Healthcare Business News

Medicaid expansion, affiliations bolster Providence Health

By Bob Herman
Posted: August 13, 2014 - 3:15 pm ET

Providence Health & Services exceeded revenue and income projections in the first half of 2014—its second consecutive strong quarter—thanks to a major component of the Patient Protection and Affordable Care Act and the system's aggressive expansion.

Todd Hofheins, Providence's chief financial officer, wrote in the financial disclosure that the expansion of Medicaid to low-income individuals has benefited the system this year. Providence mostly operates in California, Oregon and Washington—all of which expanded Medicaid—and it has actively helped eligible patients enroll in Medicaid. Hofheins said the year-to-date impact of Medicaid expansion boosted its revenue by $46 million.

Similarly, Providence's self-pay volumes decreased by 43% as more patients gained health coverage.

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Providence, headquartered in Renton, Wash., said its surplus from operations in the six months ended June 30 totaled $133.1 million, almost four times as much as the $36.3 million from the same period a year ago. Total revenue in the half-year period topped $6 billion, a 9.7% increase from the first six months of 2013. Providence’s operating margin improved to 2.2%, compared with 0.7% last year.

Washington’s and Oregon’s provider-fee programs, which obtain extra Medicaid dollars from the federal government, also raised the organization’s net revenue, according to the disclosure.

Providence’s total surplus reached $728.8 million compared with the system’s $78.9 million total surplus in the first six months of 2013. A lion’s share of that increase came from transactions. Providence took over 234-bed St. John’s Health Center in Santa Monica, Calif., in March, and it partnered with Seattle-based medical group Pacific Medical Centers in February. Most recently, Providence agreed to an affiliation deal with Kadlec Regional Medical Center, a 249-bed hospital in Richland, Wash.

Despite the positive top- and bottom-line figures, Providence’s inpatient volumes continued to sag as the system focuses more on taking care of populations in lower-cost settings. Same-hospital admissions, which exclude acquisitions, dropped 2.8%. When including all hospitals, acute admissions were still essentially flat year over year, and well behind Providence’s projections.

However, total acute outpatient visits grew 14%. Primary-care visits, outpatient surgeries, emergency room visits and home-health visits also increased steadily in the first half of 2014.

Providence ended its fiscal 2013 with a slim operating margin because of reimbursement cuts, large electronic health-record investments and a higher debt burden. Standard & Poor’s and Moody’s Investors Service downgraded Providence’s bond ratings in June, but Hofheins previously told Modern Healthcare he expects the system to rebound this year and thrive in the long term.

Providence is the fourth-largest Catholic health system and the eighth-largest overall in the U.S., according to 2013 revenue data.

Follow Bob Herman on Twitter: @MHbherman

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