Providence closed its retail clinics in Southern California as the nonprofit health system manages labor issues, inflation and other financial pressures.
Renton, Washington-based Providence closed all 27 of its Providence ExpressCare facilities on Nov. 17 after the Southern California retail clinics posted “unprecedented operating losses” amid labor shortages, inflation, supply chain disruption, lower-than-expected volumes and a more competitive retail clinic sector, the spokesperson said.
California patients will still have access to ExpressCare virtual services and can find same-day care at other urgent care clinics and primary-care facilities, a spokesperson said.
The latest Worker Adjustment and Retraining Notification Act announcement in California lists 54 affected employees, effective Jan. 3, 2023. Providence did not respond to an inquiry about how many employees would be laid off.
“The closure of these clinics affects a mix of medical assistant, [advanced practice clinicians], and leadership roles. We are collaborating with these individuals to transition them to open positions within the Providence family of organizations. We are confident there are positions for our medical assistants and APCs should they choose to remain with Providence,” a spokesperson said in a statement.
Through the first nine months of Providence’s fiscal year ending Sept. 30, it reported a $1.1 billion operating loss on $19.6 billion of operating revenue. Providence recorded a $405 million operating loss on $20.2 billion of operating income over the same period a year earlier.
The health system separated from Newport Beach, California-based Hoag earlier this year, denting its balance sheet.
Hoag represented 7% of the Providence’s operating revenues and 17% of the system’s unrestricted cash and investments, according to Fitch Ratings, which in April downgraded Providence’s long-term rating on $6 billion of outstanding debt from ‘AA-‘ to ‘A+.’ Hoag sued Providence in 2020 to dissolve the merger, claiming that Providence didn’t hold up its end of their population health initiative.
In July, Providence pared down its executive team to redirect funds to frontline workers.
Other health systems have cut or eliminated services, especially ancillary businesses, and more are expected to do so.
“Hospitals and systems are looking at the cost to keep something open versus the revenue generated and having very difficult margin versus mission discussions on whether to keep all sites and services open,” said Kevin Holloran, senior director at Fitch. “For the short term, it all comes down to staffing and labor costs.”
Some health systems’ hospice, home health and long-term care businesses were already on the chopping block prior to the pandemic. But the latest financial pressure and looming economic downturn have forced cuts, said Rick Kes, healthcare partner at professional services firm RSM. That has created an opportunity for private equity firms and other investors to acquire and consolidate those businesses, he said.
“We’re seeing the emergence of private equity and other strategic investors buying up business lines like hospice and home health to reduce overhead,” Kes said. “These investors get to pick and choose business lines that they can put together in a national model compared to health systems, even the big ones, that operate them fairly regionally.”
Providence has a partnership with Deerfield, Illinois-based Walgreens Boots Alliance, where the health system operates in-store clinics that provide low-acuity care and tests.
VillageMD, a unit of Walgreens, said on Nov. 7 that it would acquire the primary, specialty and urgent care provider Summit Health-CityMD for $8.9 billion. That deal may have influenced Providence’s decision to narrow its retail clinic footprint, industry observers said.