- A large wave of COVID-19 patients and expense growth drove nonprofit giant Providence Health to a $311 million operating loss in the third quarter, the system announced Tuesday. That's compared to an operating gain of $7 million at the same time last year.
- Expenses eclipsed revenue growth during the quarter as the system spent more on overtime and staffing agencies to respond to the increased volumes. The Catholic health system also saw a large increase in pharmaceutical spend. These factors contributed to a negative 4.6% operating margin, compared to Providence's positive operating margin of 0.1% at the same time last year.
- Officials said even as COVID-19 cases normalized later in the quarter, patients who had previously deferred care returned to the Renton, Washington-based system in droves, fueling an 8% bump in volumes. Volume growth was reflected across many service lines, including the emergency room, which was slow to return for many operators across the country prior to the third quarter.
A resurgence in COVID-19 cases starting in August spurred by the highly infectious delta variant pressured the operations of many hospitals in the quarter ended Sept. 30. Providence, one of the largest nonprofit systems in the U.S., was no different, reporting a double whammy of high COVID-19 inpatient levels and a return of delayed care in the quarter ended Sept. 30.
Many Providence service areas hit ICU census levels comparable to last winter's COVID-19 surge, while several service areas experienced their highest COVID-19 census to date, the 52-hospital system said.
Volumes continued to increase even as the COVID-19 census plateaued later in the quarter, and patients who had deferred care during the pandemic sought treatment. As a result, Providence, which operates facilities in seven states across the western U.S., saw higher outpatient and admission volumes and increases in emergency room visits, compared to the same time last year.
Emergency room visits, acute admissions and outpatient visits were up 18%, 5% and 3%, respectively.
"We experienced volumes that tested the limits of many parts of our health system," Providence CFO Greg Hoffman said in a statement.
Despite a year-over-year increase in operating revenues of 7% to $6.8 billion, expenses rose 12% to $7.1 billion, resulting in a steeper operating loss compared to the same time last year.
Supply expenses were up 11%, driven by higher spending on pharmaceuticals and medical supplies, while salaries and benefits hiked 16% as Providence invested more in its workforce due to greater usage of agency staffing and increased overtime to combat higher volumes.
The pandemic has exacerbated labor strains for hospitals as workforce unrest and burnout comes to a head. Labor expenses also rose among Providence's for-profit peers Tenet, HCA and UHS during the quarter as systems raced to build out their workforces to meet rising patient need at a time of widespread employee turnover and labor disputes.
On Saturday, a major strike at Kaiser Permanente in California was narrowly avoided when union members and management reached a tentative contract agreement. As many as 28,400 healthcare workers in the region had been set to walk off the job Monday in what would have been the largest strike in the U.S. so far this year.
Meanwhile, another open-ended strike at a Tenet hospital in Worcester, Massachusetts, has surpassed eight months; and another in Buffalo, New York, reached almost 40 days before the union and hospital management greenlit new contracts.
In a bid to get ahead of the issue, Providence in September announced it would be investing $220 million in recruiting and retaining top talent, including recognition bonuses for caregivers, increases in base pay for lower-paid positions and sign-on and referral bonuses.
Of Providence's 121,000 employees, a little less than a third are represented by unions. Providence management said in the system's financial filing they want to ensure salaries and benefits are competitive as they undergo continued contract negotiations throughout 2022.
Providence has faced strikes at different facilities over the past two years as a result of negotiations: most recently in summer last year, when a majority of nurses at Providence Regional Medical Center in Everett, Washington, voted to authorize a strike over Providence's alleged plans to reduce paid time off and other benefits.