Becker's ASC Review

21 21 HEALTHCARE NEWS 'Nothing is off the table': CommonSpirit ramps up $6B turnaround plan By Alan Condon ings are likely to get worse before they get better for Chicago-based CommonSpirit Health. e 137-hospital system is in the middle of one of the most ambitious operational overhauls in its history, a 24-to-30-month transformation program called Project Impact. e systemwide initiative comes as CommonSpirit combats deepening financial losses and a healthcare policy environment that President and CEO Wright Lassiter III has described as posing more than $1 billion in annual revenue risk. e urgency behind the initiative is clear in the numbers. CommonSpirit reported an operating loss before special charges of $578 million (-5.8% margin) in the third quarter of fiscal 2026 — the three months ended March 31 — compared with an operating loss of $85 million (-0.9% margin) during the same period last year. For the nine months ended March 31, the system's operating loss before special charges reached $1.2 billion, compared with a $438 million operating loss during the prior-year period. e $1.2 billion operating loss grew to $3.4 billion aer accounting for special charges tied to CommonSpirit's exit from Conifer Health Solutions. Project Impact is the system's response to those financial challenges. Mr. Lassiter initially put a financial target on the transformation during a November 2025 interview at Becker's 13th Annual CEO+CFO Roundtable. He said CommonSpirit aims to drive between $5 billion and $6 billion in value creation over 36 months and reach an EBITDA margin of 8% to 10%, a significant jump from the 4.8% the system posted in fiscal 2025 and a sharp contrast to the negative EBITDA margins of 2022. "Nothing is off the table," Mr. Lassiter told Becker's. "We still have sacred cows in the organization. We have corners of the organization that haven't been touched like they need to be from an efficiency perspective." e program spans eight pillars, 17 workstreams and 186 initiatives. Of those initiatives, 65% have been approved to move forward, with work concentrated in areas identified as having the greatest potential for financial return — digital and IT, business and clinical operations, physician enterprise, growth, revenue optimization, capital position and human capital management. "ese initiatives account for over $6 billion of improvement over a 36-month period," Michael Browning, senior executive vice president and CFO, said during the system's May 29 earnings call. "We're strategically prioritizing areas with the greatest potential for financial return, including clinical capacity, business operations and hiring prioritization." CommonSpirit said it is making progress in several key areas, including expanding access to care and reducing technology costs by removing redundancies and optimizing discretionary spending. Work is also progressing in specific markets identified for potential growth and rapid performance improvements. e health system also plans to move the entire organization onto a single EHR by 2030 and a single enterprise resource planning system by 2027. Sixty-five percent of the health system is now on Epic, with two of eight implementation waves live. So far, CommonSpirit has consolidated its EHR portfolio from 19 systems to 11 as part of the multiyear OneEHR initiative. "All initiatives in these areas of opportunity are expected to deliver meaningful financial improvement over the next three to four years. In the near term, we're focused on cost reduction, operational improvement. e foundational work will position us to dra strong top line revenue growth," said Mr. Browning, who was appointed CFO Jan. 2. "In the longer term, we're focused on improving growth in access year over year, with the majority of our opportunities reaching full run rate by fiscal year 2028. Length of stay efforts are actively underway across the regions, with continued improvements expected through fiscal year 2027 meaning meaningful further improvement in length to stay in fiscal year 2027 is a requirement for achieving growth projections in fiscal year 2028." A "rapid realization plan" sits inside the broader effort and aims to generate results within fiscal 2026 while implementation builds through fiscal 2028. RRP initiatives focus on clinical capacity, care access, technology, cost efficiency, discretionary spending and workforce optimization. "Our [RRP] is designed to deliver immediate measurable improvements by Q1 of 2027," Mr. Browning said. "e fast-paced effort is focused on efficiency gains and cost savings. is work — along with additional accelerated system and market level initiatives — is laying the foundation for our longer term transformation." Another key structural change is CommonSpirit's plan to streamline its governance structure, a complex move that would create a single corporate entity in each of the 24 states that the health system operates. "is is a sound decision, but it does have tax ID changes, which could potentially result in collection lags," Mr. Browning said. "Taken together, these bodies of work will create a headwind to EBITDA between 1 and 2% in the next year… [but] we strongly believe these are the right actions for CommonSpirit and will result in a stronger long- term performance and a more sustainable, efficient ministry." Strategic divestitures are also part of the turnaround plan. In March, CommonSpirit sold CHI St. Alexius Health Devils Lake (N.D.) — a 25- bed critical access hospital — to Grand Forks, N.D.-based Altru. CommonSpirit plans to offload three more North Dakota hospitals to Altru Health and sell Trinity Health System — a three-hospital network in Steubenville, Ohio — to Pittsburgh-based UPMC. Both deals are expected to close this year, pending regulatory approvals and closing conditions. However, CommonSpirit leaders said growth will be critical to improving the health system's margins. "We are focused on the right kind of growth, as far as service mix, as well as on payer rates, collections to boost our revenue trend," Mr. Browning said. "Our ongoing work on things like productivity, length of stay, supply chain, will be augmented by our rapid realization efforts, as well as other Project Impact work streams. "While we don't want to rely upon our balance sheet to address our needs as we work through this significant body of transformation work, we do have significant cash and investments in dry powder and short-

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