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Of the many grim figures emerging out of the health care sector in recent months, one stands out: $261 million, the amount Providence Health & Services, Oregon’s largest employer, says it lost through its operations in the state in the first three months of this year.
It reported far smaller second-quarter losses (approximately $4 million). But the earlier hit—which partly coincided with a massive labor strike—would be easier to shrug off if the bigger picture didn’t already look so poor.
A Renton, Washington-based nonprofit with Catholic roots, the broader Providence system spans around 50 hospitals and 1,000 clinics in seven states, among several other lines of business. According to audited consolidated financial statements, the system in 2023 lost more than $1 billion on its operations—a figure that earnings from even its mighty investment portfolio could only improve up to a reported net loss of $596 million.
In 2024, the health system said it lost $231 million more.
Then, in Oregon, came the winter labor strike, where some 5,000 nurses and hospitalists, among others, picketed en masse, demanding better wages and working conditions. Replacement worker pay drove “significant additional costs,” according to a Providence financial report. Large hospitals like Providence Portland and St. Vincent Medical Center reported having posted operating margins as low as minus 34%, quarterly figures with little to no recent precedent for Oregon hospitals of that size.
“We have been living off of our savings account,” said Jennifer Burrows, CEO of the Oregon branch of Providence, at a breakfast last week at the Portland Metro Chamber, the city’s chamber of commerce, where she and other area health care executives sought to sound the alarm.
In Oregon alone, Providence has lost money in nine of the last 12 quarters, Burrows told attendees. Systemwide, Providence reports that between 2019 and its latest June 30 quarterly report, its cash on hand has eroded 108 days, from 191 to 83.
“There’s lots of focus...about the millions of dollars that are still in the bank, but I think we can agree,” she said, that the cash on hand figure is not that of “a robust organization that can continue to invest in itself.”
During more bountiful periods, the Providence system did indeed amass a hefty fortune. It reports billions in assets, and critics are quick to note its executives’ generous compensation packages.
Experts, meanwhile, caution against drawing conclusions about the stability of a large health system from a single state in a single quarter where nonrecurring factors—in this case, a historic strike—might skew the data.
But as for the bigger picture, stakeholders agree that rising costs are driving the losses. The question, then, is what is driving those costs.
Among the commonly discussed suspects: high worker pay and supply costs, executive bonuses, expensive but essential medicine, ads on Portland Streetcar trains, government red tape, systemwide inefficiencies, or needlessly opulent new building wings.
Hayden Rooke-Ley, a Brown University researcher based in Portland, points to another dynamic often tied to higher prices: health system consolidation. He doubts Providence faces structural challenges different from any other major hospital system, but he says those broader structural challenges need urgent attention.
“Now is the time,” he says. “We need leadership right now where everyone’s going to come to the table and be willing to pursue more ambitious reform to make sure we have a health care system that operates equitably and efficiently and is putting clinicians and patients at the heart of it.”
Nationwide, U.S. health care costs have long been extraordinarily high, but for a period, the growth rate had slowed, Rooke-Ley says.
“What we have seen in the last couple of years is a reacceleration of the rate of growth of U.S. health care costs,” he tells WW, noting systemwide cost increases that far outstrip inflation. “And by all indications, that acceleration is continuing into 2025.”
In an interview, Sarah Bartelmann, who oversees cost growth analysis for the Oregon Health Authority, says it is generally accepted—and this is true in Oregon—that when health care costs increase, and researchers assess whether the cause is, say, higher utilization or a sicker population, ultimately the main answer is simply that prices have gone up.
Since hospital revenue takes up such a high proportion of the health care pie (usually somewhere between 40% and 50%), the prices they charge, and the operational expenses they say necessitate those prices, are subjects of scrutiny and debate.
Hospital costs get passed on to insurers and patients. Ultimately, they pass to practically everyone, through insurance premiums, taxes, and the lower wages that result when employers must divert funds toward ever-more-expensive health plans.
Taking into account these and other funding sources, the Oregon Health Authority estimates more than $10,000 (and counting) is now spent per person per year on health care in Oregon.
As costs rise, more people may forgo care because of the high price—as the state reports 1 in 7 Oregonians already did in 2024. And to the extent the costs prove untenable for health systems, they could erode a pillar of the economy in a state where the health sector, its largest industry, has formed a rare area of growth in an otherwise weak labor market.
Some strain may already be showing on that front. In June, Providence’s Oregon division said it would eliminate the positions of 134 people. In July, it eliminated 128 more. And since early this year, it says it has identified dozens of open positions that would not be filled.
“These reductions are not single events in time,” Burrows warned in a written statement last month, emphasizing the view that Providence’s challenges reflected systemic labor costs and burdensome regulations. “We expect to have additional announcements later in the year as we make progress toward getting ourselves back to a place of being at breakeven in terms of revenue and expenses.”
There are other indications of strain. Providence reports more than $8 billion in debt. As Becker’s Hospital Review and others reported, Moody’s on July 1 downgraded the Providence system’s credit rating, citing lower levels of cash on hand, as well as a “particularly weak Q1,” in which financials were impacted by a “number of one-time issues.”
One of these, of course, was the massive strike in Oregon. Nurses and other health care workers sought higher wages and benefits after, as an Oregon Nurses Association spokesperson puts it, “Providence had ignored its responsibilities to its workers, its patients, and to Oregonians.”
By that telling, health care workers had to strike to force Providence to invest more in patient safety, stop cuts, follow the state staffing law, and offer “regionally competitive wages and benefits to be able to recruit and retain more staff.”
At the chamber breakfast last week, Burrows remembered things differently. “We took the longest strike in Oregon history,” she said. “I actually had to ask how many days it was—I had a little PTSD and couldn’t remember. And it was 46 days. And we did that because we knew we could not agree to what was being demanded of us.”
This reporting is supported by the Heatherington Foundation for Innovation and Education in Health Care.
