From President and CEO Erik Wexler: Rapidly shifting economic headwinds call us to respond to the times
Dear Providence family,
As I reflect on my first 100 days leading the ministry, the time I’ve spent visiting and rounding with many of you has been the highlight of my role. Whenever I see you in action — serving our patients and one another — it makes me incredibly proud of our ministry and even more determined to ensure you have the resources and support you need to continue delivering high-quality, compassionate care.
When I took this role, I pledged to communicate openly about where we’re going as a family of organizations, including the “why” behind our major decisions. In that spirit, I believe it is essential to be open about the pivotal moment we’re facing right now.
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. 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 so that we remain faithful to our Mission.
This is a moment that requires courage, including leaning into our tradition of ethical discernment to ensure the most impactful decisions are evaluated through the lens of our Mission, values and community needs. By joining hands and taking bold action now, I am confident we will begin a new era of financial health that ensures we can serve our communities, especially those who are most vulnerable, for generations to come.
An urgent call to action
The last five years have been unprecedented for health care. The commercial insurers have not reimbursed us adequately or timely, and our supply and labor costs have gone up significantly due to inflation and the national labor shortage. We have also gone through unforeseen events like last year’s global CrowdStrike outage and January’s 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. As a result, our capital has been limited at a time when re-investment in our local ministries and our future is needed.
Yet, through it all, you kept our patients at the center. You continued to focus on safe, high-quality care, serving those in need with clinical excellence and compassion. Thanks to your commitment to our renew and recover strategies, we were making significant progress getting our costs in line with our revenue, and we were on track to finally break even this year. But just as we were nearing that goal, the external economic conditions in 2025 took a sudden turn.
Recent government cuts to Medicare and Medicaid have reduced our funding by $500 million this year with more proposed cuts likely to decrease our reimbursement by another $1 billion. Additionally, if tariffs on foreign goods move forward as proposed, our supply costs could go up by tens of millions of dollars annually.
Though daunting, these challenges are not insurmountable. 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.
I urgently ask each of you to be ready and willing to adapt to our new realities. With significantly reduced reimbursement levels, the status quo will not be sustainable. In these times, it’s crucial for each of us to keep doing our part. By taking actions like not wasting supplies and turning off lights when rooms are not in use, we can collectively save millions. These savings are essential for increasing access to needed care and ensuring our Mission continues long into the future.
Steps taken to date
We have taken several steps to decrease overhead over the last 100 days including streamlining administrative roles and functions to ensure more resources to support direct patient care.
As one of my first actions this year, I reorganized uppermost leadership. We also consolidated several system functions, bringing marketing and brand together, integrating the strategy and planning functions, and realigning leadership for areas such as population health, financial planning and analytics, IT solutions and services, 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.
Other changes include significantly reducing and redeploying the resources of the Digital Innovation Group to the new Office of Transformation, which will focus largely in the near term on technological advances that reduce the administrative burden on our caregivers and medical staff, giving back more time in the day for direct patient care. We are also committing to no further major league sports sponsorships and have spun-out Providence Ventures to include other partners.
In addition, we are:
- Pausing non-clinical hiring
- Restricting non-essential travel, such as for conferences
- Aggressively holding commercial insurers accountable, including filing lawsuits against three major payers for repeated claims denials and delayed payments
- Advocating with lawmakers to protect health care from state and federal budget cuts
- Partnering with organizations that have the expertise and scale to operate services more effectively, such as our Compassus joint venture on home-based care or the sale of some of our skilled nursing facilities to The Ensign Group
Next steps: Fundamental, sustainable redesign
As stewards of our Mission, we have a responsibility to thoughtfully examine nearly every aspect of how we do things to ensure we are well organized and designed to meet the greatest needs in our communities.
This includes:
- Identifying and rapidly deploying best practices
- Minimizing variation that is not essential to providing the best care locally
- Avoiding duplication of precious resources
- Determining whether programs are best operated by us or if there are other providers that can deliver them more effectively
I recognize this work will not be easy. 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.
Faith and optimism
Over the last several months, we have been working on our 2030 strategic direction, which was approved by the Providence St. Joseph Health Board of Directors and Sponsors Council last month. It’s an inspiring five-year roadmap, which you’ll learn more about soon. Getting the challenges of the last few years firmly behind us will allow us to focus on the journey to 2030 and the healthier future we will create for the communities we serve.
In my first message to you as president and CEO, I urged us to have faith and optimism in the future, our ministry and one another. I believe that more than ever, knowing that we are in this together and have the strength of an enduring 170-year-old Mission guiding us every step of the way.
Join my webinar on Thursday to learn more
We will keep you apprised of this work, and this important topic will be the focus of my monthly Leadership Conversations on Thursday, April 17, at noon Pacific time. Providence Chief Operating Officer Darryl Elmouchi, M.D., and Chief Communication and External Affairs Officer Ali Santore, will join me. I look forward to talking with you more and hearing your questions during the session.
Yours in Providence,
Erik G. Wexler
President and CEO