Two weeks ago, Providence CEO Erik Wexler sent an email to the nonprofit health system’s staff describing a “perfect storm” threatening the organization’s financial stability.

Since posting a loss of $1.4 billion in 2022, the Northwest health giant had been making strides toward seeing more patients, reducing its costs and becoming profitable again.

THANKS TO OUR SPONSOR: Become a Sponsor

Now, according to Wexler’s email, Providence is once again in financial jeopardy. Proposed federal cuts to Medicare and Medicaid are threatening more than $1 billion in reimbursements. At the same time, tariffs could drive up supply costs by tens of millions.

Wexler announced belt-tightening measures. Providence, he said, will not take on new major league sports sponsorships. The organization has cut 46 leadership roles and is pausing non-clinical hiring and non-essential travel.

Providence’s situation is not unique.

A sign for Providence Hood River Memorial Hospital, Jan. 10, 2025. Anna Lueck for OPB

Nearly half of Oregon’s hospitals lost money on day-to-day operations last year, according to a new 2024 financial report from the Hospital Association of Oregon. Among the hospitals that made money providing care last year, many had a “negligible” margin, or profits that amounted to less than 3% of their operating revenue.

The hospital association is sounding the alarm that as hospitals nationwide show improved financial performance and signs of post-pandemic recovery, hospitals in Oregon are performing considerably worse.

Last year, the operating margin for not-for-profit hospitals nationwide was 1.2%, according to Fitch Ratings. In Oregon, that operating margin was just .3%, according to financial data collected by hospitals and reported publicly by the Oregon Health Authority.

A chart, courtesy of the Hospital Association of Oregon, May 2025. The group says high wages and complex state regulation add to the cost of operating in Oregon. Hospital Association of Oregon

That weak financial position leaves Oregon hospitals uniquely vulnerable to stressors like tariffs, future pandemics or cuts to Medicaid that Republicans in the U.S. Congress have included in their budget blueprint, multiple hospital executives told OPB.

The hospital association is warning that if the current financial trends for hospitals continue, the state could see service reductions, consolidations or even hospital closures.

“Oregon already has the second fewest hospital beds per capita. We can’t afford to lose these beds,” Hospital Association of Oregon president and CEO Becky Hultberg said in a written statement in the report.

A particular challenge is Oregon’s high percentage of patients on Medicaid, which has grown to cover one in three Oregonians. That means that lower reimbursement rates for the government program — that hospitals and many other providers in the state say are inadequate — have a significant impact.

Following the pandemic, labor and supply costs have also gone up more quickly than those reimbursement rates.

Oregon’s Medicaid program pays hospitals 54 cents per every dollar of care hospitals provide its members, according to the association.

THANKS TO OUR SPONSOR: Become a Sponsor

The Oregon Health Authority didn’t respond by press time to questions about the state’s Medicaid reimbursement rates. State Sen. Katie Lieber, D-Beaverton, who co-chairs the Ways and Means committee that writes the state’s biennial budget, also did not respond to a request for comment.

Earlier this year, the Legislature passed a bill that preserved state funding for Medicaid and included better payments for rural hospitals for labor and delivery, a service that is particularly expensive to provide and threatened by closures. Roughly half of all deliveries in the state are paid for by Medicaid.

Changing patient demographics and complex state regulations

Bay Area Hospital, a 172-bed facility in Coos Bay with 24-7 trauma care and a cancer center, is among the hospitals in Oregon that lost money last year. It was the third year in a row the hospital ended with an operating loss. As a result, the hospital has been drawing down its reserves and is officially considered in default on one of its loans.

CEO Brian Moore says as economic fortunes of the town have shifted, retirees have replaced families employed in timber and fisheries, aging the population. About 85% of the hospital’s patients now have some form of government insurance: Tricare for veterans, Medicare for retirees, and Medicaid for people in poverty.

Moore says low Medicaid reimbursement rates have created a significant gap between what the hospital has to pay for labor and what it can collect. The only patients Bay Area Hospital treats without losing money are the 15% with commercial insurance.

Adding to the financial challenges, Moore said, is Oregon policymakers’ interest in trying out new progressive policies, like a measure that took effect last year requiring hospitals to proactively screen patients to determine if they are eligible for charity care and bill them accordingly. In Oregon, patients with income of up to 400% of the federal poverty level qualify for a discount on their care, based on a sliding scale.

Difficulties in implementing that law have led hospitals to write off bills for people who were fully expecting to pay them, Moore said.

“If Oregon policy leaders want to see small independent community hospitals thrive, the policy decisions they are making are not in line with bringing that about in the real world,” he said.

To guarantee its long term stability, Bay Area Hospital is now formally exploring a partnership with a Tennessee health system, Quorum Health, backed by private equity.

Larger metro area health systems — including OHSU and Legacy Health — are also struggling financially.

For Providence, the nonprofit has lost roughly $100 million on its Oregon operations each of the last four years.

“It just feels like every year we’re treading water here in Oregon, not able to make improvements to get to a positive financial performance,” said Melissa Damm, chief financial officer of Providence Central Division, which includes Oregon and Eastern Washington.

Complying with state regulation is a major part of why hospitals in Oregon are struggling more with post-pandemic recovery than hospitals in other parts of the country, according to Damm.

Providence has hired an additional 200 full time nurses in Oregon to meet the requirements of the state’s nurse staffing law, which mandates minimum nurse-to-patient ratios. The organization has also spent about $50 million in additional charity care costs in the second half of 2024, after the state’s preemptive charity care law took effect, Damm said.

