Even with federal relief, Providence posted a $221 million operating loss in the first half of 2020. The Renton, Wash.-based nonprofit health system said low patient volumes and increased costs contributed to its operating loss.
Providence operates 51 hospitals across seven states. In early March, like many health systems, Providence postponed elective surgeries, leading to a 40% decline in gross revenue in the first quarter. Volumes have since rebounded, with the health system reporting operating revenues of $12.47 billion in the first half of 2020, down from $12.63 billion in 2019.
In total, Providence saw volumes drop 13% compared to the first half of 2019. Surgeries and procedures were down 26%.
The health system received a total of $827 million in grants through the CARES Act, $651 million of which it recognized as revenue in the first half of 2020. The relief funds helped cushion costs related to the pandemic, though still didn’t fully offset Providence’s operating loss.
“Maintaining staffing and supplies in preparation for a surge of COVID-19 in tandem with these net declines in volumes and corresponding revenues resulted in operating losses of $872 million before the recognition of $651 million of grants associated with the federal CARES Act,” Providence noted in its most recent financial statement.
On top of that, Providence reported non-operating losses of $317 million for the first half of 2020, most of which was attributed to investment losses due to market volatility.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
To shore up the need for short-term cash, Providence secured $800 million in private lines of credit. It also received a total of $1.6 million in advance payments from Medicare, which must be repaid in the next year. The health system still has a total of 218 days of cash on hand.
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