PROVIDENCE – Brown University Health reported a $17.7 million operating income for the first quarter of fiscal year 2025 ending Dec. 31, 2024, according to unaudited financial statements released Thursday.
While the health system, formerly known as Lifespan Corp., is starting in the black, its earnings in the first quarter are down from the $55.4 million operating income during the same period last year. However, the health system attributed those 2024 earnings largely to $60.5 million in out-of-period and one-time, or unusual, items. During the first quarter 2025 the health system reported $14 million in unusual items.
Net income for the quarter fell to $8.2 million, down from $93.1 million reported in the same period last year.
This is the first full fiscal quarter Brown Health has been operating Saint Anne’s and Morton Hospitals in Taunton and Fall River. The health system purchased the Massachusetts facilities on Oct. 1 for approximately $175 million from Steward Health Care.
Patient service revenue associated with Brown Health’s new Massachusetts operations was $152.6 million. Patient service revenue for the Rhode Island operations fell by $13.2 million, down to $751.8 million in the most recent period from last year’s $765 million. However, management said the patient service revenue would have increased by $42.5 million excluding the unusual items.
Also, other revenue for Brown Health’s Rhode Island system rose to $99.5 million in the most recent period, compared with $81.3 million a year ago, and the Massachusetts system reported $3.1 million in other revenue. The rise in other revenue is largely because of a $17.9 million growth in retail and contract pharmacies, according to management. However, net assets released from restrictions used for operations fell to $13.6 million, compared with $34.3 million in the first quarter 2024.
Operating expenses in Rhode Island rose to $891.7 million in the first quarter 2025, up from $868.4 million in the same period last year. Also, Brown Health’s Massachusetts operations reported $155.7 million in operating expenses.
Spending on compensation and benefits in Rhode Island rose to $524.9 million in the most recent period, compared with last year’s $500 million. Also, Brown Health spent $257.5 million on supplies and other expenses, up from $234.2 million in the same period last year. Contributing to this rise was $15 million spent on onboarding and maintaining the Massachusetts system, according to management.
However, spending on license fees fell by about 50% going from $62.3 million in 2024 to $31.3 million in the most recent quarter.
Brown Health spent $78.3 million in compensation and benefits, $50.2 million on supplies and other expenses and $22.2 million on purchased services in Massachusetts.
Brown Health’s net realized returns on board-designated investments also took a hit, falling from a $41.7 million gain in 2024 to a $8.3 million loss in the most recent period. Contributing to this was the health system’s $6.1 million loss on investment income, compared with a $43.5 million gain in the same period last year.
Brown Health’s net assets rose by $18.9 million in the first quarter of 2025, compared with an increase of $128.1 million in the same period last year. This was mainly because of the decline in operating income, investment returns as well as a drop in earnings on donor restricted investments – falling from a $38.8 million gain in the first quarter 2024 to a $1.1 million loss in the most recent period.
Cash and cash equivalents rose to $440.9 million during the most recent quarter, up from $123 million last year. This was largely from Brown Health receiving $275 million in loans to fund the Massachusetts system.
Financing for the Massachusetts system drove the outstanding lines of credit up from $0 to $125 million and long-term debt, which rose to $1 billion for the quarter, up from $390 million last year.
Also, other accrued expenses for the quarter were, $132.2 million, up from $74.1 million the same period last year. This was mainly because of $31.3 million in license fees payable and the addition of the Massachusetts system.
Brown Health reported $13.9 million in losses from risk-based contracts, compared with $11.8 million last year. Management said the health system has continued to struggle with utilization, rising unit costs – especially for drug spending – and increase in “high-cost” cases. Also, flat Centers for Medicare & Medicaid Services rate along with falling risk scores have continued to lead to underfunding relative to the actual patient acuity. Brown Health’s management has ended risk-based contracts for Medicare Advantage and is looking into the effects of ending commercial risk-contracts.
Overall, Brown Health’s operating income is about $10.4 million short of the budget, but the health system performed much better, said Chief Financial Officer Peter Markell during an investor call on Thursday. Specifically, when the losses on risk-based contracts as well as $7.3 million adjustments to the state’s Disproportionate Share Program and taking away $5.6 Federal Emergency Management Agency funds, the health system’s operating income was actually $5.2 million above budget.
“The thing we want you to take away is that when you look at the core operations, they're actually doing very well compared to budget,” Markell said.
Among Brown Health’s continuing challenges is boosting volume levels in Massachusetts.
“We're still seeing the tail end of the lingering impact of the bankruptcy filing and frankly, the damage it did to the reputation of the Steward-owned hospitals,” Markell said.
Markell also said the health system is looking into combining its physician organization with Brown Physicians Inc – the top two largest physician group practices with a combined total of 1,371 physicians in the state, according to PBN’s Book of Lists.
The two groups already work closely and this combination would get all of the physicians on the Epic electronic medical system so there will be easier flow of information. So far, a Memorandum of Understanding has been signed and the Federal Trade Commission is reviewing the filings. Markell says he hopes to get a final ruling in the next six months.
(ADDS last six paragraphs with details from investor call; MINOR edits.)
Katie Castellani is a PBN staff writer. You may contact her at Castellani@PBN.com.
