Providence posts $306M loss in 2020 after patient revenue takes hit from COVID-19

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Providence posted a $306 million loss in 2020 after major drops in patient service revenue stemming from the pandemic. (AshDesign/Shutterstock)

Providence Health posted a $306 million operating loss for 2020 as the system’s patient service revenue declined by nearly $1 billion due to COVID-19.

Providence struggled with a major decline in patient volumes, which were down 9% compared to 2019 and led to a 5% decline in net patient service revenue.

While volumes have recovered since an initial decline at the onset of the pandemic, “operational recovery continues to be variable and market-specific as the pandemic continues across our footprint,” the 51-hospital system said in its earnings report released late Monday.

Providence generated $25.6 billion in operating revenue in 2020, slightly above the $25 billion that it generated the year before. However, Providence’s expenses shot up to $25.9 billion, a major spike from the $24.8 billion it paid for in 2019. This led to an operating deficit of $306 million.

A major reason was the system's response to the COVID-19 pandemic, which Providence got a jump start on as it was the first U.S. hospital system to treat a patient with the virus.

“The impact included a significant reduction in revenue, coupled with an increase in costs incurred for [personal protective equipment] and pharmaceuticals, and increases in labor costs for staffing to serve those impacted by the virus,” Providence’s report said.

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Net patient service revenue was $19 billion for 2020, down by nearly $1 billion from the $19.9 billion it posted in 2019.

Providence’s non-operating income totaled $1 billion in 2020 compared to $1.1 billion the previous year. The non-operating income, which is made up of investment gains, helped to “recoup operating losses resulting from the pandemic and offset reimbursement shortfalls from Medicaid and Medicare coverage, allowing us to serve vulnerable populations while balancing our financial standing,” the report said.

Providence’s operating earnings before interest, depreciation and amortization (EBITDA) was $1.1 billion, or 4.4% of its operating revenues. This was a decline from the $1.6 billion (6.2%) in EBITDA for 2019.

The system also got $957 million in relief funding under the CARES Act, which partly offset the losses from lower volumes, the report said.

Providence is an outlier among other larger for and not-for-profit systems that ended 2020 in the black. For instance, Mayo Clinic posted a net operating income of $728 million, helped by $587 million in donations and a massive increase in business from its lab division to help provide COVID-19 tests.

University of Pittsburgh Medical Center also posted a $1 billion profit for 2020 thanks to a boost of enrollment in its insurance business.