Providence ends 2022 with −8.8% operating margin, $6.1B net loss

Catholic nonprofit health system Providence wrapped a year of high expenses and organizational upheaval with a $1.7 billion operating loss (-8.8% operating margin) and a $6.1 billion net loss, according to financial reports released late Thursday.

Renton, Washington-based Providence’s numbers for the 2022 fiscal year included a $3.4 billion loss tied to its split with Orange County, California-based Hoag Memorial Hospital Presbyterian, which became official in January 2022.

Documents also showed $1 billion in investment losses and $247 million in “restructuring costs related to asset rationalization, leadership team reductions and other items” intended “to improve future operating performance.” Providence announced the restructuring plans last summer.

The nonprofit was already coming into the year in a tight spot. Fiscal 2021 had seen a $714 million net operating loss, though net income was $812 million thanks in part to that year’s $946 million (pro forma, reflecting the Hoag disaffiliation) in investment gains.

Despite the rough financial results, Providence’s leadership highlighted the system's largest-to-date $2.1 billion in uncompensated care and other community benefit activities during the year, compared to 2021’s $1.8 billion. The system, which has recently faced media and government scrutiny over its billing and collections practices for charity-care-qualifying patients, said it has increased its community benefit spending by more than $600 million since the start of the pandemic.

“Health care providers nationally have experienced unprecedented pressures over the last three years,” Providence President and CEO Rod Hochman, M.D., said in a statement. “Yet, through it all, Providence has not wavered from its mission. We continue to be here for our communities no matter how challenging the environment gets.”

Providence’s annual total operating revenues rose 4% year over year (pro forma) to $27.3 billion, though that increase was outpaced by operating expenses’ 6% year over year (pro forma) rise to $28 billion. Included in the operating expenses was an 8% rise in salary and benefits “due to the cost of agency staff, overtime and wage increases” as well as a 7% increase in supply costs.

Acute volume metrics “remained flat to slightly higher” compared to the previous year on a pro forma basis, Providence wrote. Acute patient days were up 1.8%, acute adjusted admissions rose 1.8%, case mix adjusted admissions increased 2% and inpatient admissions were flat, the system wrote. In the non-acute setting, Providence reported a 4.3% year-over-year (pro forma) volume increase.

Providence’s losses and the disaffiliation bring the 51-hospital system to $9.5 billion in total unrestricted cash and investments as of Dec. 31, down from the prior year’s $14.1 billion. Still, leadership said the restructuring has left Providence in a better position to tackle the coming year.

“Thanks to the dedication of everyone at Providence, our strategies for responding to the times are positioning us well for the future,” Chief Financial Officer Greg Hoffman said in a statement. “While we still have a journey ahead of us, we are moving in the right direction and beginning to see signs of renewal.”