Ascension sold hospitals and pivoted to ambulatory care after a $2.7B loss year

St. Louis-based Ascension came off a brutal fiscal 2023: even with cost containment initiatives, the nonprofit Catholic health system posted a $2.7 billion net loss as expenses climbed. In March 2024 it signed a definitive agreement to divest its northern Michigan footprint — Ascension St. Mary's in Saginaw, Ascension St. Joseph in Tawas City, Ascension St. Mary's in Standish, plus the Ascension St. Mary's Towne Center ambulatory surgery and emergency department — to MyMichigan Health, along with related care sites and physician practices.

The Michigan deal was one move in a broader retreat from hospitals Ascension did not need to own. A month earlier it announced transferring Via Christi Hospital in Pittsburg, Kansas, to Mercy; it completed the sale of Our Lady of Lourdes Memorial Hospital in Binghamton, New York, to Guthrie Clinic; and in October 2023 it agreed to a joint venture with Henry Ford Health covering its southeast Michigan and Genesys facilities under the Henry Ford brand. In 2022 it had already sold outreach laboratory assets to Labcorp and outsourced lab management.

The direction of travel showed in the numbers. For the quarter ended Dec. 31, 2023, Ascension posted $231 million in operating income against a $291 million loss in the prior-year period, which it attributed to volume growth, rates and pricing, and cost initiatives; lab outsourcing helped cut labor costs year over year. The buyer, MyMichigan, was solidly profitable — $13.5 million of operating income on $711.5 million of revenue for the six months ended Dec. 31 — and Kaufman Hall counted nearly a third of announced 2023 hospital deals involving a distressed seller.

Quarterly operating income swung from a $291M loss to $231M in the quarter ended Dec. 31, 2023; the lab sale cut labor costs year over year.

A $2.7B annual net loss made the status quo untenable even for a national nonprofit system, so the portfolio had to shrink.

Selling northern Michigan hospitals to MyMichigan — solidly in the black — moved facilities to an operator better positioned to run them.

Ascension said it is expanding ambulatory and telehealth offerings, following where care demand and margins sit rather than its legacy real estate.

Kaufman Hall counted nearly a third of 2023 hospital deals involving a financially distressed system, so Ascension's selloff followed an industry pattern rather than one bad year.

A system that cannot shrink to health should sell where it is subscale: divesting hospitals to stronger local operators funds the pivot to ambulatory and virtual care.

The MyMichigan agreement was definitive but pending when announced in March 2024. Ascension kept pruning: the Via Christi transfer to Mercy and the completed Lourdes sale to Guthrie sat alongside the Henry Ford joint venture, and Healthcare Dive reported the system would outsource Illinois hospitalist functions to a staffing firm the same week. Management's discussion of the December-quarter results pointed to 'meaningful operational improvement' and lower labor costs after the lab sale, with ambulatory and telehealth named as the growth focus in its financial disclosures.