Renton, Wash.-based Providence is pausing nonclinical hiring as part of a broader effort to ensure the health system’s financial sustainability, President and CEO Erik Wexler told employees April 17.
In his message, which was shared with Becker’s, Mr. Wexler reflected on his first 100 days leading Providence and the financial realities the health system now faces.
“Over the last three months, the economic headwinds have shifted rapidly, forming a perfect storm that threatens our financial sustainability and, therefore, our ability to carry out our mission,” he said. “We are being called to respond to the times to ensure the ministry thrives under a new reality of significantly reduced reimbursement and higher costs.”
He told employees that this moment requires thoughtful decisions and “an urgent call to action,” noting challenges in recent years, such as untimely and inadequate reimbursement from commercial insurers, increased supply and labor costs, and unforeseen events such as the 2024 CrowdStrike outage and January wildfires in Los Angeles.
“All of these circumstances have caused our expenses to consistently outpace our revenue, requiring us to dip into our cash reserves to fund day-to-day operations,” Mr. Wexler said. “As a result, our capital has been limited at a time when reinvestment in our local ministries and our future is needed.”
He said Providence had made significant progress aligning costs with revenue and was on track to break even this year. However, he noted that 2025 has brought about “sudden” new pressures, such as recent Medicare and Medicaid cuts that reduced Providence revenue by $500 million — with additional proposed cuts that could reduce reimbursement by another $1 billion. Tariffs on foreign goods could increase Providence’s supply costs by tens of millions of dollars annually, he said.
“Though daunting, these challenges are not insurmountable,” Mr. Wexler told employees. “During my engagement sessions last year, you encouraged us to be courageous. We now have an opportunity to do just that by seizing the moment and joining together to focus on meaningful action.”
This action includes steps already taken, such as reorganizing top-level leadership. Mr. Wexler said Providence has consolidated several system functions — bringing marketing and brand together, integrating strategy and planning, and realigning leadership across population health, financial planning and analytics, IT and cybersecurity.
“This has helped us trim leadership roles, making us a more efficient organization. Since the end of last year, we have 46 fewer leadership roles, including eight fewer vice president and above roles,” he said.
He also cited changes such as reducing and redeploying digital innovation to the new Office of Transformation, ending major league sports sponsorships and spinning off Providence Ventures to include other partners.
Now, Providence is taking additional steps, including the pause on nonclinical hiring. Regarding timing and next steps, a spokesperson told Becker’s the health system is working with operational leaders in shared services — such as IT, human resources and finance — to develop plans for the second and third quarters, though some initiatives may take longer.
Mr. Wexler said further steps include:
- Restricting nonessential travel, such as for conferences
- Filing lawsuits against three major payers over alleged repeated claims denials and delayed payments
- Advocating with lawmakers against state and federal budget cuts
- Partnering with organizations “that have the expertise and scale to operate services more effectively,” such as the system’s home care joint venture with Compassus and the sale of certain skilled nursing facilities to The Ensign Group
- Thoughtfully examining “nearly every aspect of how we do things to ensure we are well organized and designed to meet the greatest needs in our communities”
“I recognize this work will not be easy,” Mr. Wexler said. “As we go through it, you have my word that we will keep our mission, values and the needs of our communities front and center, and we will rely on our tradition of ethical discernment as we make critical decisions.”
