Providence reports results for third quarter 2022
The health system narrowed its net operating loss during the quarter as strategies to respond to external pressures begin showing results.
RENTON, Wash., Nov. 11, 2022 – Providence, a not-for-profit health system serving the Western U.S., today announced results for third quarter 2022. The report showed the ongoing impact of inflation, the national health care labor shortage, delayed reimbursement from payors, global supply chain disruptions and financial market weakness. In stepping up to meet the significant need, Providence, like other health systems across the country, continued to absorb the increased cost of caring for patients even as revenue and reimbursement did not keep pace. Despite these challenges, Providence curbed its net operating loss to $164 million for the third quarter of 2022, compared to a net operating loss of $424 million in the previous quarter. “Thanks to the dedication of everyone at Providence, our strategies for responding to the times are beginning to make a difference. Retention and recruitment continue to be a significant area of focus, and we are starting to see the results of a concerted effort to reduce our overall reliance on costly agency staffing, including converting travelling nurses to permanent staff roles,” said Providence Chief Financial Officer Greg Hoffman.
Other key strategies include addressing discharge challenges related to severe staffing shortages in community-based post-acute facilities, as well as a continued focus on increasing surgical capacity to meet vital health care needs. In addition, as announced in July, Providence has been working to simplify its operating management structure. The leaner executive team and nimbler administrative structure is enabling the health system to better support caregivers and patients by freeing up resources for direct patient care while keeping the focus on retaining and recruiting caregivers in essential roles.
For the nine months ended September 30, 2022, operating revenues were $19.6 billion, growing 4% on a pro forma basis. Meanwhile, operating expenses were $20.7 billion, an increase of 7%, compared with the same period in 2021 on a pro forma basis. This includes a 9% increase in salary and benefits due to the cost of agency staff, overtime, and wage increases. It also includes a 6% increase in supply costs, driven by an 8% increase in pharmaceutical spend.
Providence experienced a net operating loss of $1.1 billion for the first nine months of the year. Operating earnings before interest, depreciation, and amortization (EBIDA) resulted in a loss of $28 million. The $120 million in CARES funding that Providence recognized as revenue in the first nine months of the year provided some relief but was not adequate to cover the loss. Financial market weakness and volatility drove investment losses of $1.4 billion for the nine months ending September 30, 2022, bringing Providence’s total unrestricted cash and investments to $9.1 billion.
Providence has remained steadfast in its commitment to uncompensated care and other community programs throughout this time of need. Having ended 2021 with $1.9 billion in community benefit, up $366 million since 2019, Providence reported another increase in the first nine months of 2022. The health system invested $1.5 billion in community benefit in the nine months ending September 30, 2022, compared to $1.2 billion for the same period in 2021.
“Health care delivery systems across the country face unprecedented challenges, and Providence has not been immune. However, just as we have for more than 165 years, we will continue to be here to meet the health care needs of our communities. While we still have a journey ahead of us, we are moving in the right direction and are beginning to see signs of renewal this quarter. My deepest gratitude to the caregivers of Providence for continuing to focus on the Mission and serving those in need, especially those who are most vulnerable, with excellence and compassion,” said Providence President and CEO Rod Hochman, M.D.
*Hoag assets excluded from the 2021 comparisons.
**For additional information, see our voluntary disclosure for the quarter ended September 30, 2022.