Providence Cuts Operating Losses Nearly in Half Amid Financial Improvements

The financial report, released on Thursday, noted that the $644 million loss included $183 million in restructuring costs, which covered asset rationalization and employee reductions.

Providence Health & Services reported a significant reduction in its operating losses for 2024, improving its financial position despite ongoing challenges. The nonprofit healthcare system recorded a $644 million operating loss, equating to a -2.1% margin, a substantial improvement from the $1.17 billion loss (-4.1% margin) in 2023. The organization attributed this progress to increased patient volumes, better reimbursement rates, and more efficient labor spending.

The financial report, released on Thursday, noted that the $644 million loss included $183 million in restructuring costs, which covered asset rationalization and employee reductions.

Revenue Growth and Cost Management Contribute to Recovery

Providence's total operating revenue increased by 7% year over year, reaching $30.7 billion. Excluding a $426 million net gain in the first quarter, the growth rate stood at 5%. Management highlighted that revenue growth was observed across all operating categories, with net patient service revenues rising by 7%.

The higher revenue was driven by a 4% increase in inpatient admissions, a 5% rise in acute adjusted admissions, and a 3% growth in outpatient volumes. Additionally, acute patients’ length of stay decreased by 3%, which the organization attributed to improved access to post-acute care.

Despite the revenue boost, operating expenses grew by 5%, primarily due to restructuring costs and increased patient volumes. Salaries and benefits spending rose by 3%, though this was offset by a significant 38% reduction in agency contract labor expenses. Pharmaceutical and supply costs contributed to an 8% increase in total supply expenses.

Regulatory Challenges and Strategic Adjustments

Providence acknowledged several financial challenges, including regulatory changes, labor strikes, and lower-than-expected Medicare rate increases. The health system also reported a $468 million rise in accounts receivable, attributing it to increased claim denials, underpayments, and reimbursement delays. In response, Providence is implementing technological, operational, and legal strategies to reduce accounts receivable days.

Providence has been operating at a loss for several years but has been on an upward trajectory since 2022 , when its losses reached $1.7 billion (-6.4% operating margin). The organization launched a financial restructuring plan that year to stabilize its operations.

Newly appointed President and CEO Erik Wexler took leadership at the beginning of 2024 and oversees the organization's continued recovery.

“We are proud that Providence continues to serve more people in need year over year even as macroeconomic and regulatory pressures continue,” said Chief Financial Officer Greg Hoffman. “While we have made significant progress on our renewal 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 operating performance, Providence reported $488 million in investment income, leading to a $413 million non-operating gain. However, the system still recorded a $231 million deficit in revenues over expenses.

As of December 31, Providence reported total unrestricted cash and investments of $8.17 billion, down from $8.42 billion the previous year. The organization maintained 99 days of cash on hand, compared to 107 days in 2023. It also reported a $1.89 billion investment in community benefits for the year, slightly down from $2.05 billion in 2023.