CommonSpirit Health generates $363M in latest quarter earnings thanks to stable payer mix

CommonSpirit Health generated $363 million in earnings for the second quarter of its 2021 fiscal year, but executives say the hospital system could face changes to its payer mix as job losses from the pandemic linger.

CommonSpirit announced in an earnings report that its operating income was $363 million for the second quarter, up from $40 million in 2019. It reported earnings of $530 million for the second half of 2020, up from a loss of $187 million in the second half of 2019.

The health system’s fiscal year ends June 30.

The Chicago-based Catholic health system earned $8.2 billion in revenue for the second quarter of its fiscal 2021 year that ended Dec. 31. That figure was up from the $7.4 billion it earned during the same period in 2019.

“The increase is primarily due to stable payor mix and higher acuity, partially offset by improved but continued volume shortfalls resulting from the COVID-19 pandemic,” the earnings report said.

RELATED: Blue Shield of California, CommonSpirit team to streamline patient billing experience

The 140-hospital system’s payer mix has been relatively on the same level for commercial and government programs for its fiscal year 2021 compared with the prior fiscal year. The stability comes despite the pandemic that has caused major job losses and loss of employer-sponsored insurance.

But the system is worried about the potential for future changes to its payer mix as the economy continues to tumble due to the pandemic. 

“It is just the timing and when it is going to happen,” said Benjie Loanzon, senior vice president for CommonSpirit Health, during an earnings call Monday.

Like health systems across the country, CommonSpirit saw lower volumes at the onset of the pandemic in mid-March. Those volumes started to improve in May when states allowed hospitals to resume elective procedures.

But a resurgence of cases nationally led to a sharp rise in COVID-19 cases for the health system. At the end of last year, there were more than 3,300 COVID-19 patients being treated in CommonSpirit hospitals, which represented 18% of the system’s total inpatient cases.

In December, volumes were less than 1% below pre-pandemic levels. However, volumes across CommonSpirit “have not yet recovered to the pre-COVID-19 pandemic levels,” the earnings report said.

While volumes are down, expenses have risen for CommonSpirit. Supply costs increased $144 million, or 12.3%, in the second quarter.

“The increase is primarily due to increased supplies related to higher acuity (which impacted pharmaceutical and other supply costs), additional supplies required for COVID-19 preparedness, particularly personal protective equipment and general inflation,” the report said.

CommonSpirit, which has hospitals across 21 states, said surges could ebb and flow across different geographies.

“The system’s geographic diversity may provide greater stability of revenue trends versus more geographically concentrated providers,” it said.

The system also listed the impact of a California provider fee program that offers supplemental payments to safety net hospitals. The program has not yet been approved by the Centers for Medicare & Medicaid Services (CMS), but CommonSpirit’s operating income would have been $161 million for the second quarter and $56 million for the last six months of 2020 if it had been in place.

CommonSpirit received $2.7 billion in funds from the Medicare Accelerated and Advance Payment Program, which gave advance payments as a loan to providers. The hospital system also got $1.4 billion from a $178 billion provider relief fund passed by Congress as part of the CARES Act.

Loanzon said the system has about $111 million of relief funding left that it hasn’t spent. 

The system’s chief financial officer, Daniel Morissette, added that its Texas hospitals are still open despite the extreme winter weather that has been roiling southern states. 

Morissette also gave an update on the system’s compliance with a rule that required hospitals to post payer-negotiated rates for 300 shoppable services starting Jan. 1. 

He said on the earnings call that it has posted information on its various care sites where a patient can put in their insurance information and determine how much they have to pay out of pocket for a shoppable service. 

Morissette added that CommonSpirit has 14,000 managed care contracts systemwide. 

“We are trying to make sure that the information is complete and accurate when it is posted, so it is quite an undertaking on our part,” he said.

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