CommonSpirit Health reported an operating loss of $145 million in the third quarter of fiscal 2020, driven by a reduction in patient volume as the system prepared for the COVID-19 pandemic.
The loss comes after the Chicago-based not-for-profit health system in the second quarter posted its first operating gain since it was created by a merger between Dignity Health and Catholic Health Initiatives in 2019. While the system said it continued to see improvements in volume and revenue through February, progress was interrupted by the pandemic in mid-March.
Like other hospitals across the country, CommonSpirit saw patient volumes plummet about 40% in the second half of March as it postponed procedures and freed up resources to prepare for a surge in COVID-19 victims. This resulted in a decline in operating revenue.
"A huge percentage of this is the revenue declines that came upon us as a direct result of the pandemic and our commitment to serving the communities that we're here to serve," Dan Morrisette, CommonSpirit's chief financial officer, explained of the operating loss.
Still, for the full quarter, the health system reported $7.8 billion in operating revenue, in the three months ended March 1, compared with pro forma operating revenue of $7.3 billion in the same quarter a year ago. Operating expenses, meanwhile, increased 7.7% year-over-year to almost $8 billion. The health system reported 2019 figures as if the merger had been completed at the time.
CommonSpirit's earnings before interest, taxes, depreciation and amortization grew 5.6% year-over-year to $376 million, from $356 million in the prior-year period. It posted a deficit of revenue over expenses of $1.4 billion in the quarter, compared with net income of $9.7 billion in a year ago. CommonSpirit reported a $1.1 billion investment loss, compared with investment income of $666 million in the prior-year period.
Morrisette said the health system has worked to manage expenses to offset revenue declines by halting discretionary spending and capital construction projects. It paused consulting contracts and non-essential hiring. Executives have taken pay reductions, and its facilities have reduced staff hours.
CommonSpirit has also ramped up its telemedicine services. It is conducting about 40,000 virtual visits per week, compared to just a few thousand weekly visits before the pandemic hit.
After March 31, CommonSpirit received $713 million in grants under the Coronavirus Aid, Relief, and Economic Security Act's provider relief fund, along with $2.6 billion in funds under the Medicare Accelerated and Advance Payment Program, which are required to be repaid. In a prepared comment, Morrisette said "the funding does not begin to make up shortfalls" from the pandemic.
Morrisette said it's unclear when CommonSpirit's backlog of postponed elective procedures will come back on line. But already, the health system has seen patient volumes decreasing to a lesser degree in the current quarter. Morrisette said volumes are down about 20% to 25% more recently.
"We have recovered partially as we have been able to responsibly re-open some of our services in our communities," he said.
