Dive Brief:
- Providence is exploring a potential sale of its health plan, citing the higher spending that’s swamping insurers.
- The news disclosed on Thursday comes as the Catholic nonprofit system continues to pursue a financial turnaround plan that’s included layoffs and hospital sales.
- Providence declined to comment on potential acquirers or timing of a deal, and said it will provide updates as decisions are made.
Dive Insight:
Providence said its decision to consider a sale of Providence Health Plan isn’t due to the plan’s quality, but its struggle as a smaller regional insurer to overcome challenges like rising costs and technology investments that are easier for its larger peers.
PHP covers hundreds of thousands of members, mostly in the Pacific Northwest, across employer, commercial Medicare, Medicare Advantage, managed Medicaid and Affordable Care Act plans.
In 2024 — the most recent timeframe for which Providence has shared in-depth financial information — the system’s health plan business was chugging along comfortably. Providence’s health plan and accountable care revenues grew 4% year over year to $3.1 billion, while operating expenses were up 2.5% to $2.1 billion.
A Providence spokesperson declined to comment on PHP’s more recent financial performance. However, its membership has shrunk dramatically over the past year. At the end of 2024, PHP covered about 700,000 members. But by January this year, its membership shrunk to about 440,000 people.
PHP’s smaller size is no longer compatible with the demands of today’s operating environment, the system said.
“Today’s announcement reflects the challenges facing smaller, regional health plans that lack the scale of larger insurers, including the ability to share resources, spread costs and make ongoing investments in technology,” Providence said in its Thursday press release. “It is not a reflection of PHP’s quality or the commitment of its caregivers.”
Providence did not respond to questions about interest from potential acquirers.
However, regional plans, which normally enjoy positive brand equity in their local markets, could be attractive to national carriers looking to nab new members while burnishing their reputations, experts told Healthcare Dive earlier this year when predicting that smaller payers could be pushed to sell in 2026.
Providence, which operates 51 hospitals and more than 1,000 clinics in the western half of the U.S., is knee-deep in a financial turnaround plan as it seeks to break an unprofitable streak. The system hasn’t posted an annual profit in four fiscal years, facing staffing shortages and economic forces like tariffs and inflation driving up spending, along with difficulty getting paid by insurers on time.
Last year, Providence restructured its executive team, froze nonclinical hiring and laid off hundreds of workers — including in its insurance division. Those efforts appear to be bearing fruit. In the third quarter, Providence’s operating incomes improved by almost $230 million year over year.
Still, executives at the nonprofit have warned about challenges ahead, including impacts from the GOP’s “Big Beautiful Bill” passed last summer. The law, which included almost $1 trillion in cuts to federal healthcare programs, is expected to hit hospitals in the form of lower revenue and higher uncompensated care spending.
