- Though the COVID-19 pandemic hampered Providence's operational performance in 2020, the regional nonprofit powerhouse still ended the year in the black with net income of $1 billion, down about 9% from 2019.
- Providence ended 2020 with an operating loss of $306 million, compared to an operating income of $214 million in 2019. However, healthy non-operating income recouped operating losses and offset reimbursement shortfalls from Medicaid and Medicare coverage, Providence said in full-year financial results released Monday.
- The system, which operates 51 hospitals spanning seven states, posted drastic net losses in the first half of 2020 due to the pandemic, but seems to have closed out the year on more stable financial footing though volumes remain down.
Like other major systems, the pandemic railroaded Providence's operational performance in 2020, as state and local lockdowns and orders to pause non-emergency procedures contributed to an unprecedented drop in patient volumes starting in March. As a result, the West Coast system reported a significant dip in patient revenue, along with skyrocketing expenses for personal protective equipment, pharmaceuticals and labor.
Volumes as measured by adjusted admissions were down 9% for the fiscal year ended Dec. 31, Providence said. Despite the lower volume, operating revenues were actually up 3% year over year to $25.7 billion, driven by growth in capitation, premium and diversified revenue streams — and supported by the recognition of $957 million in federal COVID-19 grants to providers from the Coronavirus Aid, Relief, and Economic Security Act passed a year ago.
However, operating expenses climbed 5% year over year to $26 billion, resulting in operating earnings before interest, depreciation and amortization of $1.1 billion, compared with $1.6 billion in 2019.
Overall, Providence's financial results suggest the system was able to sidestep the worst of the pandemic's financial effects, and mirrors 2020 reports from other major nonprofits.
Kaiser Permanente, which reported in early February, was also able to stay in the black despite COVID-19 deflating operating and net income, which fell about 19% and 15% respectively from 2019. Similarly, nonprofit Mayo Clinic reported a shrinking bottom line, with net income down almost 24% from 2019 though it remained profitable.
California-based nonprofit Sutter Health also squeaked to overall profitability in 2020 despite a operational loss of $321 million. The system, which said it expected to take several years to fully recover from COVID-19, launched a systemwide operational and financial review as a result of its weak operational performance.
For-profit operators weathered similar headwinds and were able to turn a profit in 2020, including Universal Health Services, HCA Healthcare, Tenet and Community Health Systems.
A number of hospital executives have called out CARES grants and other federal aid as a key help in turning their finances around in 2020. However, despite the pandemic's financial pressures, numerous major operators, including Kaiser Permanante, Mayo Clinic and HCA said they would return all or a portion of congressional aid, even as powerful hospital lobbies call on Washington for additional funds.
A recent Kaufman Hall report suggests providers could be overwhelmed by ongoing COVID-19 expenses following a surge in cases over the winter. Researchers estimate hospitals could lose anywhere from $53 billion to $122 billion in revenue in 2021 if pandemic pressures don't abate, despite the glimmer of hope brought by ongoing vaccination efforts.
Despite increasing distribution of coronavirus vaccines, Moody's Investors Service has placed a negative outlook on nonprofit hospitals in 2021.
Providence came together in 2016 with the merger of Washington-based Providence Health & Services and California-based St. Joseph Health to create the nation's fourth-biggest Catholic hospital chain. Its full-year earnings come a week after California Attorney General and Biden nominee for HHS Secretary Xavier Becerra disclosed his office is investigating whether Providence violated legal commitments in applying religious restrictions to medical care at a hospital in Orange County.