Providence Health & Services posted another quarter of strong operating results as its expansion efforts continued to increase volume, particularly for outpatient services.
The Renton, Wash.-based system, which has been adding hospitals and doctors' offices, reported an operating surplus of $215.1 million on $9.2 billion in revenue for the nine-month period ended Sept. 30. That compares to an operating surplus of $61 million on $8.3 billion in revenue for the prior-year period. Its operating margin also improved to 2.3% from 0.7% during the first nine months of 2013.
Providence this year affiliated with St. John's Health Center in Santa Monica, Calif., as well as Pacific Medical Centers in Seattle. It also forged an agreement to add Kadlec Regional Medical Center in Richland, Wash., to the system.
Those deals brought in additional patient volume that helped make up for decreases in admissions and physician visits on a same-facility basis. With its new partners, Providence reported a 2.5% increase in acute-care admissions and a 7.3% increase in non-acute patient visits. Revenue from outpatient activity increased 11.2%.
Its affiliation with PacMed also provided $57 million in new capitated revenue and helped bring total capitated and premium revenue to $1.2 billion, an increase of 14.4% year over year.
Capitated and premium revenue accounted for 13% of its total revenue for the nine-month period.
All three of the states in which Providence operates—California, Oregon and Washington—have expanded Medicaid. The system reported that self-pay patients now represent only 2% of its payer mix, and revenue from self-pay patients has declined 44%. Medicaid patients represent 19% of its payer mix, and Medicaid revenue has increased 25%.
The three affiliations added more than 5,200 additional full-time equivalent employees (or nearly 5,800 including its existing hospitals) but Providence said its pension, workers compensation and medical and dental costs remained flat. Its per member per month medical costs declined 12.7%.
Total operating expenses, however, climbed 9.4% as members under capitated and premium contracts incurred higher-than-expected medical expenses outside of its network. Like many systems, it also booked higher supply costs, which it blamed on higher specialty and oncology drug costs.
A new requirement for health plans to cover hepatitis C screenings also added $2 million in costs related to additional treatments—a figure that Providence expects will grow in the future.
Yet it did see some relief from completing its Epic electronic health records implementation and found additional breathing room from centralizing certain back-office functions across the system.
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