Providence weighs sale of health plan amid financial pressures

Providence Health & Services is exploring the sale of its insurance arm, Providence Health Plan, as leaders look to strengthen the organization’s long-term financial footing.

Providence Health Plan, based in Portland, is the state’s third-largest health insurer. It sells commercial, individual, small group and Medicare Advantage plans covering more than 421,000 Oregonians. The plan employs nearly 1,200 people across six states, including 878 in Oregon.

Greg Hoffman, Providence’s chief financial officer, said Thursday that the Catholic health system is reviewing “strategic options,” including a sale, but did not disclose a timeline or identify possible buyers.

For Oregon’s health care market, a sale could potentially place one of the region’s longstanding nonprofit-affiliated plans into the hands of a larger, possibly national, insurance company.

Providence leaders said the health plan will continue operating as usual and will honor all existing contracts. They said “the goal is uninterrupted coverage for members and continuity for providers and employer partners.”

Hoffman cast the move as a response to rapid changes in the insurance market — not a reflection of the plan’s quality.

“This is about how the market has changed and what it takes to sustain that work,” Hoffman said in a statement. “Rising prescription drug costs, pressure to keep prices affordable, and the need to continually upgrade technology make it harder for smaller plans to keep up.”

Providence Health Plan reported a $102 million net loss last year on $2.5 billion in revenue. The loss stemmed in part from rising medical and pharmacy use and a decline in its Medicare Advantage rating to 3.5 stars out of 5 — a middling score that can affect bonus payments and competitiveness.

Hoffman said Providence believes a larger organization could better position the plan for “long-term stability” while continuing to serve members.

Larger insurers can spread costs across broader customer bases and invest more heavily in innovation, giving them a competitive edge over regional plans like Providence Health Plan, Providence officials said.

At the same time, Providence has pulled Providence Health Plan out of the bidding process for the Oregon Public Employees’ Benefit Board, a major contract that would have required a long-term commitment.

Providence leaders declined to shared additional details about how a potential deal might unfold.

“We’re taking a thoughtful approach,” Hoffman said. “Throughout this process, we will keep our caregivers, members, clinicians, providers and employer partners at the center of our decisions.”

Meanwhile, Providence announced a series of layoffs last year that affected frontline and non-clinical employees across its hospitals, clinics and Providence Health Plan. Providence leaders said the cuts were part of the health system’s effort to stabilize its finances, citing rising operational costs and Medicaid cuts and shrinking payments from commercial insurance companies.

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