Dive Brief:
- Providence has frozen nonclinical hiring after economic factors gathered into a “perfect storm” to pressure the health system’s bottom line, according to an internal email obtained by Healthcare Dive.
- The email, sent to staff last week by CEO Erik Wexler, said ongoing headwinds, including lagging reimbursement from payers and elevated supply and labor costs, as well as one-time events like last year’s CrowdStrike outage and wildfires that hit Los Angeles in January, contributed to Providence’s financial hardship.
- In addition to freezing hiring, Providence will continue to lobby lawmakers to protect healthcare from budget cuts and has sued three large undisclosed payers for “repeated claims denials and delayed payments,” Wexler said in the email.
Dive Insight:
The 51-hospital nonprofit health system hasn’t posted a profit in four years. Wexler, who stepped into the CEO role in January, was hoping to change that pattern.
The CEO immediately implemented cost cutting measures, including restructuring and downsizing his leadership team by 46 positions in January.
However, despite Wexler’s efforts to help Providence rebound, the executive said external economic headwinds have proven to be vexing.
“We were on track to finally break even this year. But just as we were nearing that goal, the external economic conditions in 2025 took a sudden turn,” Wexler wrote.
Wexler said cuts to Medicare and Medicaid have cost the health system $500 million and that proposed cuts could run the system another $1 billion annually. Proposed tariffs could cause supply costs to shoot up by tens of millions of dollars annually.
As a result, Providence’s expenses have consistently outpaced its revenue and the health system has had to dip into its cash reserves to fund daily operations, the CEO said.
Providence will continue to rein in costs, including cutting nonessential travel and ending future sponsorship of major league sports teams.
The health system has also begun to lean more heavily on joint ventures, including Providence’s Compassus joint venture for home-base care and its affiliation with Ensign for skilled nursing, in an effort to cut costs.
“There’s almost no end to economically advantageous solutions where companies can take over... a function,” Tyler Giesting, director of healthcare mergers and acquisitions at West Monroe, told Healthcare Dive in an interview earlier this month. He noted that JVs help health systems save through economics of scale.
Providence is one of the first health systems to announce a hiring freeze due to economic hardships.
However, workforce shakeups have been on the rise this year as health systems contend with mounting uncertainty, including threats to Medicaid and valuable medical research dollars, as well as the onset of possible tariffs. Penn Medicine, Yale New Haven Health, Mass General Brigham Jefferson Health and Lehigh Valley Health Network are among providers that have let workers go in recent months or consolidated leadership teams, citing operational challenges.
And more health systems could follow Providence’s lead and freeze hiring, Mark Pascaris, senior director and analytic lead of nonprofit healthcare at Fitch Ratings, told Healthcare Dive.
The consultant called Providence’s choice to freeze hiring an “industry marker” in the face of a volatile equity market, looming trade war and possible budget cuts.
“As they’re hit on multiple fronts, everyone has to react in their own way,” Pascaris said. “Do we expect that others will follow with similar actions? The answer is probably yes.”
