Providence Reports Results For First Quarter 2022
PROVIDENCE REPORTS RESULTS FOR FIRST QUARTER 2022
In responding to the significant needs of its communities, the not-for-profit health system absorbed the rising cost of caring for patients while forging a path to recovery and renewal.
RENTON, Wash., May 13, 2022 – Providence, a not-for-profit health system serving the Western U.S., today announced results for the first quarter 2022. The report showed the ongoing impact of inflation, the national health care labor shortage and global supply chain disruptions. 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 reimbursement did not keep pace, resulting in a net operating loss of $510 million for the first three months of the year.
“With the pandemic, the last two years were challenging for many in health care. However, 2022 may be the biggest challenge yet. Rising costs due to inflation and the health care labor crisis are putting significant pressure on major U.S. health systems, some of whom have reported significant operating losses this quarter,” Providence CFO Greg Hoffman said.
“At Providence, we remain deeply committed to our communities and our caregivers and have charted a course to recovery that will allow us to navigate the headwinds and emerge from these challenging times stronger and transformed,” said Hoffman.
Another key to renewal is Providence’s strategic plan – Destination Health 2025 – which focuses on healing and rebuilding the caregiving workforce, as well as creating the workforce of the future. The plan also advances other key strategies, such as diversifying revenue through value-based care and other services to support patient care operations.
Meanwhile, Providence’s level of community benefit investment continues on an upward trajectory. Having ended 2021 with $1.9 billion in community benefit, up $366 million since 2019, Providence reported another increase in first quarter 2022. For the first three months of the year, Providence invested $412 million in community benefit, compared to $400 million for the same period in 2021.
“We are incredibly proud that we continue to increase our commitment to uncompensated care and other community programs throughout this time of need. This would not be possible without the dedication of our caregivers and community partners. Together, we are extending our Mission to more people in need, especially those who are most vulnerable,” said Providence President and CEO Rod Hochman, M.D.
Providence began the first quarter of 2022 with some of its highest COVID-19 admissions to date, with the daily census peaking at 2,420 patients in January of this year. As COVID-19 cases began to recede, Providence saw non-COVID-19 admissions and outpatient visits ramp up. Volumes, as measured by case mix adjusted admissions, increased 4% on a pro forma basis* for the first three months of the year. Yet even with improved volumes and higher acuity levels, patient care operations continued to be strained by the health care labor crisis, resulting in an increased reliance on costly agency staffing and other premium labor compared to the prior year.
For the three months ended March 31, 2022, operating revenues were $6.3 billion, growing 4.9% on a pro forma basis. Meanwhile, operating expenses were $6.8 billion, an increase of 9%, compared with the same period in 2021 on a pro forma basis. This includes a 13% increase in salary and benefits due to the added cost of agency staff, overtime, wage increases, and retention efforts. It also includes a 6% increase in supply costs, driven by a 13% increase in pharmaceutical spend.
As a result, Providence experienced a net operating loss of $510 million for the first three months of the year. Operating earnings before interest, depreciation, and amortization (EBIDA) resulted in a loss of $161 million. The $31 million Providence received in CARES funding during the first quarter provided some relief but was not adequate to cover the loss.
Also, of note, market volatility drove investment losses of $359 million, bringing Providence’s total unrestricted cash and investments to $10.9 billion.
“Though external economic pressures continue to bear down on health systems across the country, Providence remains steadfast in our commitment to meeting the needs of our communities. Just as our founders did more than 160 years ago, we will continue to respond to the times to ensure we can bring our healing Mission to those in need well into the future,” Hoffman said.
*Hoag assets excluded from the 2021 comparison.
**For additional information, see our voluntary disclosure for the quarter ended March 31, 2022