- Higher labor costs, supply chain disruption, weak investments and inflation drove nonprofit giant Providence to an operating loss of $424 million in the second quarter, the Washington-based system said Monday.
- COVID-19 volumes receded in the quarter from their January peak and weren’t offset by a rebound in surgical levels, according to Providence’s financial filing. Meanwhile, the nonprofit had to rely more heavily on expensive agency staffing compared to the prior year amid the ongoing healthcare labor shortage.
- The financial results were released a month after Providence announced a plan to shrink its leadership team and overhaul its operational structure.
Providence is one of the largest nonprofit hospital operators in the U.S., with 51 hospitals and more than 900 outpatient sites across seven states, along with an affiliated health plan. But the system, like many of its peers, says it has struggled amid persistent operating challenges posed by the COVID-19 pandemic.
In the first six months of 2022, Providence’s acute volumes were down slightly compared to the first half of 2021, with inpatient admissions dropping 8% and surgeries and procedures down 9%. Outpatient visits and emergency room visits were up 3% and 6% respectively, however.
Providence’s six-month operating revenue was $12.7 billion, down 5% year over year. Operating expenses ticked up slightly year over year to $13.6 billion, mostly driven by higher salaries and benefits expenses like increased agency expense and overtime, according to the system.
Providence also saw a nonoperating loss of $902 million due to a weaker financial markets and a $3.4 billion loss due to the removal of Hoag Hospital’s net assets from the system’s balance sheet. Southern California-based Hoag disaffiliated from Providence in January.
As a result, Providence posted a net loss of $5.2 billion in the first half of the year. That’s compared to an income of $721.4 million in the first half of 2021.
In July, the Catholic health system announced it was simplifying its operations with a leaner executive team and pared-down administrative structure. The internal surgery is a bid to operate as efficiently as possible, Providence CFO Greg Hoffman said in the system’s release on its financial results.
Providence plans to group its existing seven operating regions into three new divisions, and consolidate its three clinical business lines — physician enterprise, ambulatory care network and clinical institutes — under one executive leadership team.
To try to offset some of the inflationary pressures on its labor and supply expenses, the system is working with its payers to try and increase reimbursement across multiple payment models, including value-based care, according to the filing. Providence is also working to expand its health plan beyond Oregon, and growing its value-based care initiatives with other payers, particularly in California.
In addition, Providence is trying to diversify and drive growth in non-acute service lines, especially ambulatory, home and community care, and is “continuing to evaluate optimal growth and capitalization opportunities,” the filing said.