'There's something wrong with the system': CommonSpirit CFO

Chicago-based CommonSpirit has implemented several measures to address the gap between rising expenses and slower-growing revenues, including strengthening its revenue cycle function, but the volume of denials remains a pervasive and labor-intensive challenge, according to CFO Dan Morissette.

"I can't help but mention the payers," Mr. Morissette said Jan. 14 at the J.P. Morgan Healthcare Conference. "Even when you go through this laborious process of getting [claims] appealed, we actually win most of them, which tells you there's something wrong with the system."

These payer challenges are not unique to the 137-hospital system and have been a consistent issue raised by executives during CommonSpirit's recent investor calls.

The health system has been working with payers through its managed care teams to establish standardized language and ensure contract adherence, but has had significant challenges getting paid appropriately for the care it has provided. This issue is a particular challenge within Medicare Advantage, which has seen a growing number of hospitals and health systems opt out of plans with commercial payers. Among the most commonly cited reasons are excessive prior authorization denial rates and slow payments from insurers.

"Rarely, if ever, [have I] seen the kind of payer behavior that we've seen recently," Mr. Morissette said during a February investor call. "Denials that are absolutely not in accordance with the contracts that we have, delayed payments where we need to go to arbitration and/or litigation to try to get paid for work that we're clearly entitled to. The behavior overall has been egregious."

Some markets face a higher concentration of payer challenges, though most experience issues, according to CommonSpirit, which operates facilities in 24 states.

"We have some markets in which the payers have a near-monopoly on the commercial insurance market and therefore we do not receive enough reimbursement to offset the costs of Medicaid, self-pay and even some of the Medicare outpatient things," Mr. Morissette said.

CommonSpirit is addressing these challenges by taking a tougher stance with payers and strengthening its revenue cycle, including clinical denials, documentation, underpayment reviews, patient collections, outsourcing accounts to specialized vendors, and improving performance with partners.

The health system is pushing for change in the dynamics of payer-provider relationships. It has taken a tougher stance on contract renewals and is strengthening its revenue cycle through underpayment reviews, patient collections at the service site and outsourcing additional accounts to specialized vendors, among other initiatives. 

CommonSpirit reported a $581 million operating loss (-1.5% margin) in fiscal 2024, improving on an operating loss of $1.3 billion (-3.6% margin) in FY 2023. 

While still operating in the red, CommonSpirit saw that operating improvement continue into the first quarter of fiscal 2025. The system reported an operating loss of $331 million (-3.5% operating margin) in the three months ending Sept. 30, 2024, up from a $402 million operating loss (-4.7% margin) during the prior-year period. 

Mr. Morissette said healthcare has "never been more challenging" for health systems. While CommonSpirit does not issue forward-looking statements and continues to battle payers across multiple markets, he expects FY 2025 "to be better than" FY 2024. 

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