Erik Wexler stepped into the top leadership role at 51-hospital Providence at a “tumultuous” time in healthcare, as he described. The nonprofit health system, which operates hospitals in the western U.S., faces challenges close to its local communities—the Los Angeles wildfires last January and healthcare worker strikes in Oregon—as well as broader headwinds such as higher supply and labor costs and Medicaid policy changes.
“We look at this as a 'polycrisis.' There's a series of issues that are facing healthcare in the United States,” Wexler said during a sit-down interview with Fierce Healthcare this week, also ticking off tariffs, inflationary pressure and reduced and delayed commercial insurer reimbursement as critical challenges.
The health system is positioning itself to endure and navigate those significant headwinds with a focus on redesigning its operations for a new reality of reduced reimbursement and rising costs, Wexler said. Looking to tighten its belt, Providence has reduced its leadership head count, consolidated departments, signed service partnerships and paused hiring for nonclinical positions.
For the first three months of 2025, Providence's operating revenues grew 1% year over year to $7.8 billion. The system saw higher patient volumes in the initial months of 2025 offset by increased operating expenses, which grew 6%. Inpatient admissions were up 4%, and case mix adjusted admissions grew 3%, according to Providence's first-quarter financial statement released this week.
The nonprofit system reported a $244 million operating loss (-3.1% operating margin) in the quarter. Net loss for the quarter, which includes nonoperating items, came to a loss of $161 million. Providence reported investment gains of $105 million during the first quarter and said it invested $559 million in community benefit during the quarter.
The health system operates more than 1,000 clinics and employs north of 124,000 caregivers.
In a statement accompanying its first-quarter results, Providence Chief Financial Officer Greg Hoffman said Providence has made significant progress in its key operating performance metrics in recent years, but the last several months have brought "greater uncertainty around Medicaid funding, with only slight increases in Medicare rates, and several new state laws that have increased expenses and decreased revenues."
New laws in Oregon regarding presumptive charity care and staffing legislation have added further complexity and significant financial pressure to Providence's operations, Hoffman noted.
Leadership also flagged ongoing delayed payments or denials from commercial insurers, an issue that has been echoed by other health system executive leaders in recent investor calls.
"One of the biggest financial impacts and destabilizing issues for healthcare in the United States is the transference of our balance sheets onto the balance sheets of the commercial payers," Wexler said. "I get the for-profit imperative, I get the responsibility to their stockholders and financial analysts, but it shouldn't be at the cost of destabilizing healthcare."
From 2023 to the end of 2024, Providence saw a $500 million revenue hit due to reimbursement challenges as a result of downcoding, denials and delayed payments, Wexler contends. "For all that money that we were due, it's sitting in the bank accounts of the commercial payers, earning decent interest. For us in the not-for-profit space, we're financing it. That's why Congress has to take a close look at the ecosystem of healthcare," he said.
These challenges come as Republicans in Congress push through a tax and immigration package that includes provisions that would cut Medicaid eligibility. With Medicaid program changes on the horizon, Wexler has a stark warning to lawmakers: The challenges facing healthcare amount to a national security issue.
“Healthcare was significantly destabilized through the last pandemic. There will be another pandemic. When? We don't know. But healthcare in the United States has been weakened over the years and is about to be weakened further. The reason I call it a potential national security crisis is that if we have another pandemic and we're not able to keep people healthy and well, then the service industry will slow down and potentially stop. Manufacturing will slow down and potentially stop, and the country will find itself unable to recover, as we did from the last pandemic,” Wexler said.
He added, “I do think there's going to be a significant reset of the level of services that we're able to provide in the United States to people that depend on us for health and wellness. It's just not affordable anymore. You’re going to see hospitals close, you're going to see services shut down, and you're going to see access to care significantly reduced.”
A third of Providence’s patients are on Medicaid, according to the health system.
Wexler and other leaders of Catholic, nonprofit health systems voiced similar warnings earlier this week when they cautioned that cutting funds to Medicaid will have a significant impact on people's access to care. Leaders stress that further cuts to funding could lead to program or service line closures.
The Trump administration has framed changes to the Medicaid program as efforts to root out waste, fraud and abuse. “There are bad players out there, and that needs to be corrected and potentially punished,” Wexler said. “But we implore Congress, and we implore the administration to avoid cuts to Medicaid.”
Republicans' budget megabill would impose, for the first time, a federal mandate on work requirements for Medicaid recipients.
“Work requirements, if not handled the right way, will defund people who can't get jobs and don't have access to jobs, and what that will do is cause them not to have preventative care, wind up having diseases or comorbidities that get them to end of life and very expensive care when they could potentially have those diseases or medical conditions prevented,” Wexler noted.
In conversations with lawmakers, Wexler said members of Congress have been “very open” to discussions about reducing the cost of healthcare.
“We try not to be the health system of, ‘No, you can't do this.’ We try to be the health system of, ‘We understand and here are some ideas for you so that we can find a pathway together.’ Congress is interested in potential solutions as they try to reduce the overall cost for the United States and what the federal government has to fund,” he said.
