Providence's operating losses doubled in 2021

Providence health system endured much deeper operating losses in 2021 than during the previous year, the not-for-profit company reported Wednesday.

Providence recorded a $714 million operating loss on operating revenue of $27.3 billion last year, down from $306 million and $25.7 billion in 2020. The 52-hospital chain accrued $1.2 billion from non-operating income and $313 million from COVID-19 relief grants that offset its losses. Providence collected $1 billion in non-operating income and $957 million in relief funding the previous year.

Operating losses mounted in part because labor costs such as wages rose 10%, the Renton, Washington-based health system reported.

"We experienced a confluence of events in 2021—three major surges in COVID-19 volumes, a national shortage of healthcare personnel and deferrals of non-emergent care," a Providence spokesperson wrote in an email. "This resulted in higher costs in 2021. At the same time, reimbursement did not keep pace."

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Providence faces a tough road ahead this year, too. The company has a smaller presence in the strong Southern California market since Newport Beach-based Hoag separated from the health system in January. Hoag initiated the breakup when it filed a lawsuit to end the partnership in 2020. The legal battle that followed brought to light cultural, financial, religious and operational clashes between the two health systems.

Hoag accounted for 7% of Providence's operating revenue and 17% of its unrestricted cash and investment in 2021. Southern California generated more than 31% of the company's operating revenue last year.

Meanwhile, Providence faces legal trouble over its charity care spending. Washington state Attorney General Bob Ferguson (D) sued the health system last month, alleging it doesn't inform patients when they are eligible for financial aid. Providence violated state laws by sending 46,783 bills for low-income patients to debt collectors between September 2019 and September 2021, according to the complaint.

Providence characterized the charges unfair and inaccurate. "When the AG's office first raised their concerns with us two years ago, we cooperated fully and in good faith. That is why it is inconceivable that the AG has chosen now to file this complaint, which runs counter to the facts we provided to his office," the organization said in a news release last month.