Providence is still in the running for its first positive operating year since the pandemic, reporting Wednesday a six-month operating income of $53 million (0.3% operating margin) for the period ended June 30.
The performance is a slip from the strong $176 million operating gain (2.3% operating margin) that kicked off the nonprofit system’s 2024.
Still, leadership counted the midyear numbers as a victory in light of the first half of 2023’s $547 million operating loss (-3.9% operating margin).
“Thanks to the dedication and support of everyone at Providence, we are continuing to meet the growing needs of our communities by delivering high-quality, compassionate and affordable care," Chief Financial Officer Greg Hoffman said in a release. “Despite ongoing headwinds, our strategies for renewal and recovery are driving positive results, and we remain focused on continued improvement in 2024.”
Operating revenues across the six-month span (excluding one-time net gains recognized in the first quarter) were 7% higher year over year, which the health system attributed to a combination of improved reimbursement rates and increased volumes.
In terms of the latter, Providence logged 4% increases in inpatient admissions and case-mix adjusted admissions across the half as opposed to the prior year. These came alongside greater access to post-acute care that fueled a 4% decrease in length of stay, management said in a filing.
Outside of the inpatient setting, Providence logged a 2% decline in outpatient visits, though this flipped to a 1% increase when excluding the volumes from a sold-off outreach lab in Oregon.
Operating expenses grew 6% compared to the first half of 2023 and were largely driven by the costs of treating more patients and inflationary pressures.
Salaries and benefits expenses rose 4% “as wage increases were offset by lower premium labor expenses,” management wrote in the filing. Contract labor spending also declined by 40% year over year “through a combination of reduced rates and lower utilization.” Meanwhile, supplies expenses rose 9% on the back of a 17% increase in pharmaceutical expenses.
Providence also logged $236 million of nonoperating gains across six months, slightly below the prior year’s $315 million due to lower investment gains. Together, the system reported a first-half 2024 bottom line of $289.2 million, reversing the $232.1 million net loss of the first half of 2023.
“Though these are challenging times for health care across the country, the Mission of Providence is well positioned to endure and thrive for generations thanks to our nurses, doctors and caregivers,” President and CEO Rod Hochman, M.D., who is set to retire at the end of the year, said in a statement. “Together, we are making important strides and advancing the healing ministry, especially for those who are most vulnerable.”
Renton, Washington-based Providence is comprised of 51 hospitals and more than 1,000 clinics across a seven-state footprint. The system employs over 124,000 people. Across 2023, it reported over $28.7 billion in operating revenues but a -4.1% operating margin.
Its word of higher patient volumes is proving to be a trend across second-quarter health system financial reports. Mayo Clinic, for instance, recently reported a 7.1% jump in admissions as fellow large nonprofit Mass General Brigham logged a 3% year-over-year rise in discharges for its most recent quarter.