Providence’s finances are looking to turn over a new leaf in 2024 with a $176 million operating income (2.3% operating margin) and a $360.3 million bottom line for its first quarter.
The numbers, disclosed Friday, are a reversal of the consistent losses the Renton, Washington-based nonprofit has weathered in recent years. For instance, last year’s first quarter saw an operating loss of $345 million (-5.1% operating margin). In 2022, it was a $510 million operating loss (-8.1% operating margin).
The nonprofit credited its improvements to stronger admissions, improved reimbursement rates and its work to reduce length of stay.
“Thanks to the dedication of our caregivers, Providence continues to meet the growing needs of our communities with high-quality, compassionate care,” Providence Chief Financial Officer Greg Hoffman said in a statement. “Together, we are navigating the headwinds facing healthcare by focusing on our strategies for recovery and renewal. We expect the positive momentum to continue throughout the year and are excited for a strong 2024.”
Operating revenues during the quarter ended March 31 rose 14% year over year to $7.8 billion. The increase dipped to 8% when excluding $426 million of other one-time gains from January subsidiary sales.
Net patient revenues increased by 11% year over year, which management said was consistent across all areas of hospital revenues and reflected higher demand and increased rates for care. Here, inpatient admissions rose 3%, acute adjusted admissions by 4% and case mix adjusted admissions by 4% compared to the prior year, all while length of stay was cut by 4% “due to improved access to post-acute care.”
Overall outpatient visits dipped by 2%, though management attributed the difference to 2023 volumes related to lab services the system has since sold off. Meanwhile, outpatient ER visits, home health visits and physician visits all rose by 2% since the prior year. Health plans and accountable care revenues also grew by 4% year over year.
Operating expenses grew by 6% to more than $7.1 billion, with much of the gain stemming from Providence’s increased volumes. Within labor, salaries and benefits expenses grew by 4% though agency contract labor spending fell by 42% via a combination of lower rates and utilization. Supplies expense rose 5% year over year, which included both a 12% rise in pharmaceutical expense but a 12% decline in nonmedical supply costs.
Nonoperating gains for the quarter landed at $184 million and included $205 million of investment gains. Both of these numbers fell below the first quarter of 2023, when nonoperating gains were $228 million on the back of $259 million in investment gains.
In a release highlighting the numbers, Providence called out $410 million of community benefit investments it made during the first quarter. It also highlighted the aforementioned subsidiary divestments—modular services business Acclara, revenue cycle company Advata and certain laboratory services in California—which it said strengthened its cash position.
“These transactions represent our strategies to diversify and deconstruct the traditional model of healthcare 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 employs more than 122,000 people across 51 hospitals and over 1,100 clinics plus other programs in seven states. It tallies about 29 million total patient visits per year and runs a health plan covering 2.6 million lives. Across 2023, the Catholic nonprofit reported over $28.7 billion in operating revenues but a -4.1% operating margin.
During the quarter, Providence announced a settlement with the state of Washington to refund or erase $157.7 million in medical care payments, putting to bed an investigation over allegations related to its charity care practices. It is still being investigated for similar concerns in nearby Oregon.
Additionally, last week brought news that President and CEO Rod Hochman, M.D., plans to retire from his role and move into a CEO emeritus position at the top of 2025. Providence’s board has begun the process of selecting his replacement.