CHICAGO—Oct. 4, 2019—CommonSpirit Health, formed Feb. 1 through the merger of Catholic Health Initiatives and Dignity Health, posted an operating loss of $222 million before special charges and merger-related costs in the fiscal year ending June 30, the health ministry announced today.
The Chicago-based organization, which operates 142 hospitals in 21 states, is in the midst of an integration effort that includes a transition to a new operating model, a single credit structure and a comprehensive performance-improvement plan.
“CommonSpirit has made huge strides toward creating a bold new health organization that will deliver care for many years to come and improve the health of communities across the country,” said CEO Lloyd H. Dean. “We know this is not an easy task and that we face challenges in the near term, which is why we are investing in a strong, disciplined business model that will help the organization evolve to meet the changing health care needs of our communities.”
Since its founding eight months ago, CommonSpirit has centralized key functions such as quality and patient safety, contracting, and information technology, while establishing 11 geographic divisions across 21 states. It has also begun to scale successful service lines and care models including its home health business, specialty pharmacy program, and value-based care agreements.
The year end financial statement reflects pro forma financial performance for the last 12 months, including the period before Dignity Health and Catholic Health Initiatives combined to form CommonSpirit. Given the size and complexity of the combination, the results were expected as the organization implements a new operating model and a strategy for future growth that focuses on preventive care, improved patient experience, and customized and coordinated services across the entire continuum of care.
CommonSpirit posted a net loss of $290 million on revenue of almost $29 billion. Total operating loss was $582 million after special charges and merger-related costs. A significant portion of the FY 2019 loss was the result of asset impairment and merger-related charges, and a decline in operating performance in some markets. The decline in revenue compared to FY 2018 was largely due to California provider fee income in FY 2018 that related to FY 2017, and income from the operations of U.S. Healthworks as well as the gain on its sale. The organization anticipates that a system-wide performance-improvement plan that is expected to realize at least $2 billion through growth and cost savings will result in a 8% EBIDA margin within the next four years.
The organization’s same-store volumes remained relatively consistent year over year with outpatient visits increasing 1.5% and adjusted admissions decreasing 0.1%. Excluding the California provider fee, net patient and premium revenue per adjusted admission increased 2.2%.
CommonSpirit continues its founding organizations’ legacy of caring for vulnerable populations. The organization provided approximately $4.45 billion in charity care and unpaid cost of Medicaid, community benefit and uncompensated cost of Medicare. The organization is now one of the country’s largest providers of Medicaid services and supports a wide array of health care facilities in both rural and urban communities.
“Our founding ministries have provided care to their communities for more than 150 years by being true to where we came from and being smart about where we are headed,” said CEO Kevin E. Lofton. “That is what drives CommonSpirit’s strategy and vision. As our new organization looks to the future, our shared values will continue to guide our approach to caring for all people, especially those who need our care the most.”
In August 2019, CommonSpirit executed a highly successful $6.5 billion debt restructuring, drawing significant demand from investors and support from financial analysts who cited CommonSpirit’s geographic reach and diversity of services as key factors in positioning the health system for long-term success. Also in August, CommonSpirit announced that it would sell its KentuckyOne facilities in Louisville, including Jewish Hospital, to the University of Louisville. The transaction is expected to improve overall financial performance moving forward.
“CommonSpirit is well positioned for future growth. At the same time, we know our performance is not where we need to be if we’re to build a sustainable health ministry for the future,” said Chief Financial Officer Dan Morissette. “By sharpening our focus on strong operations and leveraging our diversity of services to offer a superior experience across the continuum of care, we expect to see significant financial improvement in the coming months and years.”
About CommonSpirit Health
CommonSpirit Health is a nonprofit, Catholic health system dedicated to advancing health for all people. It was created in February 2019 through the alignment of Catholic Health Initiatives and Dignity Health. CommonSpirit Health is committed to creating healthier communities, delivering exceptional patient care, and ensuring every person has access to quality health care. With its national office in Chicago and a team of approximately 150,000 employees and 25,000 physicians and advanced practice clinicians, CommonSpirit Health operates 142 hospitals and more than 700 care sites across 21 states. In FY 2019, Catholic Health Initiatives and Dignity Health had combined revenues of nearly $29 billion and provided $4.45 billion in charity care, community benefit, and unreimbursed government programs. Learn more at commonspirit.org.