Chicago-based CommonSpirit saw its operating revenue increase 9.6% year over year in the first quarter of fiscal 2026, but system leaders said more improvement is needed.
“While we’re moving in the right direction, we have to acknowledge that this performance is not yet at our goal for this year and improvements are underway to get to that level,” Senior Vice President of Operational Finance John Petersdorf said on CommonSpirit’s Dec. 3 investor call.
In early October, CommonSpirit unveiled Project Impact, an initiative aimed at accelerating improvement in operating and financial performance and moving the system toward a more sustainable cost structure and operating model.
The initiative will evaluate every aspect of operations. Early focus areas include digital/IT, business and clinical operations, the physician enterprise, growth, revenue optimization, capital position and human capital management.
“This work is also about operating differently as what work is performed at the national level versus the regional level versus the market level and reducing friction and duplication,” Mr. Petersdorf said. “While we did a lot of that work at the time of the alignment in 2020, there is still much more opportunity in these areas.”
Project Impact aims to accelerate results within 12 to 18 months and has an overall 24- to 30-month implementation plan. Mr. Petersdorf said, however, that the system is “not waiting for Project Impact to achieve improvement.”
“We need to continue to improve our operations while we implement both the short-term and long-term plans,” he said. “For example, in the first quarter, our results show a 4% productivity improvement despite pressure in certain supply cost categories, particularly in pharmaceuticals. Supply cost as a percentage of revenue is flat and supply cost per adjusted admission is only up slightly. Length of stay is showing a 4% improvement as well.”
Mr. Petersdorf said they are also “spending a great deal of effort on our revenue cycle, standardizing contract language with the payers, elevating denial discussions, although, again, like most of our peers, progress in this area is slow.”
He said that in October — the first month of the second quarter of fiscal 2026 — the system produced a positive operating margin without any significant one-time items. He attributed this to strong volume and effective cost management.
“We’re somewhat encouraged by results in October, although one month does not make a trend,” he said.
CommonSpirit’s new CFO, Michael Browning, is slated to begin on Jan. 2. He most recently served as the CFO for Columbus-based OhioHealth. He succeeds Daniel Morissette, who retired at the end of October. Mr. Morissette had served as the system’s CFO since it was formed in 2019 through the merger of San Francisco-based Dignity Health and Englewood, Colo.-based Catholic Health Initiatives.
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