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Following Hoag split, Providence adding $700 million patient tower to SoCal location

by John R. Fischer, Senior Reporter | September 26, 2022
Business Affairs
Providence Health & Services is adding a $712 million patient tower to its Providence Mission Hospital in Southern California. (Photo courtesy of Providence Mission Hospital)
Looking to increase its inpatient and outpatient care services in Southern California, Providence Health & Services has invested $712 million into the construction of a 100-bed patient tower at Providence Mission Hospital.

The acute care regional medical center currently has 523 available beds across its two campuses in Mission Viejo and Laguna Beach. Situated at its Mission Viejo location and a multispecialty ambulatory surgery center, the new tower will include private rooms, operating and surgical suites and cardiac catheterization labs.

It will also provide maternity and neurology care, and Providence will move its inpatient mental health services to the tower from Laguna Beach, according to the Denver News Depot.

Construction is set to begin in the fall 2023 and be completed in five years. Its announcement follows a drop in Providence’s operating income following its split with Hoag, a small and profitable health system in Southern California, earlier in the year.

“We want to give the 800,000 people south of the El Toro ‘Y’ a state-of-the-art center and all of the care they need without having to travel,” said Kevin Manemann, divisional chief executive at Providence South, in a statement.

The new tower will enable the hospital to care for its growing and aging population in Orange County. Two new outpatient clinics will also be available in San Clemente and Mission Viejo for high-acuity, urgent care in emergency medicine, primary care, and other specialties.

Coming out of 2021 with an operating income of 31%, Providence saw this decline over six months to roughly 27% after it called off its merger with Hoag. Hoag claimed that the 51-hospital Catholic system, located in Renton, Washington, did not fulfill its obligations in their population health initiative.

In a 2020 lawsuit, Hoag said that Providence’s centralized governance model allegedly impeded its ability to make decisions locally and meet the needs of local patients, as well as created cultural, financial and operational clashes.

Providence denied this, saying that it improved Hoag’s medical group, diagnostics, ambulatory surgery centers, orthopedic services and mental health offerings.

Hoag made up 7% of Providence’s operating revenues and 17% of its unrestricted cash and investments. Non-operating revenues dropped by $3.4 billion after the split.

Additionally, a double-digit rise in labor expenses cost Providence $714 million in operating losses out of its $27.33 billion operating revenue in 2021, though non-operating earnings rose by $1.23 billion.

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