CommonSpirit Health's finance chief chalked up the not-for-profit health system's $550 million operating loss in its fiscal 2020 largely to the COVID-19 pandemic.
The Chicago-based system drew $29.6 billion in operating revenue in the fiscal year ended June 30, a 1.9% loss margin. That's compared with a $602 million operating loss on $21 billion in operating revenue in fiscal 2019, or a 2.9% loss margin.
The 137-hospital system had been on track for a very strong year through February, then moved into "fiscal discipline mode" when the pandemic hit in March, Dan Morissette, CommonSpirit's chief financial officer, told Modern Healthcare.
"I hate to call it a positive year given what's happened, but I think we've delivered for our communities in a way that our whole team is proud of," he said.
The health system's expenses came to $30.1 billion in fiscal 2020, a 41% year-over-year uptick. Revenue, by comparison, grew 40% year-over-year.
"The fourth quarter of course was difficult for everyone, with COVID-19, so I think this looks within the range of expectations, all things considered," said Ken Gacka, senior director and analytical manager for healthcare ratings at S&P Global Ratings.
CommonSpirit said it has received $1.1 billion in CARES Act grants, money that doesn't have to be repaid. Of that, $826 million was counted as operating revenue in fiscal 2020, while $227 million was deferred.
The health system also took in $2.6 billion in advance Medicare payments, which need to be repaid. Congress recently pushed back the timeline on recoupment and lowered the repayment rate. Morissette said the relaxed terms are very helpful as the system continues to weather the effects of the pandemic in some of its markets.
CommonSpirit is still recovering from the effects of the COVID-19 pandemic. Inpatient volumes in August were still down 7% to 8% from pre-pandemic levels, while outpatient volumes were down 12% to 13% in that time, Morissette said. On the other hand, higher-than-average acuity means charges are not down nearly as much, he said.
CommonSpirit had cut $350 million from its expenses as of February toward its ambitious goal of $2 billion in cost savings in four years. Morissette declined to share an updated figure, but said the system had temporarily paused that initiative due to the pandemic.
Gacka said the $350 million is a "reasonable start," but said CommonSpirit has a long way to go before reaching that goal.
CommonSpirit was pleased to learn that CMS has restored funding for heart transplants at Baylor St. Luke's Medical Center, Morissette said. CommonSpirit is part-owner of the Houston hospital, which has been a drag on the health system's finances in the two years since the federal government cut off payments for heart transplants.
While that will help the Houston market's performance, turning it around completely will take additional discipline around other elements of the operations there, Morissette said.
CommonSpirit also revealed earlier this week it is planning a $2 billion bond financing before the end of the year, most of which will consist of refinancing existing debt. The purpose of that, much like last year's bond issuance, is to generate savings and reduce risk to CommonSpirit's portfolio, Morissette said.
Up to $750 million of that financing could consist of new debt, although the system plans to have roughly the same amount of debt outstanding after the issuance as it did at the end of its fiscal 2020, Morissette said.
CommonSpirit's total debt stood at $15 billion as of June 30, 2020, $13.1 billion of which is long-term debt. That's compared with $13.5 billion in total debt as of June 30, 2019, including $9.2 billion in long-term debt.
Outpatient services comprised 52% of CommonSpirit's net patient revenue in fiscal 2019, but just 49% in 2020. Inpatient services inched up from 48% to 51% in that time. Morissette that could be because outpatient facilities like physician clinics and emergency rooms are suffering more post-pandemic than inpatient facilities. Overall, he said the long-term trend toward more virtual care and remote visits hasn't changed.
"We still see the trend definitely toward outpatient volumes," he said.
