- Providence posted a $310 million operating loss for the third quarter on Tuesday as it struggles to rebound from a $6.1 billion loss in its 2022 fiscal year.
- Though year-over-year revenue grew 5% in the quarter, the Renton, Washington-based health system was hammered by rising expenses. Pharmaceutical costs rose 21% year over year and salary and benefit expenses increased by 8%.
- The nonprofit health system has focused on recovery strategies since last year. Executives noted that some workforce optimization efforts have paid off — reliance on contract labor was down 13% for the first nine months of the year compared with the same period in 2022.
Providence, like many nonprofit hospitals, struggled last year with inflationary pressures, labor shortages and investment losses. It also severed ties with Southern California-based Hoag Hospital in January 2022, leaving a $3.4 billion hole in its balance sheets.
The nonprofit health system said inflation, labor shortages and delayed reimbursement from payers are still affecting its bottom line, but its financial outlook is improving.
"Health systems nationally continue to contend with significant macroeconomic pressures, including inflation, the shortage of healthcare personnel and inadequate, delayed or denied reimbursement from payers," Providence CFO Greg Hoffman said in a release. "Yet, with a steadfast focus on our recovery and renewal strategies, we are seeing appreciable improvements in many of our local markets."
Demand for services — particularly outpatient care — continued to rise at Providence, which operates in seven Western states. Non-acute volumes grew 8% during the first nine months of the year, primarily driven by a 13% increase in outpatient surgeries and procedures, and a 5% increase in home health visits, according to the report. Inpatient admissions grew 1% over the period.
Operating revenues for the quarter totaled $7 billion and included $109 million gained from the September sale of Providence Oregon’s outreach laboratory services.
Providence received a boost from its investment portfolio. Non-operating gains were $244 million for the first nine months of the year, compared with non-operating losses excluding disaffiliation of $1.3 billion during the same time in 2022.
The health system attributed the increase to investment gains of $298 million over the first nine months of the year. The system posted $1.4 billion in investment losses during the same period in 2022.
Providence’s recovery strategy, called Destination Health 2025, began rolling out last year. The plan to improve operational efficiency included consolidating the executive leadership team through a reduction in force and renegotiating payment rates with commercial insurers.
Going forward, the system remains focused on reducing the use of premium labor, such as agency nurses, according to the release.