CommonSpirit's Project ImpACT trims length of stay and lifts volumes back to growth

CommonSpirit Health, the 138-hospital Catholic nonprofit, closed fiscal 2025 with a $225 million adjusted operating loss (-0.6% margin) on roughly $40 billion of revenue. Its answer is Project ImpACT, a multiyear turnaround plan — recently accelerated — that spans IT modernization, clinical quality and human capital, but for fiscal 2026 prioritizes short-term results in clinical capacity, care access, select discretionary spend and workforce optimization.

The second quarter of fiscal 2026 (ended Dec. 31) delivered the first proof: a reported $78 million operating loss, but $2 million of operating income (0.0% margin) after normalizing for delayed California provider-fee income, and $456 million of excess revenues over expenses. Total operating revenues rose $403 million year over year to more than $10.5 billion, net patient revenue grew $609 million to $9.9 billion, adjusted admissions rose 3.8%, and acute average length of stay fell from 4.7 to 4.63 days.

The efficiency levers are specific: standard department staffing models and reduced contract labor brought labor cost from 54.4% to 53.2% of normalized net patient revenue; supply spend per adjusted admission grew just 2.1% against 6% total, with supply-chain renegotiations and vendor consolidation underway; and revenue-cycle work targets clinical denials prevention and payer dispute resolution — capped by a recently announced $1.9 billion decision to terminate Tenet Healthcare's Conifer Health Solutions and bring revenue cycle in-house.

CFO Michael Browning called the trajectory encouraging but 'far from over': the quarter is framed as an early preview of what Project ImpACT is expected to yield, alongside strategic efforts targeting underperforming markets that could include service rationalization and divestment.

Adjusted Q2 FY26 operating income of $2M vs a $78M reported loss; volumes +3.8%; labor cost down from 54.4% to 53.2% of net patient revenue.

The plan banks short-term operational wins — capacity, access, discretionary spend, workforce — while the multiyear IT and quality work matures

Standard staffing models and lower contract labor moved labor from 54.4% to 53.2% of patient revenue, the system's largest cost line

Bringing revenue cycle in-house from Conifer for $1.9 billion converts an outsourced cost into a controlled capability aimed at denials

Managed-care renegotiation and denial prevention turned 'ensuring we are paid for the care we provide' into a measurable lever

A turnaround plan earns credibility by banking visible wins early — staffing models, length of stay, denials — before the structural projects land.

Management casts the quarter as an early preview of Project ImpACT's gains, with fiscal 2026 priorities set on clinical capacity, care access, discretionary spend and workforce optimization. Service rationalization and possible divestments continue in underperforming markets.