Renton, Washington-based Providence logged a $202 million operating loss for the second quarter (-2.8% operating margin) that the nonprofit says reflects its efforts to trim expenses amid last year’s tough losses and ongoing headwinds facing the hospital industry.
Providence had seen a $424 million operating loss during the same quarter a year back, results that preempted a broader restructuring of its business for greater efficiency.
Year to date, the system sits at a $547 million net operating loss (-3.9% operating margin) and a $232 million deficit of revenues over expenses.
“External pressures—including inflation, the shortage of health care personnel and an increase in denials or delays in reimbursement—have persisted well into 2023,” Providence Chief Financial Officer Greg Hoffman said in a release. “That is why we continue to stay the course on our strategies for recovery and renewal. These efforts are making an important difference, and together with the caregivers of Providence, we are improving our overall operating performance and continuing to meet the growing health needs of our communities.”
In its financial statement, Providence highlighted broad volume gains during the first six months of 2023 compared to the prior year. Inpatient admissions rose 2%, acute adjusted admissions increased by 4% and case mix adjusted admissions rose 6%, while non-acute volumes saw a 6% gain that was boosted by a 17% jump in outpatient surgeries and procedures.
The volumes fueled a 10% year-over-year rise in six-month operating revenues to $14 billion, $11 billion of which came from net patient service revenues. The most recent quarter’s $7.2 billion operating revenue represented a 12% year-over-year gain over the same period in 2022.
Operating expenses increased 7% year over year on a six-month basis and 8% on a three-month basis. Providence management noted that the increases during both periods were “driven mainly by costs associated with serving higher patient volumes.”
Salaries and benefits expenses rose 5% year over year across six months and 4% across the quarter, with the system highlighting a 13% decline in contract labor spending when comparing 2023 and 2022’s first halves. Supply spending was up 10% across the six months ended June 30 and 6% for the second quarter.
Providence’s nonoperating activity for the first half yielded a $315 million gain, thanks largely to $362 million of investment gains. These softened the blow from operations for a year-to-date bottom line of -$232 million.
Providence’s days of cash on hand dropped from 129 at the end of 2022 to 117 as of June 30. The system highlighted in its release the $1 billion of community benefit it has provided so far in 2023 “despite the challenges,” which is up from $718 million during the prior year’s first half.
“Ensuring everyone has access to health care, regardless of ability to pay, is central to our commitment to serving all in need, especially those who are most vulnerable,” Rod Hochman, M.D., Providence president and CEO, said in a release. “I am incredibly proud that our investment in community benefit continues to increase.”
Providence comprises 51 hospitals, more than 1,000 physician clinics and other locations and employs nearly 120,000 people across seven western states. The system has been working to turn around the $1.7 billion operating loss (-8.8% operating margin) and $6.1 billion net loss it logged across the entirety of 2022.
Providence’s report of increased volumes and persistent expense pressure has so far been the trend of the second quarter, as per the earnings filings of recent weeks from fellow large nonprofits like Sutter Health, Mayo Clinic and UPMC.