CommonSpirit Health reports $1.3 billion operating loss

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CommonSpirit Health has reported an operating loss of $1.3 billion for the year, for a -3.9% margin.

Revenues increased 0.5% over the prior year, when normalizing the results for income yet to be recognized for the California Provider Fee program awaiting Centers for Medicare and Medicaid approval. Expenses also increased, by 1.4%. 

CommonSpirit focused its efforts in Q4 on growth; reducing labor costs, including contract labor; enhancing revenue yield; optimizing length of stay; and continued value capture efforts.

Revenue was bolstered by an increase in patient volumes, which reached pre-pandemic levels in many of the health system's markets, CommonSpirit said. However, private and government reimbursements did not keep pace with increased costs of providing care to patients. 

A focused effort to appropriately decrease patients' length of stay, which had increased significantly due to the lack of available post-acute care options since the onset of the COVID-19 pandemic, mitigated some of these effects. 

Financial performance was also impeded by continued labor shortages and inflation, declining acuity and rates, costs associated with managing the October 2022 ransomware attack and charges related to workforce reductions.

"Like the rest of the healthcare industry, CommonSpirit continues to be affected by inflation, the continued labor shortage and challenging dynamics with payers," said CommonSpirit Chief Financial Officer Dan Morissette. "Given those headwinds, we continue to focus on initiatives and opportunities that allow us to pursue growth, reduce costs and increase efficiency, while at the same time investing appropriately in developing the workforce of the future."

The nonprofit health system operates more than 140 hospital health systems in 24 states. CommonSpirit also completed the acquisition of five hospitals and more than 40 clinics from a single, regional health system in Utah in May. 

CommonSpirit was created by the combination of Catholic Health Initiatives and Dignity Health as a single ministry in early 2019. CEO Wright Lassiter III
joined CommonSpirit last year.

WHY THIS MATTERS

Value capture efforts to lower the cost of care include the recent launch of a national Population Health Services Organization. The PHSO is focused on expanding access to equitable care and improving quality and outcomes while lowering costs.

It will provide services such as advanced population health analytics, network management, care coordination, data management and analytics, technology infrastructure and reporting, with the focus of helping providers and networks succeed in value-based care.

CommonSpirit Health, which serves urban and rural communities, is one of the nation's largest providers of Medicare and Medicaid services.

Because of that, the company claims the PHSO will serve a more diverse payer portfolio than other management services organizations. Its goal is to improve equitable health outcomes via affordable and coordinated high-quality care.

Half of the providers engaged in CommonSpirit value-based agreements are not employed by CommonSpirit – a part of the network the PHSO only anticipates will grow more in the future.

THE LARGER TREND

The demand for value-based agreements by payers and providers is increasing. For example, CMS has said that the vast majority of Medicaid and all Medicare beneficiaries will be in a value-based care relationship by 2030.

The PHSO will build off the expertise from CommonSpirit's existing value-based programs, which include full Risk-Bearing Organizations (RBOs) and 10 Accountable Care Organizations. CommonSpirit said that over the past five years of participation in the Medicare Shared Savings Program, it has saved Medicare more than $474 million by prioritizing proactive outreach and addressing not only medical, but also behavioral and social needs.

A 2022 report from the Medical Group Management Association found that value-based care only accounts for a small portion of medical revenue in most specialties. Data from the survey found that revenue from value-based contracts accounted for 6.74% of total medical revenue in primary care specialties, 5.54% in surgical specialties and 14.74% in nonsurgical specialties. Across all practices, the median revenue amount from value-based contracts was $30,922 per provider.

Americans are largely on board with the concept of value-based care, but there's one thing they don't seem to like that much: the term itself, which they either don't resonate with or don't understand. That's according to research published by United States of Care in August, which found that 64% of the 1,000 people surveyed preferred value-based care to fee-for-service models.

More than half of the respondents (59%) felt positively about the term "value-based care," but even those with a favorable opinion of the term preferred other labels, such as "patient-first care" and "quality-focused care." Many people associated "value-based care" with low quality.

Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com