Providence St. Joseph Health saw its first-quarter operating income swing to a $50 million loss due to a poorer-paying mix of reimbursement, the system said in a financial disclosure Friday.
"Lower reimbursement for services from changes in payment rates and procedure mix remains the most significant challenge for the system," Providence St. Joseph said in its disclosure.
The 50-hospital giant, created by the July merger between Providence Health & Services and St. Joseph Health, posted an operating gain of $35 million in the first quarter of 2016.
Heavy competition for labor in the seven west coast and southwestern states where the system operates also drove up first-quarter costs, the company said.
Operating earnings before interest, depreciation and amortization decreased to $276 million in the first quarter of 2017 compared with $353 million during the same period in 2016.
Providence St. Joseph, a not-for-profit system, saw its first-quarter revenue increase 3% to $5.61 billion from $5.45 billion in the year-earlier quarter.
Strong investment and non-operating income rode to the rescue to allow the system to post a net gain for the quarter.
A $212 million non-operating gain in the quarter buoyed Providence St. Joseph to a net surplus in the quarter of $162 million compared with a net surplus of $40 million in the year-ago period.