CommonSpirit announces operating loss after being hit hard by omicron variant

In its second quarter of fiscal 2022, CommonSpirit Health said it lost a portion of its revenue due to rising labor and supply costs, as well as increased duration patient stay, issues associated with the pandemic.

The Chicago-based system, formed by the 2019 merger of Catholic Health Initiatives and Dignity Health, reported an operating loss of $81 million on $17.43 billion in operating revenue for the quarter, a negative margin of 0.9% similar to its fiscal 2020 losses.

Overall, CommonSpirit’s operating revenue grew nearly 9%, from $16 billion in the second quarter of 2021 to more than $17 billion in 2022, the company announced on its investor call. Wednesday.

The nonprofit health system’s operating income before interest, taxes, depreciation and amortization fell from $1.5 billion in the second quarter of 2021 to $944 million in the current quarter, a margin EBITDA of approximately 5%.

Although the company remains financially stable, these losses reflect the heavy toll of COVID-19, and, specifically, the omicron variant, Dan Morissette, CFO of CommonSpirit, said on the earnings call.

He said staffing costs, especially for contract workers, along with inflation, increased patient length of stay, staff turnover and other pandemic-related costs, made up the expenses. high for the quarter.

Compared to the second quarter of 2021, labor expenditure, by adjusted admission, increased by 12.3% due to increased personnel costs affecting suppliers nationwide. Additionally, supply costs increased by 11.6%, driven by inflation and the need for supply, in response to the omicron surge.

“This quarter demonstrated how important it is for us to be proactive and strategic in managing the impacts of the COVID-19 pandemic,” Morissette said in a statement. “Our priority now must be to meet the increased demand for care and do all we can to support our employees, while also focusing on efficiency as we continue to see the ebbs and flows of the pandemic. ”

Yet CommonSpirit also saw significant gains over the prior year quarter, including a return in patient volume and an increase in critical care admissions, resulting in a 9.3% increase in net patient and patient revenue. premiums.

The system’s volume recovery, in addition to its joint ventures and new affiliations with institutions like Baylor College of Medicine and Virginia Mason Medical Center, resulted in an increase in operating revenue of $1.3 billion.

Adjusted admissions increased by 1.5% over the previous year, while outpatient visits increased by 5.1% and emergency department visits by 16.6%.

Morissette said CommonSpirit is focused on taking action for worker retention by increasing its staff, while supporting its current employees and management with salary incentives and resources.

The system virtually hires nurses to handle admissions, discharges and transfers to streamline operations. Eventually, CommonSpirit said it intended to reduce turnover with its system-wide residency program and reduce its reliance on traveling nurses.

CommonSpirit also plans to buy Colorado Plains Medical Center in Colorado and Western Plains Medical Complex in Kansas for approximately $135 million over the next year.

To offset the costs of COVID-19, CommonSpirit has applied for provider relief funding from the Department of Health and Human Services and the American Rescue Plan Act of 2021, in addition to the CARES Act funding it received in the past two years.

While there will likely still be labor and supply pressures through 2022, Morissette said CommonSpirit’s spending should moderate somewhat and the larger scale of the business will help. to keep costs down.

He said CommonSpirit’s short-term goal was to “get back to the baseline.”

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