Wexler added, "While they're looking at potential impacts to Medicaid, what are they doing to make sure that commercial payers are following through on their responsibility so that we can have balance in the ecosystem and survive this very tumultuous time?"
Health systems have already struggled to recover since COVID, hospital leaders argue. Earlier this year, hospitals nationally had a monthly median operating margin of 4.4%. But for rural hospitals, the nationwide median operating margin is 1% or lower.
Recent government cuts to Medicare and Medicaid have reduced Providence’s funding by $500 million this year with more proposed cuts likely to decrease its reimbursement by another $1 billion, Wexler wrote in a letter to employees in April.
The impact of tariffs on supply costs also is weighing heavily on health system leaders' minds.
After imposing tariffs on China, Mexico and Canada in February, President Donald Trump imposed a 10% across-the-board tariff on all imports in April, with higher rates for countries with which the U.S. has the largest trade deficits, particularly China.
Tariffs on foreign goods would significantly raise Providence’s supply costs, which early estimates that costs could go up $10 million to $25 million per year, the health system said.
Unlike other industries impacted by tariffs, health systems don’t have the option of cost shifting, he noted. Seventy percent of Providence’s reimbursement comes through government payers, namely Medicare and Medicaid, with commercial insurers a portion of the remaining of the 30%.
“One of the reasons I call it a polycrisis is not only are we seeing potential reductions in 70% of how we're paid, but we have no ability to endure the increases in tariffs because we can't get that from any place else,” he said.
Wexler insisted that Providence is taking steps to bring down costs. “We're very focused on how to organize our system in a way that creates more efficiency. When contracts are opening, we renegotiate those very aggressively, including vendor contracts. I have reduced my own senior leadership team and organized it in a more efficient manner. We are, year to date, close to 1,000 FTEs [full time equivalents] less than we had in the prior year,” he said.
He warned that more workforce reductions were likely on the horizon, with an initial focus on nonclinical positions.
Redesigning care delivery with a focus on tech, AI
Even with the belt-tightening, Providence has zeroed in on several strategic initiatives to revitalize care delivery and the practice of medicine, Wexler said, and that includes addressing clinician and physician burnout and cutting down on administrative workloads.
Wexler, whose career in healthcare spans 30 years, joined Providence in 2016 and most recently served as chief operating officer. He was tapped to succeed former CEO Rod Hochman, M.D., back in July. He spent five months on the road on an engagement tour speaking with health system employees and executives before stepping into the role Jan. 1.
“One of the things I heard and committed to based on the feedback out there is that we needed to get rid of administrative burden, and that we would use our own resources to remove those barriers so that people could do a better job for our patients,” he said. “In healthcare in the United States, we're very good at putting new technologies out there and then going on to the next great one before putting it fully in a space of deployment. We're not going to make that mistake anymore at Providence," he said.
The health system is testing out ways to use artificial intelligence to improve operations and workflows using tools such as Microsoft DAX Copilot, an AI assistant for automated clinician documentation.
“Our thesis is that it can reduce that administrative burden and create savings in ways that allows people to spend time on more important things that provide better care to our patients. In the future, we believe that artificial intelligence will be able to provide the methodology for our physicians and our clinicians to do better at actually researching and providing the right level of diagnostics and, ultimately, the right care model or care pathway for our patients in the recovery of whatever medical issue or disease they're facing,” Wexler said.
Providence also is redeploying the resources of its Digital Innovation Group into a new Office of Transformation, which will target more immediate projects to reduce administrative burdens. At the top of the year, it spun out its Providence Ventures as an independent venture capital firm to include other partners.
It marks a shift to focus Providence’s innovation and digital health resources for internal efficiency projects.
“Our Digital Innovation Group has been extraordinary in helping to create companies and then spin them out, and there was a time where we could afford to make those investments, but given this polycrisis that I described, we can no longer invest in that way,” Wexler said. “We've got to invest in ourselves and so our leadership team has committed to revitalize care delivery in a way that takes our digital innovation group and lifts and shifts them into an office of transformation that is focused and disciplined on those areas of improvement in 2025.”
Those internal efforts include deploying ambient technology, developing AI tools to help clinicians manage their email inboxes and using tech to tackle administrative burdens.
The health system also is focused on building out its technology capabilities through its scaled partnerships like Truveta. Founded in 2020, Truveta is a data-driven collaboration between 30 health systems. In January, Providence joined 16 other health systems to launch the Truveta Genome Project to form a large and diverse database of genotypic and phenotypic information. The 17 health systems along with Illumina and Regeneron invested $320 million in Truveta preferred equity at a valuation exceeding $1 billion to fund these efforts.
"We're using artificial intelligence to create a pathway that helps us understand disease, cure disease and ultimately to find a way through artificial intelligence to help patients in an 'n of 1' to do much better in their own recovery," Wexler said of the genome project.
In 2020, the health system also established the Providence Global Center in India as a healthcare engineering, operations and innovation center that provides advanced healthcare solutions to Providence and other healthcare providers. Teams at Providence India are working on information technology, cybersecurity, AI and digital health initiatives, and this work also represents a potential new revenue stream for the health system.