When state Rep. Lauren H. Carson saw Brown University Health’s financial performance earlier this year, she was fuming.
Rhode Island’s largest health system reported a $17.6 million loss for a three-month period that ended on Dec. 31, a bottom line written in red ink largely because of the two ailing hospitals that Brown Health had purchased from bankrupt Steward Health Care in 2024 for $175 million.
Carson, D-Newport, hadn’t forgotten that Brown Health had explored closing the birth center at Newport Hospital, a controversial cost-cutting strategy that drew protests from the community.
“Brown Health’s losses are all coming from out of state, and yet, once again, the Noreen Stonor Drexel Birthing Center at Newport Hospital – the only labor and delivery unit on Aquidneck Island – is being held up as a potential casualty,” she said in March. “That is unacceptable.”
In the end, the center was spared from closure, at least for now. But a lasting impression was left amongst some observers that Brown Health’s foray into nearby Massachusetts with the acquisition of Saint Anne’s Hospital in Fall River and Morton Hospital in Taunton may cost the healthcare system in the Ocean State.
The birthing center wasn’t alone on the chopping block. Cuts were also considered by Brown Health in behavioral health care services through Gateway Healthcare, and at Samuel Sinclair Dental Center, which provides dental care to children and people with special needs.
They were also eventually spared.
But for how long?
Brown Health reported an $18.8 million loss in its second quarter, which ended March 31. And the financial picture has grown even more dire at Saint Anne’s and Morton. Financial reports show that Brown Health’s Massachusetts assets lost $79.6 million in a six-month period ending March 31, more than three times the $21.1 million loss reported in the same period a year earlier.
It’s a stark difference from the health system’s performance on the Rhode Island side of the border, where an operating income of $43.1 million was reported in the same six-month period.
[caption id="attachment_526898" align="alignleft" width="181"]
Markell[/caption]
Peter Markell, Brown Health’s chief financial officer, insists the health system’s struggles in Massachusetts haven’t affected services in Rhode Island. The proposed closure of the birthing center, Gateway Health and the dental center was brought about by their own financial issues.
“Our Massachusetts hospitals were never a factor in the discussions around [closing the services],” Markell said. “And importantly, none of those programs were closed.”
In addition, no capital projects such as large-scale renovations and expansions have been canceled, according to Markell. “So far, we have been able to manage the cash flow,” he said.
Still, others are skeptical that Rhode Island hospitals won’t be paying a price at some point.
Robert Hackey, a professor of health sciences at Providence College, says he expects that Brown Health’s Rhode Island operations will “cross-subsidize” efforts to improve the quality of care at the Massachusetts institutions.
“Had the acquisition not happened, those dollars could be invested here,” Hackey said. “Alas, for the foreseeable future, they’ll need to direct dollars to improve staffing, upgrade equipment and facilities to compete with other hospitals in the Massachusetts market.”
[caption id="attachment_526902" align="aligncenter" width="955"]
IN THE BALANCE
Three of Brown University Health’s hospitals in Rhode Island generated significant surpluses in fiscal 2025. Across the border, Saint Anne’s and Morton hospitals posted deficits as Brown Health began the task of rebuilding the former Steward Health Care facilities. (Brown Health’s fiscal year begins Oct. 1.) / SOURCE: BROWN UNIVERSITY HEALTH 2025 ANNUAL REPORT[/caption]
LOW VOLUME
Clearly, Brown Health didn’t expect the financial challenges to be so persistent when it purchased the Steward hospitals in 2024, as well as several outpatient clinics and surgery centers in southeastern Massachusetts.
An S&P Global Ratings report in February 2025 noted that Brown Health had planned for a $7 million loss for that fiscal year and projected that the Massachusetts facilities would roughly break even or be profitable in 2026, once transition costs were removed.
At the time, S&P’s primary concern wasn’t that Saint Anne’s and Morton would lose money; it was that Brown Health had added about $500 million of debt, in large part for the purchase of the Massachusetts properties.
Things haven’t played out as expected.
Brown Health’s quarterly reports to investors indicate that both Saint Anne’s and Morton aren’t admitting as many patients as they did before Steward Health Care’s spectacular collapse brought on by financial missteps and executive mismanagement.
