California was CommonSpirit's top-performing market in terms of margins in the first quarter of fiscal year 2025 (the three months ending Sept. 30) but the Chicago-based system's South region, which includes Texas and Kentucky, "remains challenged," Benjie Loanzon, senior vice president and corporate controller, said during the company's Dec. 2 earnings call.
"We are taking a range of actions in this region, focusing on our ambulatory strategy," Mr. Loanzon said. "We are encouraged by recent performance improvements, though a significant amount of work will be needed to reach an acceptable level [of] performance."
CFO Dan Morissette said the health system continues to look at ways to improve the South region's performance. Key focus areas include contracting, efficiency, growth and cost containment.
"Although Texas didn't perform well in Q1, we are encouraged by other achievements in terms of the volume and cost containment," Mr. Loanzon said. "Kentucky is the most improved market in terms of the financial performance. In terms of the volume and cost containment, it has a positive EBIDTA compared to the past."
Mr. Loanzon maintained that there is still much work to do to improve financial metrics in CommonSpirit's South region and underlined plans to improve revenue through its ambulatory strategy while also reducing costs.
Lisa Zuckerman, senior vice president of treasury, capital planning and strategic investments, noted that the Houston market recently has undergone an updated market planning process and there are several operating changes underway "to really coordinate that market as a hub and spoke market."
CommonSpirit is also evaluating capital investment needs for the region as part of its ambulatory strategy.
"Taken together, our thought is that there's still a lot of embedded potential in this market that needs to be realized before we would consider anything else," Ms. Zuckerman said.
The South region, which reported $7.2 billion in revenue in fiscal 2024, will consolidate its EHR systems and transition to a single version of Epic, with the first "go-live" set for June 2025. The move is part of CommonSpirit's plan to standardize operations under a single EHR system. The multi-year plan to improve efficiency, streamline and reduce redundant technologies, generate economies of scale and boost system capabilities.
The California market drove $13.2 billion in revenue in FY 2024 and $3.3 billion in revenue in the first quarter of fiscal 2025.
"Nearly all regions improve during the first three months of FY 2025 generally related to volume improvements and length of stay and labor management, although expense inflation and revenue yield remain an issue in some areas," Mr. Loanzon said. "Similar to last year, California is our top performer in terms of margins. This is our largest region in terms of operating revenue. The performance improvements we have seen last year continue this year. Nearly all markets within California are performing to plan."