Providence posted a $21 million operating loss (-0.3% operating margin) for the second quarter of the year as elevated volumes and revenues outpaced year-over-year expense increases.
The operating performance is an improvement over the prior year’s $123 million operating loss (-1.6% operating margin), for which the 51-hospital nonprofit credited its “continued focus on staffing and reductions from expense management initiatives.” The system is sitting at a $265 million operating loss (-1.7% operating margin) across six months.
Providence executives cheered the system’s steady march toward breakeven after several consecutive years of losses.
Still, the organization stressed a slew of economic headwinds it refers to as a “polycrisis” affecting nonprofit health systems like Providence as cause for continued expense reduction. Among these are inflation, tariffs, new state regulations around staffing and charity care, payment delays from commercial payers and the impending federal funding cuts of the "one big, beautiful bill."
Of note, in June it announced a restructuring that cut 600 full-time-equivalent positions with smaller job reductions occurring before and after. Compared to the prior quarter, Providence decreased its total number of employees by 1,800, according to the filing.
“Thanks to the dedication of all our caregivers and the discipline we are bringing to our sustainability initiatives, we’re seeing meaningful improvements in our performance, bringing us closer to breakeven,” Chief Financial Officer Greg Hoffman said in a release. “At the same time, the passage of H.R.1 and other external pressures continue to challenge the entire health care sector. These headwinds reinforce the urgency of our transformation and our commitment to adapt, so we can sustain our Mission and ensure continued access to high-quality care in the communities we serve,”
Operating revenues for the quarter were $7.91 billion, a year-over-year increase of 3% that was driven by improved commercial rates and higher volumes, management wrote in its quarterly filing. For the latter, inpatient admissions, acute adjusted admissions and case mix-adjusted admissions all rose 3% compared to the prior year. Physician visits rose by 8%, outpatient surgeries and procedures grew 5% and total outpatient visits increased by 3%.
The quarter’s operating expenses of $7.93 billion reflect a 2% year-over-year increase largely tied to the cost of treating additional patients, management wrote in the filing. Here, the system highlighted a 43% reduction in agency contract labor and reductions from other expense management initiatives, though supplies spending was still up 9%.
Providence management noted a handful of events that have impacted its access to working capital since the start of a year such as a work stoppage among Oregon facilities and delayed approvals of state directed payment programs. It also said that its net days in accounts receivable as of June 30, 54, is an improvement from the top of the year but still higher than historical trends “due to continued headwinds primarily driven by delays in payor processing and increased denials.”
Investment gains of $138 million during the quarter dragged Providence to a net nonoperating gain of $114 million for the quarter. Together with operations, Providence ended the quarter with a roughly $93 million excess of revenues over expenses for the quarter. The system is down $69 million year to date.
“I’m incredibly proud of the progress we’ve made and grateful to our caregivers and teams across Providence St. Joseph Health for their continued dedication,” President and CEO Erik Wexler said in a release. “The strain remains, especially with emerging challenges like H.R.1, but we will continue to respond to the times and answer the call while transforming for the future.”
Providence is among the country's largest nonprofit systems. Across 2024, it reported nearly $31 billion in total operating revenues but a $644 million operating loss (-2.1% operating margin).