Even without counting the multi-billion hit tied to the early termination of a major joint venture and outsourcing arrangement, CommonSpirit Health’s operations took a bruising during the three months ended March 31.
The major Catholic nonprofit system reported Friday a $578 million operating loss (-5.8% operating margin) during the third quarter of its fiscal year. That’s after two key adjustments: normalization for delayed income received through California’s provider fee program; and removing the nearly $2.5 billion of “special charges” the system recorded on paper for the quarter that include contract termination and intangible asset impairment stemming from its breakup with Tenet Healthcare’s revenue cycle services business.
For comparison, CommonSpirit had logged an $85 million operating loss (-0.9% operating margin) a year prior with the California provider fee program adjustment. Across the first nine months of the fiscal year, the system is looking at a $743 million operating loss (-2.4% operating margin) for 2026 and a $282 million operating loss (-1.0% operating margin) in 2025, with the same adjustments.
CommonSpirit’s operating revenues during the quarter were flat year over year at $10 billion, whereas its operating expenses (before special charges) grew from Q3 2025’s $10.1 billion to $10.6 billion in the most recent period.
Its bottom line for the quarter (adjusted and excluding special charges) was a loss of $762 million; across nine months, it reported a $280 million gain.
In a filing and accompanying press release, the organization highlighted year-over-year volume growth (3.2% for the quarter; 4.3% year to date) and a reduction in certain key operating metrics such as average length of stay (from 4.83 days to 4.7 days for the quarter; from 4.74 days to 4.62 days for year to date). Still, the system said its facing the strain of “industry-wide pressures,” including a increase in supply costs, case mix/acuity declines, worsened payer mix and “ongoing challenges with payers related to payment delays.”
“Our third-quarter performance reflects a dynamic healthcare landscape, where we’re seeing positive demand for our services alongside persistent financial headwinds,” Chief Financial Officer Michael P. Browning said in a release. “Our focus remains firmly on long-term sustainability. Through innovations in care delivery and targeted operational improvements, we are building resilience and ensuring we can continue to achieve our strategic goals.”
The system outlined recent care quality and experience while pointing to ongoing initiatives aimed at boosting its operating performance (broadly referred to by the company as Project ImpACT). For the latter, it described a mixture of volume growth expansions, labor cost management via organization-wide standard staffing models, addressing payer disputes that limit revenue collection, contract renegotiations to reduce costs and “focused improvement efforts, including service rationalization, for those markets where performance is currently below requirements.”
The severing of its revenue cycle arrangement and sale of its minority joint venture interest to Tenet, announced in early February, is among CommonSpirit’s bids to reduce long-term expenses. Ending the contract ahead of its 2032 conclusion will allow the system to insource its revenue cycle functions.
CommonSpirit runs 137 hospitals and about 2,400 care sites across 24 states. Across its 2025 fiscal year, after adjustments, the system reported a $225 million operating loss (-0.6% operating margin), nearly $1.6 billion in net income and around $40 billion of total operating revenues.
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