Lowered inpatient volume is a big problem because hospitals have huge fixed costs, and fewer admissions means less revenue. Observers say bankruptcies such as Steward’s can have lasting negative effects, with referral patterns shifting, doctors leaving and patients choosing more-stable hospitals.
In a six-month period ending March 31 alone, the Massachusetts hospitals saw patient discharges sink 11.6% and the number of days patients were in the hospitals drop 7.9%. Brown Health says the clinics and surgery centers in Attleboro and Foxborough, Mass., have also been underutilized.
It hasn’t helped matters that Brown Health reports it has experienced more uncompensated care, in the form of insurance denials, below-cost Medicaid reimbursement, bad debt and charity care.
At the same time, however, four of Brown Health’s hospitals in Rhode Island – its flagship Rhode Island Hospital, Hasbro Children’s Hospital, The Miriam Hospital and Bradley Hospital – have held up well.
Rhode Island revenue increased nearly 14% in the six-month period ending March 31 while operating income only slipped from about $47.6 million to $43.1 million despite inflation and insurance reimbursement pressures.
Brown Health credits a $40 million increase in pharmacy revenue and an $89.4 million operating revenue boost from the newly acquired Brown Physicians Inc. as improving the financial picture.
At the same time, Brown Health reports having more than $1.1 billion in unrestricted cash and investments.
Still, Brown Health’s overall operating margin was in negative territory instead of its target 3% margin.
James Bailey, associate professor of economics at Providence College, says Brown Health had just gotten back to profitability after the COVID-19 pandemic when it took on this massive turnaround job.
“Now they lost tens of millions of dollars last quarter,” he said. “The challenge with acquiring bankrupt hospitals is that they went bankrupt because they were losing money for their old owners, so they will lose money for you too unless and until you manage to turn them around.”
The big question is whether Brown can reverse the trends at Morton and St. Anne’s.
“One year hasn’t been enough for them to do that, but it’s still early as these things go,” Bailey said.
[caption id="attachment_526897" align="aligncenter" width="1200"]
THE DIAGNOSIS: Brown University Health says lowered inpatient volumes are at least partially to blame for the poor financial performance of its Massachusetts facilities, such as Morton Hospital in Taunton, pictured.
PBN PHOTO/WILLIAM HAMILTON[/caption]
OFF-RAMPS?
It remains to be seen what Brown Health’s financial performance might mean for its capital projects that are underway or on the drawing board.
The biggest work project on the horizon is a decadelong, $1 billion, multiphase plan for a renovation on the campus of Rhode Island Hospital that would include the construction of a 185,000-square-foot “diagnostics and treatment platform” building.
Brown Health executives had considered postponing the renovation of Rhode Island Hospital last year – and cutting other services and programs – because of financial pressures.
In the end, executives closed Brown Health Home Medical, which provided medical equipment and supply services to patients, and made staff changes at Rhode Island Hospital’s inpatient adult psychiatry unit.
Markell acknowledges that if the financial situation does not improve in the near future, changes are possible among many of its capital projects, which also involve upgrading clinical equipment, information technology systems or infrastructure.
Many of the projects have “built-in” off-ramps that would allow them to slow down, pause or stop work if necessary, according to Markell.
“Not every project is at the same stage, and priorities can shift based on operational needs and financial conditions,” he said.
While Markell acknowledges that Brown Health’s overall financial condition could affect the timing of future capital projects, he draws a distinction when it comes to concerns that losses at the Massachusetts hospitals could force cuts to patient services in Rhode Island.
Markell denies that losses at the Massachusetts hospitals prompted discussions about potentially scaling back Rhode Island services, arguing that programs such as the Newport birthing center, Gateway Healthcare and the Samuel Sinclair Dental Center face long-standing financial pressures because Medicaid reimbursement often falls short of the cost of care.
He says the discussion underscored a broader issue facing hospitals in Rhode Island and across the country: the growing gap between the cost of providing care and government reimbursement for many essential health services.
“Programs like these provide critical care and support to some of our most vulnerable populations, and they rely heavily on Medicaid reimbursement,” Markell said. “Ensuring those reimbursement rates keep pace with the cost of providing care is important to maintaining access to these services.”
