Providence sees $714M operating loss in 2021 as returning patients drive higher costs

Providence wrapped up its 2021 fiscal year with higher year-over-year volumes but ultimately fell well beneath 2020's operating income and net income.

For the year ended Dec. 31, 2021, the Catholic system reported a net operating loss of $714 million, more than twice the $306 million loss it saw in 2020.

Despite a nearly $200 million year-over-year improvement in net nonoperating gains to $1.23 billion, Providence also saw its net income dip to $812 million from the prior year's $1.12 billion.

In a release accompanying the earnings, the system characterized 2021 as “an unprecedented year, marked by three major surges in COVID-19 volumes, a national shortage of health care personnel, as well as deferrals of non-emergent care.”

Still, the provider took an optimistic tone in its announcement, highlighting its recovering volumes, expectations of pent-up demand from deferred care, a new strategic plan and the year’s $1.9 billion in uncompensated care and other community benefits alongside the year’s losses.

“Throughout this time of need, Providence continues to be here for our communities,” President and CEO Rod Hochman, M.D., said in a statement. “We are deeply grateful to our caregivers for their commitment to the mission and all they do to help us serve those who are most vulnerable. We are incredibly proud that we continue to increase our community benefit levels amid the challenges of the pandemic.”

Providence’s case mix adjusted admissions rose 7% year over year, driven by outpatient visits, admissions, emergency room visit increases, and surgeries and procedures. Long-term care patient days, virtual visits and membership in the system’s health plan all declined from the previous year.

Total operating revenues rose 6% from $25.68 billion in 2020 to $27.33 billion in 2021. Operating expenses rose 8% from $25.98 billion in 2020 to $28.04 billion in 2021.

For the latter, Providence pointed to the higher costs of serving more returning patients as well as a 10% bump in salaries and benefits expenses and a 9% rise in supplies expenses.

The 52-hospital nonprofit said it recognized $313 million in CARES Act funding during 2021, well below the $957 million of the prior year. Providence said it has also repaid a total of $621 million of the $1.6 billion of COVID-19 Accelerated and Advance Payments to the Centers for Medicare & Medicaid Services during fiscal year 2021.

“When the first U.S. patient with COVID-19 was admitted to a Providence hospital two years ago, there was not a playbook for what was about to unfold. But together we responded to the challenge,” Hoffman said. “Though the headwinds will be strong the next few months, we have charted a clear path to recovery and renewal, and we will continue to invest in the health and well-being of our caregivers and patients.”