COVID-19 pushes CommonSpirit to $1.4B loss in Q3

CommonSpirit Health, which operates 137 hospitals across 21 states, saw revenues rise in the third quarter of fiscal year 2020 but ended the period with an operating loss. 

CommonSpirit, formed last year through the merger of San Francisco-based Dignity Health and Englewood, Colo.-based Catholic Health Initiatives, recorded its first operating gain in the second quarter of fiscal 2020. Revenues and volumes were trending up in the third quarter until the COVID-19 pandemic hit.

CommonSpirit said same-facility adjusted admissions were trending at a 2.2 percent increase prior to the COVID-19 pandemic. By the end of the third quarter, adjusted admissions were up only 0.1 percent on a same-facility basis. 

For the third quarter, the health system reported revenues of $7.32 billion, when normalized to include only three months of California provider fee revenues, up from $7.26 billion in the same period a year earlier. Patient volume declines due to the COVID-19 pandemic in the last month of the quarter hindered further revenue growth.

The health system said it incurred significant expenses to secure extra personal protective equipment and reorganize staffing to meet the needs of intensive care and emergency department units. Operating expenses climbed 7.7 percent year over year to nearly $8 billion in the third quarter. 

CommonSpirit ended the third quarter of fiscal 2020 with an operating loss of $145 million. With normalized provider fee income, the health system's operating loss was $387 million in the third quarter.

"COVID-19 has had a significant impact on our finances," CommonSpirit Senior Executive Vice President and CFO Daniel Morissette told Becker's. "CommonSpirit has stepped up to respond to this crisis. This came at a tremendous cost." 

To help offset revenue declines, the health system implemented several cost-reduction measures that included cutting executive pay, halting most capital projects and reducing discretionary spending. CommonSpirit has also received $713 million in grants made available through the Coronavirus Aid, Relief and Economic Security Act and about $2.6 billion in advance Medicare payments, which must be repaid. 

Mr. Morissette said the health system is focused on recovery and is already seeing some positive momentum in terms of patient volumes.

"We are beginning to safely resume healthcare services across our healthcare network," he said. "With a few exceptions, most of our facilities have reopened."

In recent months, the health system has ramped up telemedicine services to more than 40,000 visits per week and expanded home health services to reach patients outside of the hospital and other facilities. Mr. Morissette said expanded telehealth and home health services will continue to be part of CommonSpirit's strategy moving forward.

After factoring in a $1.1 billion investment loss, CommonSpirit ended the third quarter of fiscal 2020 with a deficit of revenues over expenses of $1.4 billion, compared to pro forma net income of $9.7 billion in the same period a year earlier. Investment results in the most recent quarter were severely impacted by financial market disruptions related to the COVID-19 pandemic. In the third quarter of fiscal 2019, the health system recorded investment income of $666 million. 

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