A combination of sicker patients and stable commercial reimbursement anchored CommonSpirit Health’s finances at the end of 2020.
Executives on the not-for-profit health system’s investor call Monday for the quarter ended Dec. 31, 2020—the second quarter of its fiscal 2021—noted that patient acuity was higher compared with the 2019 period because of COVID-19 patients, with overall case mix index up 8% year-over-year. The Chicago-based system also hasn’t yet experienced the effects of pandemic-related job losses, which are expected to move more patients to Medicaid and Medicare.
“We were surprised,” Benjie Loanzon, CommonSpirit’s senior vice president of finance and corporate controller, said on the call. “We were kind of expecting that there’s going to be a decline in commercial payer mix, but we haven’t experienced that.”
For-profit HCA Healthcare also reported sicker patients and strong reimbursement in the final quarter of 2020.
CommonSpirit’s operating income was $363 million in the quarter, a 4.4% margin, compared with $40 million in the 2019 period. That was due in large part to having recognized $293 million in federal coronavirus relief grants in the 2020 period. Without the grants, CommonSpirit’s operating income would have been $70 million, or a 0.9% margin. CommonSpirit has received $1.4 billion in total grants under the Coronavirus Aid, Relief, and Economic Security Act.
The health system drew $8.3 billion in revenue in the quarter, up 11% from the prior-year period. Expenses came out to $7.9 billion, up 6.7% year-over-year.
CommonSpirit’s admissions in the quarter were down 6.1% from the prior-year period on a same-store basis. Inpatient surgeries were down 15.3%, and outpatient surgeries were down 6.6%. Emergency department visits, the slowest to return, were still down nearly 20% year-over-year at that time.
Dan Morissette, CommonSpirit’s chief financial officer, said on Monday’s call that volumes have recovered substantially since the peak COVID-19 impact in April and May, with outpatient surgeries in some markets already back to their pre-pandemic levels. That said, the significant surge in COVID-19 cases at the end of the year prompted deferred surgeries and limited intensive care capacity in some markets, slowing the return to normal.
CommonSpirit had treated more than 144,000 COVID-19 patients as of Dec. 31, 2020. Current inpatient cases have fallen to about 1,400, although the system remains vigilant, Morissette said. None of CommonSpirit’s facilities are currently suspending elective procedures.
Morissette said CommonSpirit is now turning its focus toward vaccinating staff and community members. He said nearly 100,000 staff members and clinicians have received at least one dose, and many of them have received two doses. All told, CommonSpirit has administered more than 439,000 COVID-19 vaccinations across 133 facilities.
CommonSpirit has set a goal of cutting $2 billion in expenses through a combination of merger-related synergies and performance improvement initiatives. In October, the health system said the pandemic had prompted it to push back the timeline on that from four to five years.
On Monday, Morissette said the health system expects to see between $350 million and $400 million in synergies in its fiscal 2021.
“Despite some of the challenges presented by COVID, overall we continue to make progress and remain cautiously optimistic that we will achieve our synergy goals established for FY21,” he said.
