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CommonSpirit Health executives cited high labor costs, inflation, and revenue challenges as reasons for its losses in the 2023 fiscal year during an earnings call on October 12, though the Catholic health system still touted a “strong financial performance” for Q4.
The nonprofit health system, which is headquartered in Chicago and has 142 hospitals across 24 states, reported a $1.4 billion operating loss and $259 million net loss for the 2023 fiscal year ending on June 30, compared to a $1.3 billion operating loss and $1.85 billion net loss in 2022, according to financial statements. Net operating revenues for the fiscal year reached $34.6 billion, up 0.5% from the previous year’s total of $34.4 billion, according to the health system.
“We continue to work toward a more sustainable cost structure to meet the ongoing challenges of wage and other inflation and revenue trends that have not kept pace with inflation,” CommonSpirit CFO Dan Morissette said in the Q4 earnings call.
While CommonSpirit reported patient volumes reaching pre-pandemic levels in many of its markets this quarter, “private and government reimbursements did not keep pace with increased costs of providing care to patients,” according to the health system.
The 2023 operating results also included the $160 million loss from last year’s cybersecurity incident. The health system has collected all the insurance receivables related to the ransomware attack, John Petersdorf, CommonSpirit’s SVP of operational finance, said during the earnings call.
At the same time, the results of three of the health system’s markets—states in the Pacific Northwest and the southeastern part of the country as well as Texas—were “concerning,” Petersdorf said
The Pacific Northwest market experienced inflation-related salary increases that were “higher than almost any other place in the country,” Petersdorf added. In Texas, the health system is looking to reduce costs and expand ambulatory care, he said. For the southeastern market, CommonSpirit is planning to also increase ambulatory services, with “significant opportunities for improvement” in Tennessee and Kentucky, Petersdorf said.
“We are doing a comprehensive portfolio review. There are no hidden plans right now. We’re committed to the markets that we’re serving, and we’re working to improve performance,” Morissette said.
While the health system continued to decrease labor costs from its peak in February 2022, the cost savings were offset by employee wage increases, Petersdorf said. CommonSpirit eliminated 2,000 full-time jobs in Q4 as part of the system’s “improvements in [its] cost structure,” Petersdorf said.
Other health systems faced similar challenges and workforce reductions.
North Carolina-based Novant Health cut 160 positions amid inflationary pressures, Healthcare Dive reported earlier this month. St. Louis-based Ascension was also hit hard by inflation, Healthcare Brew previously reported last month.
“Similar to other big systems, fiscal [year] 2023 was challenging due to inflation, labor shortages, and revenue yield challenges,” Morissette said.