Dive Brief:
- Providence made progress on its financial turnaround plan during the third quarter, with operating incomes hitting $21 million — a $229 million improvement over the same period last year.
- The Renton, Washington-based nonprofit health system attributed the improvement to increased patient volumes. Inpatient admissions, for example, were up 5% for the three months ended Sept. 30.
- President and CEO Erik Wexler cheered the results in a press release Thursday. “When we started the year, we intentionally set out to reach a breakeven financial sustainability goal. It has taken a tremendous amount of hard work and decisive action from everyone across Providence St. Joseph Health, and that effort is starting to make a real difference.”
Dive Insight:
While Providence has been in the black for some recent quarters, the system hasn’t posted an annual profit in four fiscal years. Recently, the health system has said its struggling with a “polycrisis,” including new state laws on charity care and staffing, tariffs, inflation, and delayed or denied payments from commercial payers.
The health system, which operates 51 hospitals, has made efforts to get back in the black. Providence restructured its executive team in January, froze nonclinical hiring in April and laid off approximately 600 workers in June.
Now, the health system says those efforts are paying off.
Excluding revenues and expenses from certain divestitures and partnerships, Providence’s operating revenue increased 5% during the third quarter to nearly $8 billion, up from $7.6 billion the year prior.
Operating expenses grew 3% during the third quarter as Providence continued to focus on reducing labor costs. Contract labor spend was down 33% year over year.
However, supply costs continued to be a pain point, rising 8% year over year. The increase was driven by a rise in pharmaceutical and medical supply costs.
Wexler said Providence is eyeing possible headwinds from the One Big Beautiful Bill Act, signed into law earlier this year. The law will cut federal Medicaid spending by almost $1 trillion over a decade and usher in changes to provider taxes.
Wexler warned the challenges posed by that law and other industry shifts “reinforce the urgency of our transformation and our commitment to adapt.”
Moving forward, Providence plans to invest in artificial intelligence-powered tools to help accurately predict and schedule demand for high-acuity procedures, including surgeries, and length-of-stay initiatives. It will also continue efforts to reduce payer delays and denials, the system said Thursday.
