Providence hit by payment cuts, fewer patients

Providence Health & Services reported that its operating income came in lower than expected in 2013 as flat inpatient volumes and an adverse payer mix depressed gains.

The Renton, Wash.-based system reported $37.7 million in net operating income for its fiscal 2013, ended in December, which was 81.5% below the $204.1 million it earned in 2012. Revenue rose about 5% to $11.1 billion, from $10.6 billion in 2012.

While inpatient volume was nearly flat, declining only 0.1%, the system reported that its commercial volume was 4.9% lower than expected, and instead, it saw a greater percentage of Medicare and Medicaid patients. But reimbursement cuts under sequestration meant a $45 million reduction in Medicare revenue, and a delay in Washington’s provider tax program further reduced Medicaid revenue by $23 million, according to the system’s earnings report.

“For a mission-driven organization, our ability to increase community-benefit spending is the measure of financial health,” Providence Chief Financial Officer Todd Hofheins said.

The system in 2013 exceeded its target for community benefit spending and provided more than $951 million for programs that increased access to care and improved the health of communities, he added. It also increased cash and investments on its balance sheet by $473 million over the previous year.

Providence has forged a number of affiliations over the past two years, including its February 2012 acquisition of Swedish Health Services, Seattle, and its July 2012 tie-up with Facey Medical Group, which operates 10 clinics in Southern California.