For Renton, Wash.-based Providence, the turnaround from a $225 million operating loss in the first half of 2025 to $175 million in operating income through June 30, 2026, did not come from a single change. President and CEO Erik Wexler pointed to five actions: reducing subsidiaries and support entities, reevaluating underused services, cutting reliance on agency and contract labor, limiting how many initiatives moved forward at once and winding down the health plan.
“We took a very intentional, multifaceted approach,” Mr. Wexler told Becker’s. “What we did was really put together key metrics and limit the scope of what was needed to turn the organization around.”
1. Reducing subsidiaries and support entities
Providence had operated 36 subsidiaries and support service corporations and reduced that count by about half, Mr. Wexler said. The system monetized some of those businesses while reducing annual operating losses.
“For the half that we removed from the organization, we monetized some of those, but we also were able to reduce operating losses by about $100 million a year,” he said.
Mr. Wexler said some of the businesses did not directly support Providence’s primary healthcare operations. He pointed to the system’s health IT consulting business as one example. Providence sold its health IT consulting arm, Tegria Services Group, to healthcare-focused investment firm Altaris in January and sold revenue cycle company Acclara, which had been part of Tegria, to R1 RCM for $675 million in 2024.
“That is not a space that we should be spending our time in. Other consultant organizations can do as good or better a job with that,” Mr. Wexler said of the consulting business. Of the revenue cycle sale, he said: “We realized that we are not the best-known experts at revenue cycle, and combining forces with R1 allowed us to advance technological improvement in that space.”
2. Reevaluating underused services
Providence also reviewed duplicated and underused programs through what Mr. Wexler described as an ethical discernment process rooted in Catholic social teaching. He said those programs were contributing to operating losses and productivity challenges.
He pointed to Providence Seaside Hospital in Oregon, where the system closed obstetric services.
“We were doing about 20 deliveries a year, and we had multiple nurses on every shift supporting one or two deliveries a month. It’s not the best use of our very important nursing colleagues, caregivers,” he said. “So we closed the service, knowing that 10 miles away there was another hospital, not part of Providence, that had capacity and could take on those patients.”
At the same hospital, Providence opened a level 4 trauma program, which, according to Mr. Wexler, had treated more than 150 patients halfway through 2026.
“What we saw is 20 patients a year going to another place to get that care, and 150 patients that couldn’t have had trauma care locally within Seaside Hospital,” he said.
3. Reducing agency and contract labor
Providence also reduced its reliance on agency and outside contract labor. Mr. Wexler tied the change to lower turnover and retaining more of the system’s own employees.
“We always are grateful for that resource when we can’t fill the role,” he said. “But we’ve been able to reduce our turnover rates so that we keep our important caregivers that have been in our healthcare system and will be with us for a long time to come, rather than having travelers come in and out.”
4. Limiting how much moves forward at once
Providence also became more selective about the number of initiatives it pursued simultaneously. The system paused implementation of acute rehab services so leaders could focus on implementing a home care and hospice partnership with Compassus. Acute rehab services are now expected to begin implementation in the second half of 2026 and into 2027.
Mr. Wexler said the Compassus partnership addressed a more immediate need around transitions from the hospital to home.
“This is really important to transitions in care for our patients and the community, and allowed us to be sure we’re addressing something that is an even greater need than, say, acute rehab services,” he said.
5. Winding down the health plan
Providence said in May it would shutter most of its insurance business in 2027 after more than four decades as a regional payer serving more than 440,000 members. The system said in August that it will exit insurance entirely after failing to reach a deal with a national insurer for its Medicare Advantage business.
Mr. Wexler said the health plan lost more than $100 million in 2025 and also lost money the year before. He said winding down the plan is expected to cut those losses roughly in half for 2026, but not enough to make the business sustainable.
“Small regional health plans are challenged to survive because of the scale of administrative costs that’s necessary to be able to keep rates down and allow health plans to be in a space of financial sustainability,” he said. “We found over the years that while we were competing for the rates that were out there very well against other commercial health plans, their administrative cost at a scaled level is much less, and so the cost per dollar for us was much bigger.”
Mr. Wexler called the decision painful and said it involved Providence Health Plan leadership, Oregon executives, the board and the system’s sponsors council.
“So the best course was to accept the fact that we can’t be all things to all people, that we’ve got to focus on the core,” he said.
Asked what he would tell another system CEO navigating a turnaround, Mr. Wexler emphasized keeping the number of priorities manageable.
“I think we need to live in a space of marathon and sprint, and keeping a limited number of initiatives in play is really critical to success,” he said. “Now, 10 or 15, or maybe 20 years ago, that wasn’t as much an issue, because I think healthcare systems, even rural hospitals, safety- net hospitals, had more resources than we do today.”
That approach is also applied to new proposals. Mr. Wexler said P.K. Khurana, Providence’s chief strategy and growth officer, recently brought forward a partnership idea for a program that is performing well. Mr. Wexler asked whether it would have a greater material effect than the four other initiatives already receiving attention.
“He said, ‘No, it will have a minimal impact, but we still think it’s important for the future.’ And so it’s a question of not if, it’s a question of when for us, when we work on that sprint,” Mr. Wexler said.
Providence continues to work toward its 2030 strategic goals, with tactics and metrics the board uses to hold leadership accountable. Mr. Wexler said the system is moving out of what he described as a period of constriction.
“We have moved through a period over the past year and a half, and in particular in 2026, of constriction,” he said. “We’re now going to move into a space of growth, but very, very thoughtful and disciplined growth.”
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