Providence Reduces Q2 Operating Losses Amid Higher Patient Volumes and Improved Commercial Rates
Providence reported a \$21 million operating loss (-0.3% operating margin) in the second quarter, as higher patient volumes and revenue growth outpaced year-over-year expense increases.
The results mark a significant improvement from the \$123 million operating loss (-1.6% margin) recorded in the same period last year, which the 51-hospital nonprofit attributed to ongoing staffing improvements and expense management efforts. For the first six months of the year, Providence posted a \$265 million operating loss (-1.7% margin).
Executives highlighted the system’s steady progress toward breaking even after several years of operating losses.
However, Providence pointed to a range of economic pressures — which it calls a “polycrisis” — that continue to challenge nonprofit health systems. These include inflation, tariffs, new state rules on staffing and charity care, payment delays from commercial insurers, and looming federal funding cuts from the “one big, beautiful bill.” In June, the system announced a restructuring that eliminated 600 full-time-equivalent positions.
“Thanks to the dedication of our caregivers and the discipline behind our sustainability initiatives, we’re making meaningful progress toward breakeven,” Chief Financial Officer Greg Hoffman said in a statement. “However, the passage of H.R.1 and other external pressures continue to weigh on the health care sector. These challenges underscore the urgency of our transformation and our commitment to adapt so we can sustain our Mission and ensure continued access to high-quality care in the communities we serve.”
Providence reported operating revenues of \$7.91 billion for the quarter, up 3% year over year, driven by stronger commercial rates and higher patient volumes. Compared to the prior year, inpatient admissions, acute adjusted admissions, and case mix-adjusted admissions each rose 3%, physician visits increased 8%, outpatient surgeries and procedures were up 5%, and total outpatient visits grew 3%.
Operating expenses totaled \$7.93 billion for the quarter, a 2% increase from the prior year, largely due to the costs of treating more patients. The system noted a 43% drop in agency contract labor costs and additional savings from other expense management measures, though supply expenses climbed 9%.
Providence leadership pointed to several factors affecting its access to working capital this year, including a work stoppage at Oregon facilities and delays in state-directed payment program approvals. The system reported net days in accounts receivable of 54 as of June 30 — an improvement from earlier in the year but still above historical norms, driven largely by ongoing delays in payer processing and higher denial rates.
During the quarter, Providence recorded \$138 million in investment gains, resulting in a net nonoperating gain of \$114 million. When combined with operating results, the system closed the quarter with about \$93 million in excess revenue over expenses. Year to date, however, Providence remains down \$69 million.
“I’m incredibly proud of the progress we’ve made and grateful to our caregivers and teams across Providence St. Joseph Health for their continued dedication,” President and CEO Erik Wexler said in a statement. “While challenges like H.R.1 continue to put pressure on our system, we will keep adapting and transforming to meet the needs of the future.”
Providence is one of the largest nonprofit health systems in the U.S. In 2024, it reported nearly \$31 billion in total operating revenues but posted a \$644 million operating loss (-2.1% operating margin).
