Issue link: https://beckershealthcare.uberflip.com/i/1522996
12 CFO / FINANCE Providence CFO eyes 'strong 2024' after $176M operating gain in Q1 By Alan Condon R enton, Wash.-based Providence is back in the black after reporting a $176 million operating gain (2.3% margin) in the first quarter, a significant improvement on the $345 million operating loss (-5.1% margin) reported in the first quarter of 2023. The 51-hospital system saw first-quarter patient revenues increase 11% year over year to $7.8 billion while expenses rose 6.4% to $7.6 billion, according to financial documents. Salaries and benefits costs grew by 4% year over year to $3.9 billion as wage increases were offset by lower premium labor expenses. Contract labor declined by 42% year over year for the quarter. "We are navigating the headwinds facing healthcare by focusing on our strategies for recovery and renewal," CFO Greg Hoffman said in a May 17 news release shared with Becker's. "We expect the positive momentum to continue throughout the year and are excited for a strong 2024." Providence saw higher patient volumes in the three months ended March 31, versus 2023, with inpatient admissions up 3% and case mix adjusted admissions up 4%. Excluding one-time gains, net operating revenues were up 8% year over year, driven by higher volumes and improved reimbursement rates. The health system also strengthened its cash position from the $675 million sale of revenue cycle management company Acclara to R1 RCM as well as the sale of laboratory services to LabCorp. "These transactions represent our strategies to diversify and deconstruct the traditional model of healthcare through partnerships, allowing Providence to expand access to care, become more nimble and collaborate with others to better serve our patients, caregivers and communities in a more affordable way," Mr. Hoffman. Financial market results drove investment gains of $205 million for the first quarter, compared with $259 million in the prior year, bringing Providence's total unrestricted cash and investments to $8.6 billion as of March 31, 2024. Providence reported a net income of $360.3 million in the first quarter, compared to a net income of $454.5 million during the same period in 2023. Rod Hochman, MD, will retire as president and CEO of the health system at the end of 2024, capping off a 45-year career in healthcare. n 'No silver bullets' to improve margins, OSF CFO says By Madeline Ashley P eoria, Ill.-based OSF HealthCare has seen drastic improvements to its financial performance over the last two years, a performance that has allowed the health system to see revenue growth and expand its M&A footprint. OSF was able to turn around a $43.2 million operating loss (-4.5% margin) in the first quarter ended Dec. 31, 2022, to a $0.9 million gain over the same period in 2023. But the health system didn't stop there and, in the first six months ended March 31, 2023, transformed a $60.9 million operating loss to an $8.9 million gain for the same period in 2024. OSF HealthCare CFO Michael Allen connected with Becker's to discuss the strategies that helped OSF get to a more steady financial place and some of their plans for the future. Editor's note: Responses were lightly edited for length and clarity. Question: What strategies has OSF HealthCare implemented to help it turn the corner financially? Michael Allen: OSF Healthcare has improved operating results by more than $70 million compared to FY2023, aer seeing an even larger improvement from FY2022 to FY2023. Aer a very difficult FY2022, from a financial perspective, the organization launched a series of initiatives to return to positive margins. ere has been a focus on reducing the reliance on contract labor, nursing and other key clinical positions, with better recruiting and retaining initiatives. e organization is actively implementing automation for repeatable tasks in hard-to-recruit administrative functions and is actively managing supply and pharmaceutical costs against inflationary pressures. OSF has also seen revenue growth from patient demand, expanding markets, capacity management and improved payment levels from government and commercial payers. Q: KSB Hospital and OSF HealthCare recently entered into merger negotiations. How do you expect hospital consolidation to evolve in your market as many small, independent providers continue to face financial challenges and struggle to improve their bottom lines? MA: e economics of the healthcare delivery system model is challenging in most markets, but particularly difficult for small and independent hospitals and clinics. Given the structure of the payment system and the rising operating costs, I don't see this pressure easing any time soon. OSF is looking forward to our opportunity to extend our healthcare ministry to KSB and the greater Dixon area and continue their great legacy of patient care.