Providence Health Reports Q3 Operating Loss Amid Efforts to Strengthen Financial Performance

While higher labor and supply costs posed challenges, the health system reported improved performance compared to last year, reflecting ongoing recovery efforts and a focus on operational stability.

Providence Health & Services, one of the largest nonprofit health systems in the United States, posted a $208 million operating loss in the third quarter of 2024.

While higher labor and supply costs posed challenges, the health system reported improved performance compared to last year, reflecting ongoing recovery efforts and a focus on operational stability.

Performance Highlights: Balancing Growth & Costs

Providence’s operating revenues in Q3 rose by 5.7% to $7.6 billion, driven by increased patient volumes and better reimbursement rates. However, operating expenses also grew by 4%, reaching $7.8 billion. Labour costs, including salaries and benefits, rose by 4%, while supply expenses surged by 8%, largely due to a 12% increase in pharmaceutical costs.

Despite these challenges, Providence achieved notable progress. The Q3 operating loss of $208 million represented a substantial improvement from the $310 million loss reported in the same quarter last year. Operating EBIDA also improved, increasing by $61 million to $165 million in Q3.

Greg Hoffman, Providence’s Chief Financial Officer, acknowledged the ongoing economic pressures but highlighted the system’s resilience. “Despite national challenges such as staffing shortages and rising supply costs, our teams have stayed committed to recovery and operational improvement. We are encouraged by the progress in many of our local markets,” Hoffman stated.

9-Month Financial Snapshot

For the nine months ending September 30, 2024, Providence reported a $155 million operating loss, a marked improvement from the $857 million loss during the same period in 2023. This improvement reflects the success of the health system’s cost-management strategies and its ability to adapt to post-pandemic challenges.

During the nine months, operating revenues increased by 9% to $23 billion, compared to $21.2 billion in the prior year. This was driven by higher patient volumes and an 8% rise in net patient service revenues. At the same time, Providence reduced lengths of stay by 3%, improving patient flow and access to post-acute care.

Acute-adjusted admissions grew by 5%, while physician visits and home health visits each increased by 3%. These figures demonstrate an expanding demand for Providence’s services across both acute and non-acute care settings.

Providence reported $248 million in investment gains in Q3, contributing to a positive net income of $20 million for the quarter. This brought the health system’s total unrestricted cash and investments to $7.8 billion as of September 30, 2024, providing financial stability amid ongoing recovery efforts.

The organization continued to uphold its mission of supporting vulnerable communities, investing $1.3 billion in community benefit programs during the first nine months of 2024. Rod Hochman, MD, President and CEO of Providence, reiterated the health system’s long-standing commitment to its mission. “For more than 165 years, Providence has remained dedicated to compassionate care. Our mission continues to guide us as we strengthen our communities and expand our healing ministry,” Hochman said.

Looking Ahead: Strengthening Foundations for the Future

Providence faced headwinds in accounts receivable (A/R), which increased by $515 million since the end of 2023. This was primarily due to denials, underpayments, and increased payer requests. In response, Providence has implemented multiple initiatives to streamline operations, including leveraging technology and legal measures to reduce A/R days.

Operating across seven states with 51 hospitals and over 1,000 clinics, Providence serves millions of patients annually. While rising labor and supply costs remain a challenge, the health system’s improved financial results reflect its resilience and strategic focus.

As Providence continues to adapt to economic and industry shifts, its commitment to patient care, operational efficiency, and community benefit ensures it remains a cornerstone of healthcare delivery in the regions it serves.