivity," and the ongoing systemwide rollout of its new consumer-facing digital platform.
CommonSpirit Health is among the nation’s largest nonprofit health systems, operating more than 2,300 care sites including 137 hospitals in 24 states. During its most recently completed fiscal year, it reported $37 billion in operating revenues and a normalized operating loss of $875 million (-2.4% operating margin).