Providence St. Joseph Health's effort to streamline operations and improve productivity systemwide is not coming cheap—in fact, the restructuring shrunk its operating income last year.
The Renton, Wash.-based health system drew just $3 million in operating income last year on $24.4 billion in total operating revenue. Excluding those asset impairment, severance and consulting costs, the system said its 2018 operating income would have been $165 million. The restructuring costs are being spread across 2018 and 2019.
The system's operating income was also $3 million in 2017 on total operating revenue of $23.2 billion. On a non-GAAP basis, Providence St. Joseph said its saw a $98 million operating loss in 2017. Despite flat operating income, revenue increased 5.5% year-over-year. Expenses rose 4.8% during that time, to $24.3 billion in 2018.
The system's operating earnings before interest, depreciation and amortization was $1.4 billion in 2018, up 4% from $1.3 billion in 2017. Providence St. Joseph Health said that metric was also negatively affected by restructuring costs, without which it would have gone up 26% to $1.5 billion.
Like most of its peers, Providence St. Joseph Health was hit by the stock market downturn at the end of 2018. It suffered $366 million in investment losses last year, compared with $882 million in investment income in 2017. The loss transformed the system's $780 million in net income in 2017 into a $445 million net loss in 2018.
Providence St. Joseph Health's inpatient admissions were down 1.5% year-over-year to 514,000. Emergency room visits and acute patient days were mostly flat.
Meanwhile, outpatient visits grew 5% to 26.9 million. The system is working to aggressively expand its ambulatory care network, from about 2 million visits annually across 200 sites today to 5 million visits from more than 500 sites in 2022. Outpatient visits include those provided at hospitals, while ambulatory visits are only those provided outside of hospital campuses.
"We believe ambulatory networks offer advantages to patients and physicians, including greater affordability, predictability, flexibility, and convenience, while offering a seamless connection to our full continuum of care," the system wrote in a report accompanying its financial release.
Providence St. Joseph Health's biggest state by revenue is California, from which the system drew 35% of its operating revenue in both 2017 and 2018. Another 21% came from Oregon in both years and 20% from Washington and Montana combined.
Providence St. Joseph Health has been catching headlines lately for branching beyond traditional acute care. It formed a for-profit population health management company, launched its second, $150 million venture fund and bought a revenue-cycle management company based on blockchain technology.