Brown Health has identified low Medicaid reimbursements and the potential impact of changes to federal healthcare funding as significant long-term risks to the health system.
[caption id="attachment_526899" align="aligncenter" width="1200"]
SLOW GOING: Robert Hackey, health sciences professor at Providence College, says the job of turning around St. Anne’s and Morton hospitals won’t be completed quickly.
PBN FILE PHOTO/ELIZABETH GRAHAM[/caption]
RESTRUCTURING
One of Brown Health’s most immediate financial priorities is turning around its Massachusetts operations.
In May, Brown Health took the step of consolidated leadership at Saint Anne’s and Morton, appointing a single president and a single chief operating officer/chief financial officer to oversee both facilities.
The move was described as a restructuring intended to improve the hospitals’ financial stability.
[caption id="attachment_526900" align="alignleft" width="168"]
Abilheira[/caption]
Julie Abilheira was named as president, replacing Carole Billington, who had served as president and chief nursing officer of St. Anne’s since February 2025.
Also, Heidi Taylor will serve as chief operating officer and chief financial officer for both facilities. She had been Morton Hospital’s president and was its vice president of finance since 2018.
The restructuring appears to be consistent with Brown Health’s broader strategy of integrating its Massachusetts operations. Health system executives have emphasized economies of scale, physician integration and unified operations as central to the health system’s plan for restoring the financial performance of the former Steward hospitals.
[caption id="attachment_526901" align="alignleft" width="171"]
Taylor[/caption]
“We will have more ‘covered lives’ in the territory where we are, and that is important in healthcare,” said Markell, referring to the number of insured patients who can receive care through Brown Health’s hospitals, physicians and other services.
“It’s true for hospitals, just like other industries, to some extent, [that] if you stop growing, you start to lose your energy. I think we felt it was important to grow, and Massachusetts was the natural place to go to grow. And then you get a scale of size, which helps you lower your full unit costs because you are spreading your fixed and semi-fixed costs over a larger base. So, that helps make you more unit-cost competitive,” he said.
He says Brown Health is working to build relationships between physicians affiliated with Brown University’s academic medical system and community physicians in Massachusetts.
“The relationships that are beginning to develop, we think, are very good,” he said.
Brown Health acquired Hawthorn Medical in the Steward deal and is developing strong ties with Prima CARE, which, along with Hawthorn, is one of the largest physician organizations in southeastern Massachusetts, Markell says. The system is also working to strengthen its relationship with Revere Health, which acquired Steward Health Care’s accountable care organization contracts during the 2024 bankruptcy.
Those relationships are critical because physician groups largely determine where patients receive primary care, specialist care and hospital treatment.
Markell says the organization is also looking for opportunities to improve efficiency, lower unnecessary expenses and adopt industry best practices.
“We are also regularly assessing staffing levels to ensure they are aligned with patient volumes and community needs. That means making sure we have the right people in the right places to deliver safe, high-quality care while managing costs effectively,” Markell said.
“Our goal is not simply to reduce costs, but to ensure we are operating as effectively as possible while continuing to provide the services and care our patients depend on,” Markell said. “We have to get them back on track in Massachusetts, delivering a 3% profit margin.”
Hackey, however, cautions that Brown Health is attempting to reverse years of financial decline under Steward Health Care.
“There’s no magic wand to undo years of underinvestment and deferred maintenance,” Hackey said. “Brown University Health entered into this arrangement as a savior, but it’s going to take years to rebuild what was lost.”
Carson, the Newport lawmaker, isn’t sure whether to believe Brown Health executives when they say the disappointing performance of the Massachusetts hospitals hasn’t affected services in Rhode Island.
“I don’t understand that,” she said. “I think it’s one big system.”
In the meantime, the new $15.2 billion fiscal 2027 state budget includes an allocation of $1.6 million to help keep the Stonor Drexel Birthing Center open, approximately one-third of the funding Brown Health said it needed. Carson says the other two-thirds can be raised by the health system and through fundraising.
Meanwhile, Carson says the state budget also includes a provision requiring Brown Health to obtain what she called a “reverse certificate of need” from the R.I. Department of Health before closing or reducing services at the birthing center.
“Now it’s a much more rigorous procedure,” she said.
