Providence announced this week that it wants to sell its health plan, signaling its desire to exit the “payvider” club.
Being a payvider — an organization that both provides healthcare services and operates an insurance plan — has long been hailed as a key way for health systems to control costs. But it’s turning out that the financial benefits are difficult to capture for smaller, regional plans facing rising medical and drug costs, higher utilization and the capital demands of modernizing technology.
Providence has run its own health plan since 1984. The plan, which serves about 435,000 members in Oregon and Washington, offers plans across employers, Medicare, Medicare Advantage, Medicaid and the Affordable Care Act.
The Renton, Washington-based nonprofit health system said its decision to shed the plan was shaped by increasing costs, market pressures and the complexity of running an insurance business alongside its hospitals and clinics.
“Regional health plans across the country are under increasing pressure from rising costs, including prescription drugs, constraints on premium affordability and significant technology demands. Providence said organizations with larger platforms can improve long-term stability and support innovation,” the health system said in a statement.
Providence declined to share any details about deal timing or potential acquirers.
The announcement comes while the organization is still navigating its financial comeback from one of the toughest stretches in its recent history, when Providence posted a $6.1 billion net loss and an −8.8 % operating margin in 2021. This was partly tied to the health system’s restructuring and its split with Hoag Hospital.
Since then, Providence has been able to reign in costs and boost patient volumes enough to get back in the green. As of the third quarter of 2025 (the most recent financial data available from Providence), the health system reported $8 billion in operating revenue and returned to profitability with $21 million in net operating income.
The health plan is a different story, though. Last year, it posted a $102 million net loss on $2.5 billion in revenue. Like many regional insurers, the plan has been squeezed by rising costs for care and drugs, as well as limits on how much premiums can increase.
Providence’s decision to offload its struggling health plan is not an isolated case.
For instance, Indiana University Health sold its health plan to Elevance Health in 2024, and Michigan Medicine shut down its health plan at the end of last year.
These moves reflect a broader recalibration in healthcare, said Josh Berlin, CEO of rule of three, a healthcare consulting firm.
As market pressures intensify, both providers and insurers are increasingly focusing on their core businesses rather than trying to operate across both sides of the industry, he explained.
“It certainly begs the question then of how much more successful would a provider and a plan be if they focused on partnering and joint venture strategies, which a number of have done very successfully, so that strength could meet strength — maybe a far better way to bring benefit to the communities they serve,” Berlin stated.
He thinks this approach — focusing on partnerships rather than running insurance themselves — might shape the next phase for health systems.
Photo: AnnaStills, Getty Images