The rise in high-deductible insurance plans is also an issue, Damm said. The plans shift costs from insurers to patients, and in cases where patients cannot pay or qualify for charity care, the deductible ends up being passed on to hospitals as a loss.

The high cost of operating in Oregon, combined with the prospect of cuts at the federal level that could further reduce payments from Medicare and Medicaid will force difficult choices about what services to cut, Damm said.

“We all understand that Medicaid right now, in the current state, is underfunded in the budget,” she said. “Frankly, we look at what we are estimating for federal cuts, those are also large dollars. If we see those types of cuts, it’s going to be really difficult.”

Mayo Clinic finished 2024 with a record operating income.

According to annual financial results released this week, the Rochester-based health system had an operating income of $1.293 billion last year. That surpassed 2023’s income by nearly 20% and set a new record for Mayo.

Revenue, meanwhile, climbed to $19.8 billion, marking a 10% year over year increase. Expenses also increased, hitting $18.5 billion. Unsurprisingly, staff salaries and benefits remain the biggest chunk of expenses for Mayo. In 2024, the system paid out $10.5 billion in that area.

“Our staff are our greatest strength, and we invested significantly in them in 2024 and took intentional steps to demonstrate how much we value their commitment,” said Mayo chief administrative officer Christina Zorn in a news release issued Wednesday.

Mayo remains the largest health system in Minnesota, and the largest employer in the state. Today, the system employs around 57,000 people in Minnesota. Including Mayo’s operations in other states, the nonprofit had nearly 83,000 employees.

The post-Covid years have been a bumpy ride for several health systems in the state, with several grappling with financial losses in the years following the onset of the pandemic. But Mayo never recorded a loss throughout the pandemic, though its operating income did take a hit.

For its part, Mayo evidently remains in expansion mode. In addition to its ongoing $5 billion redesign program for its Rochester campus, the health system is looking to beef up its presence in Arizona. Earlier this week, Mayo unveiled plans to spend $1.9 billion on its campus in the southwestern state. Plans call for increasing clinical space on the campus by about 60%.

The Arizona upgrades are part of Mayo’s wider “Bold. Forward. Unbound.” plan, which also calls for investments in Mayo’s hospital in Jacksonville, Florida. The overarching idea is to “achieve seamless integration of physical spaces and digital capabilities to meet patients’ unmet and evolving needs across all sites,” according to Mayo.

Mayo’s financial performance is likely to be a boon for the city of Rochester, which itself has been seeing notable population growth within recent years.

Dive Brief:

Kaiser Permanente reported 2024 results last week that demonstrated the payoff of Risant Health, the integrated healthcare system’s fledgling subsidiary to operate nonprofit hospitals that launched last year

Kaiser brought in $115.8 billion in operating revenue last year, up nearly 15% from 2023. The nonprofit system and health plan recorded net income of $12.9 billion, more than triple the $4.1 billion recorded the year prior. Risant’s acquisitions accounted for half of Kaiser’s net income and 40% of its revenue growth, a spokesperson said.

Risant completed its first two acquisitions in 2024, buying Pennsylvania-based Geisinger in March and North Carolina-based Cone Health in December. Kaiser executives have previously said Risant will buy at least five health systems within the first few years of operating. A Kaiser spokesperson declined to comment on the timing of upcoming acquisitions.

Dive Insight:

The year-end report marks the first time Kaiser Permanente has reported consolidated financial statements for its core health system, health plan and Risant.

Collectively, Kaiser is massive with 55 hospitals and more than 800 medical offices. While the company reported $115.8 billion in operating revenue for the year, the cost of providing care increased, too. The system’s operating costs were $115.2 billion in 2024, compared to $100.5 billion in the prior year.

“Like others in the health care sector, [Kaiser] and Risant Health experienced significant financial pressures in 2024 such as high prescription drug prices, high costs of goods and services, and increased care volumes, especially in ambulatory care settings,” the system said.

Pharmaceutical and supply costs rose industry-wide in 2024. Experts predict more price hikes in 2025, especially if proposed tariffs on critical medical supplies are finalized.

In response to cost pressures, Kaiser conducted multiple rounds of layoffs last year, including cuts of at least 460 jobs in its home state of California, according to notices filed with state regulators. In January, the system said it planned to cut 52 additional jobs.

Several rounds of cuts have targeted Kaiser’s IT workforce and employees in administrative roles. Other providers, including Jefferson Health, Lehigh Valley Health Network and, most recently, Mass General Brigham have also cut nonclinical roles this year to lower costs.

Still, Kaiser’s total reductions impact less than a fraction of the health system’s total workforce of more than 240,000 employees.

A spokesperson for Kaiser declined to say whether the health system had offshored or outsourced any departments as part of its bid for efficiency. However, the possibility has been top of mind for Kaiser workers since at least 2023. During the fall of that year, approximately 75,000 Kaiser employees took to the picket line partially in pursuit of protections against outsourcing.

Kaiser has also leaned into artifical intelligence and technology investments to enhance efficiency. For example, in August the system rolled out an AI documentation tool to help cut down on time physicians spend on administrative tasks.

Kaiser’s capital spending totaled $3.7 billion in 2024. While a portion of the spending went toward technology initiatives, the system said the lion share was allocated toward meeting California seismic safety standards by 2030.