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HOW PROVIDENCE IS TURNING AROUND YEARS OF LOSSES

Analysis  |  By Jay Asser  
|   May 29, 2024


TOPICS

business strategy
earnings
finance
inpatient
revenue


THE HEALTH SYSTEM POSTED ENCOURAGING FIRST QUARTER EARNINGS THAT SHOW IT’S
CLIMBING OUT OF FINANCIAL TURMOIL.

--------------------------------------------------------------------------------


KEY TAKEAWAYS

Providence reported $360.3 million in net income for the first three months,
representing a U-turn from the net losses of $596 million and $6.1 billion in
the past two years, respectively.

A rise in inpatient volume, along with reduced length of stay, boosted operating
revenue 14% to $7.8 billion, while divestitures strengthened the system’s cash
position.

Providence’s finances are finally heading in the right direction after
languishing in the red for multiple years.

The nonprofit health system released its first quarter earnings, which showed a
promising turnaround thanks to higher admission volumes, improved reimbursement
rates, and reduced length of stay.

Through the first three months, Providence generated $176 million operating
income and $360.3 million net income, compared to a $345 million operating loss
and $117.3 million net loss over the same period last year.

Providence faced significant financial struggles the past two years when it,
along with many nonprofit hospital operators, grappled with increased labor
costs and lower patient volumes in the aftermath of the COVID-19 pandemic. The
results were a $6.1 billion net loss in 2022, followed by an improved, but still
consequential net loss of $596 million in 2023.





“Together, we are navigating the headwinds facing health care by focusing on our
strategies for recovery and renewal,” Providence CFO Greg Hoffman said in a news
release. “We expect the positive momentum to continue throughout the year and
are excited for a strong 2024.”

Operating revenue in the first quarter jumped 14% to $7.8 billion as inpatient
admissions increased 3%, acute adjusted admissions rose 4%, and case mix
adjustment admissions grew by 4%. Meanwhile, length of stay dropped 4% due to
improved access to post-acute care.



On the outpatient side, physician visits, home health visits, and outpatient
emergency room visits all increased by 2% each. However, total outpatient visits
went down by 2% due to the sale of Providence Oregon’s outreach laboratory
services business in August 2023.



Increased patient volumes also led to a 6% rise in operating expenses to $7.1
billion. In terms of labor costs, salaries and benefits expenses rose 4%, but
Providence managed to reduce agency contract labor by 42%.

The health system also called attention to divestures of revenue cycle company
Advata, modular service business Acclara, and lab services in California for its
improved cash position.

“These transactions represent our strategies to diversify and deconstruct the
traditional model of health care through partnerships, allowing Providence to
expand access to care, become more nimble and collaborate with others to better
serve our patients, caregivers and communities in a more affordable way,”
Hoffman said.

Providence’s first quarter earnings come on the heels of longtime CEO Rod
Hochman announcing his retirement. Hochman will vacate his position at the end
of this year and move into a CEO emeritus role. The health system is in the
process of selecting his successor.



Jay Asser is the contributing editor for strategy at HealthLeaders. 








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TAGGED UNDER:

business strategy
earnings
finance
inpatient
revenue

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