Providence Health & Services' rapid growth has strengthened the Renton, Wash.-based system's financial position and this most recent quarter was no exception.
New hospitals added to its network in 2014 contributed to an 11.6% increase in year-to-date admissions, above expectations. Emergency room visits similarly increased 16.8% and physician visits were up 18.1%.
Its post-acute service lines, including hospice, home health, assisted living and long-term care, saw 3% more volume than in the previous year.
Membership in its health plans also increased rapidly. In the first half of the year, Providence's health plan membership grew 17.8% to surpass 505,800 compared with the same period in 2014.
The system is responsible for 606,000 people enrolled in a value-based payment arrangement either through its health plan or an accountable care organization or similar contract.
However, premium and capitated revenue did not increase as much as expected. As enrollment has grown, Providence's health plans saw higher medical claims and more expenses associated with people going outside of the system for healthcare services.
Nevertheless, premium and capitation revenue in the first half of the year increased 15.4% compared with the first six months of 2014.
On the expense side, Providence faced a steep increase in drug costs in the first half of the year. Drug price increases, particularly for sole-source generic and specialty products, averaged 35.2%, the system said. Six drugs in particular accounted for 14% of the total year-over-year price increase with some drugs increasing as much 7,700%.
In response, Providence said it is growing its own specialty pharmacy business in an attempt to counteract the price increases.
In total, Providence reported a year-to-date operating surplus of $216.2 million on $7.3 billion in revenue compared with an operating surplus of $133.1 million on $6 billion in revenue in the first half of last year. Its operating margin improved to 3% from 2.2%.
The system is continuing its expansion strategy. Last month, it signed a letter of intent to affiliate with Irvine, Calif.-based St. Joseph Health System and add new markets in California and Texas.
