Renton, Wash.-based Providence is deploying a "restructuring and renewal" plan to address medium-term challenges and position its core assets for performance across multiple industry scenarios in the coming years, the health system said in its March 7 financial report.
The 51-hospital system launched various restructuring efforts to renew its operating model and ensure near-term sustainability while delivering on its longer-term Destination Health 2025 strategy.
The plan is broken up into four key focus areas:
1. Simplified operational and clinical structure. Providence consolidated leadership from seven regions to three divisions: North Division (Puget Sound and Alaska), Central Division (Eastern Washington and Western Montana, Oregon, and West Texas and Eastern New Mexico) and South Division (Southern California and Northern California). The health system also consolidated its clinical operations with the intent to steer resources to the bedside and direct patient care and simplify decision-making.
2. Streamlined support services. The system aims to streamline support services by aligning to the new divisional model, optimizing service delivery levels, unlocking efficiencies from technology investment (such as the transition to a single enterprise resource planning solution) and continuing to evolve care delivery and workforce models leveraging virtual capabilities and delivery.
3. Program portfolio management. Over the next few quarters, Providence said it is reassessing the services it provides across its ministries, "within the context of the current and expected future economic factors," to provide care in the most effective and affordable way possible. The system said this reevaluation stems from the pandemic's influence on many economic factors in care delivery, from accelerating technical advancements in virtual and outpatient care to macroeconomic pressures associated with workforce shortages and inflation.
4. Reimbursement. Providence said it is working with payers to increase reimbursement across "several payment models," including value-based care, as inflationary factors continue to affect its labor and supply costs.
Providence reported a $1.2 billion operating loss in 2023, improving on a $1.7 billion loss in 2022. Net operating revenues increased 9% year over year to $28.7 billion while operating expenses grew 7% to $29.9 billion.
"Providence's caregivers have been diligently working to strengthen our financial recovery. We made positive progress in 2023, and it was good to see us end the year serving more people as access to care improved and length of stay decreased," CFO Greg Hoffman said. "Those are important markers on our journey toward sustained renewal."