Large System Reports $1.8B Loss Amid 'Intense Financial and Operational Pressures'

High expenses, low payer reimbursement rates, and inflation are to blame, the system says.

Ascension Healthcare, a nonprofit hospital operator, says it has implemented "significant improvement plans" focused on operational efficiencies and controlling expense growth as the system just reported a loss from operations of almost $1.8 billion on revenue of $21.3 billion for the nine months ending on March 31.

"As has been widely reported, hospitals nationwide are experiencing intense financial and operational pressures as a result of the after effects of the COVID-19 pandemic, continued healthcare worker staffing shortages, ongoing supply chain challenges and persistent inflation. Ascension is no exception to these trends," Liz Foshage, EVP and CFO of Ascension, said in the announcement.

The main reason for the loss though? Expenses, the system says.

Ascension attributes its expense growth to inflationary pressures consistent with the overall healthcare provider industry, it said. While Ascension said it has implemented plans focused on controlling expenses and improving efficiency, its actions didn’t gain traction against inflationary pressures.

Both supply and salary and benefit expenses decreased for the operator as Ascension relied less on contract labor, but the system reported a 15% increase in other areas like purchased services, driven by its transition to outsourced laboratory services.

Unsurprisingly, Ascension noted that the reimbursement rates from commercial and government payers have also not kept pace with operating expense inflation, which has been a common complaint heard across the healthcare leadership landscape.

Due to these ongoing business challenges, Ascension also saw a one-time, non-cash impairment losses in the third quarter of fiscal year 2023 of $715 million as the carrying value of certain assets within Ascension’s markets may not be fully recoverable, the system said.

Third quarter losses seem to be a trend as another large system recently announced similar financial results citing the same concerns as Ascension.

CommonSpirit says a decline in patient acuity and reimbursement that has not kept up with inflation impacted its financial results for the 2023 third quarter. Rising expenses, labor shortages, and the impact of a cyber security issue from late 2022 also played a role in the organization's latest financial results.