Higher volumes, more favorable reimbursement rates and more efficient labor spending helped Providence cut its 2024 operating losses nearly in half.
March 6, the nonprofit system reported a $644 million operating loss (-2.1% operating loss) across 2024, a stark improvement over the $1.17 billion operating loss (-4.1% operating margin) of the year prior. The 2024 tally includes $183 million in reconstruction costs “related to asset rationalization, employee reductions and other items,” according to its filing.
Operating revenues across the system grew 7% year over year to $30.7 billion (5% when excluding a $426 million net gain in the first quarter), with management noting in its filing that the growth was spread across all of its operating categories.
Net patient service revenues rose 7% on the back of improved rates and higher volumes. For the latter, on a year-over-year basis, inpatient admissions rose 4%, acute adjusted admissions by 5%, case mix-adjusted admissions by 5% and normalized outpatient volumes by 3%. Acute patients’ length of stay also dipped by 3% “due to improved access to post-acute care,” management said in the filing.
On the other side of the balance sheet, Providence reported a 5% rise in operating expenses due to the aforementioned $183 million restructuring costs and, more substantially, costs associated with serving higher patient volumes. Salaries and benefits spending rose 3% as wage increases were offset by a 38% year-over-year reduction in agency contract labor spending. Supplies spending rose 8%, largely due to pharmaceutical expenses.
Providence’s operating improvements came “despite several headwinds across the year related to regulatory changes, strikes and much lower Medicare rate increases,” the system said in a release. It also noted a $468 million rise in accounts receivable, or six net days, “due to an increase in denials, underpayments and delays in paying claims. Providence is pursuing multiple technology, operational and legal tactics to lower [accounts receivable] days.”
The organization has operated in the red for several years now, though it’s been on an upward trajectory since 2022’s $1.7 billion (-6.4% operating margin) low point, when it launched the reorganization. It also welcomed a new president and CEO, Erik Wexler, at the top of the year.
“We are proud that Providence continues to serve more people in need year over year even as macroeconomic and regulatory pressures continue,” Chief Financial Officer Greg Hoffman said in a release. “While we have made significant progress on our renew and recovery strategies post-COVID, we are not taking it for granted and are practicing continued operational focus and discipline to ensure long-term sustainability, which will position the ministry to thrive for years to come.”
Beyond operations, Providence tallied $488 million of investment income that backstopped its $413 million non-operating gain. This brought the system to a $231 million bottom-line deficit of revenues over expenses.
Providence reports total unrestricted cash and investments of $8.17 billion and 99 days of cash on hand as of Dec. 31. A year prior those were $8.42 billion and 107 days, respectively. The organization also said it invested $1.89 billion in community benefit during the year, down slightly from $2.05 billion in 2023.