Providence posts $164M operating loss in Q3 after money woes in H1

Providence stemmed some of the bleeding during its financial third quarter, reporting a $164 million operating loss after already being down $934 million at the year’s halfway mark. 

“While we still have a journey ahead of us, we are moving in the right direction and are beginning to see signs of renewal this quarter,” President and CEO Rod Hochman, M.D., said in a release announcing the earnings.

The Washington-based nonprofit health system has been drowning under the weight of high labor costs, weak volumes and other economywide pressures such as inflation and supply chain disruptions. 

In its earnings announcement, Providence highlighted its work addressing discharge logjams caused by “severe staffing shortages in community-based post-acute facilities,” increasing its surgical capacity and streamlining its operations via an executive team reorganization launched during the summer. 

“Thanks to the dedication of everyone at Providence, our strategies for responding to the times are beginning to make a difference,” Chief Financial Officer Greg Hoffman said in the release. “Retention and recruitment continue to be a significant area of focus, and we are starting to see the results of a concerted effort to reduce our overall reliance on costly agency staffing, including converting travelling nurses to permanent staff roles.”

The 51-hospital nonprofit reported $6.87 billion in operating revenues for the quarter ended Sept. 30, up slightly from the $6.81 billion of last year’s third quarter. Operating expenses declined year over year from $7.12 billion to $7.03 billion. Providence’s operating margin improved year over year from -4.6% to -2.4%. 

The most recent quarter included net recognition of reimbursements from California provider fee programs of $145 million and $46 million in CARES Act funding, according to Providence’s public filing.

The system saw $19.57 billion in total operating revenue for the nine months ended Sept. 30, down year over year from $20.2 billion. Total operating expenses for the first nine months of this year landed at $20.67 billion, up slightly from last year’s $20.61 billion. Nine-month operating loss was $1.1 billion (-5.6% margin), over twice that of the $405 million net operating loss of the previous year.

Those year-over-year comparisons, however, don’t take into account the disaffiliation of Hoag Memorial Hospital Presbyterian back in January. 

On a pro forma basis, Providence has seen its nine-month operating revenue grow 4% and operating expenses grow 7%, driven by a 9% salary and benefits increase, 8% pharmaceutical spend increase and 6% supply cost increase. 

Providence’s management noted in its filing that year-to-date acute volume metrics “remained flat to slightly higher” compared to the previous year on a pro forma basis. Third-quarter acute patient days were up 1.4%, acute adjusted admissions remained even, case mix-adjusted admissions fell 1.1% and inpatient admissions had dropped 1.2% from the prior year’s equivalent period. 

Adjusted nonoperating losses hit $1.4 billion for the nine-month period, compared to a $705 million pro forma gain during the prior year. Of note, the system has been hit with $1.4 billion in investment losses year to date as opposed to the $687 million pro forma gain of last year. 

“Healthcare delivery systems across the country face unprecedented challenges, and Providence has not been immune,” Hochman said in the release. “However, just as we have for more than 165 years, we will continue to be here to meet the healthcare needs of our communities.”