Issue link: https://beckershealthcare.uberflip.com/i/1535973
12 CFO / FINANCE Providence operating margin slips to -3.1% in Q1; CFO 'preparing for every scenario' By Alan Condon R enton, Wash.-based Providence reported a $244 million operating loss (-3.1% margin) in the first quarter, down from a $176 million operating gain (2.1% margin) in the first quarter of 2024. Providence's first-quarter report reflects "rapidly shifting economic headwinds" — particularly in West Coast states — coupled with the health system's effort to redesign operations for a "new reality of reduced reimbursement and rising costs," according to financial documents published May 21. "We are taking bold steps to ensure that our health system remains strong and sustainable for generations to come," President and CEO Erik Wexler said in a May 21 news release. "This includes continued focus and discipline on our operations while also working to revitalize the practice of medicine, build new care delivery models and leverage technology to support our caregivers and patients." First-quarter operating revenue increased 0.9% year over year to $7.9 billion due to increased volumes (inpatient admissions were up 4% and case mix adjusted admissions were up 3%) and improved commercial rates. Operating expenses grew by 6.4% to $8.1 billion in the quarter, driven by costs associated with serving higher patient volumes and a 46-day strike in Oregon. "The last several months have brought greater uncertainty around Medicaid funding, with only slight increases in Medicare rates, and several new state laws that have increased expenses and/or decreased revenues. Meanwhile, we continue to be challenged by inflation, the national labor shortage, and ongoing delayed payments or denials from commercial insurers," CFO Greg Hoffman said. "Specifically, new laws in Oregon regarding presumptive charity care and staffing legislation have added further complexity and significant financial pressure to our operations." During a May 20 media briefing, Mr. Wexler said U.S. healthcare faces a "polycrisis" driven by inflation, labor shortage, tariffs, and proposed Medicaid cuts being discussed on Capital Hill. Mr. Hoffman said the 51-hospital system is "preparing for every scenario" and proactively redesigning its operations to combat economic headwinds, as well as potential reimbursement cuts at the state and federal levels. After accounting for nonoperating items, such as investment gains, Providence reported a $161 million net loss in the first quarter, compared to a $360 million net income in the same period in 2024. Days of cash on hand was 86 on March 31, 2025, compared to 99 on Dec. 31, 2024. Providence has $7.6 billion in long-term debt and $27.7 billion in total assets. n Health system bad debt piles up: 5 things to know By Laura Dyrda U .S. hospitals and health systems in many regions are seeing a sharp rise in uncompensated care, with new data showing big increases in bad debt and charity care deductions during the first quarter of 2025. "Disruptions in health insurance coverage can drive increases in bad debt and charity care deductions for U.S. hospitals and health systems. According to the latest data from Q1 2025, health systems across the country already experienced significant increases in bad debt and charity deductions in recent years," noted Strata in its "Healthcare Performance Trends: Q1 2025" report. Five findings: 1. Health systems' charity deductions for health systems nationwide grew 5.4% from the first quarter of 2024 to 2025, according to the Strata report. Compared to 2023, charity deductions were up 21.4%. 2. Health systems' bad debt deductions rose 9.2% in the first quarter compared to last year, and rocketed around 17% since 2023. 3. Hospitals reported a median 7.6% increase in charity deductions from the first quarter of 2024 to this year, while bad debt deductions decreased 0.9%. However, bad debt was still up 15.3% compared to the first quarter of 2023. 4. Year-over-year, bad debt and charity care per calendar day for hospitals rose 9% in March and 13% compared to 2022's numbers, according to Kaufman Hall's "National Hospital Flash Report." However, the bad debt and charity care as a percentage of gross revenue was relatively flat compared to March of last year. 5. e regional breakdown of bad debt and charity care per calendar day for March is: West Year over year: 9% YTD compared to 2022: 59% Midwest Year over year: 11 YTD compared to 2022: 48% South Year over year: -2% YTD compared to 2022: -8% Northeast / Mid-Atlantic Year over year: -15% YTD compared to 2022: 7% Great Plains Year over year: -13% YTD compared to 2022: 0% n