CommonSpirit posts operating loss, inks $135M deal for 2 hospitals

CommonSpirit Health, a 140-hospital system based in Chicago, reported an operating loss for the three months ended Dec. 31 as higher labor and supply costs offset revenue gains, according to financial documents released Feb. 15. 

CommonSpirit, formed through the 2019 merger of San Francisco-based Dignity Health and Englewood, Colo.-based Catholic Health Initiatives, saw revenues rise 7.2 percent year over year to $8.9 billion in the second quarter of fiscal year 2022, which ended Dec. 31. The increase was attributed to rebounding patient volume. On a same-facility basis, adjusted admissions, outpatient visits and emergency department visits were up year over year. 

The nonprofit system's revenue gains were offset by higher expenses tied to labor and supply costs. Supply costs rose 11.6 percent year over year, and labor expenses per adjusted admission were up 12.3 percent as a result of higher than normal contract labor costs, increased incentive and overtime pay and a high number of staff who were out sick, CommonSpirit said.

CommonSpirit is launching programs to address staffing shortages, including a systemwide nursing residency program. It is also expanding its internal nurse staffing agency and leveraging relationships with academic partners. 

"This quarter demonstrated how important it is that we are proactive and strategic about managing the impacts of the COVID-19 pandemic," CommonSpirit CFO Dan Morissette said in a Feb. 15 earnings release. "While patients continued to return to our care sites, labor and supply costs also rose significantly. Our priority now must be meeting the increased demand for care and doing all we can to support our employees, while also focusing on efficiencies as we continue to see ebbs and flows from the pandemic." 

CommonSpirit recorded an operating loss of $81 million in the three-month period ended Dec. 31, compared to operating income of $363 million in the same period a year earlier. 

CommonSpirit closed out the second quarter of fiscal year 2022 with excess revenues over expenses of $118 million. In the same period of 2020, the health system reported net income of $1.9 billion. 

The health system entered into a definitive agreement in early February to acquire two hospitals — one in Kansas and one in Colorado — from Brentwood, Tenn.-based LifePoint Health. CommonSpirit disclosed in its earnings report that it is paying $135 million for the two facilities. Under the deal, which is scheduled to be completed by the end of the fiscal year, the hospitals will be managed by Centennial, Colo.-based Centura Health.

CommonSpirit disclosed last year that a group of hospitals in North Dakota and Minnesota were being held for sale and that it was in discussions to negotiate an affiliation agreement to transfer ownership of the hospitals. The health system said Feb. 15 that the hospitals no longer meet the requirements as held for sale. 

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