The administrative wing of The Miriam Hospital on Providence’s East Side is a mess these days, and hospital President Maria Ducharme couldn’t be happier about it.
That’s because the two-story wing – which dates back to 1926, decades before the hospital moved in – is being prepped for demolition, in part to make way for a new, bigger emergency department.
But the project to build a three-story extension will come at a price: as much as $130 million.
It’s a big job, and as Ducharme recently inspected the progress, workers were hefting debris to dumpsters outside the old building ahead of razing the structure along Summit Avenue.
Miriam’s emergency department was originally designed to handle about 25,00 patients annually, but now as many as three times that amount arrive at the ER each year, suffering from a wide range of ailments.
On busy days, patients sit for hours in a cramped waiting room, which sometimes overflows into a nearby hallway. Treatment areas are sliced into a maze of small rooms and narrow corridors, making it difficult for staff to do their jobs efficiently.
“In a more contemporary emergency department, that’s not going to happen,” Ducharme
said, following a tour of the emergency department recently. “They’ve been working in some really challenging circumstances for a long time.”
Miriam – operated by Brown University Health – is just one of numerous hospitals in the region that is taking part in a building spree of sorts – undertaking or planning major renovations, demolition and new construction projects costing tens of millions of dollars or more at a time when hospital groups have been grappling with financial problems and when the future is looking gloomy.
Last spring, Women & Infants Hospital in Providence opened a new $40 million labor and delivery center. A year earlier, Butler Hospital finished construction on a $12 million short-stay unit. Both are owned by Care New England Health System.
Meanwhile, Sturdy Memorial Hospital in Attleboro had a recent groundbreaking for a $113 million emergency department expansion, and South County Hospital in South Kingstown has put constructing a new breast cancer center on its to-do list, although no price tag or timeline has been made public.
Perhaps, the biggest work project on the horizon is a decadelong, $1 billion, multiphase plan for a massive renovation on the campus of Rhode Island Hospital that would include the construction of a 185,000-square-foot “diagnostics and treatment platform” building.
Some observers say the building spree is inevitable under the rising demand for health care in an aging population, and stiff competition pushing entities to offer cutting-edge facilities and services, particularly in specialties that are more profitable for hospitals. It’s a matter of not only attracting patients but recruiting doctors and nurses, too.
To pay for construction, hospital groups typically rely on a mix of bond financing and fundraising campaigns, but such projects come with risks such as a higher debt burden, fundraising gaps, rising construction costs and potential higher operating costs when the work is complete.
Some question the timing.
James Bailey, associate professor of economics at Providence College, says he has been taken aback by how much health systems are investing in capital projects, given the uncertainty surrounding massive cuts to Medicaid and health care funding in Washington.
Not only that, but interest rates remain elevated, raising borrowing costs for large-scale construction projects. And the health care trends hospitals are planning for now could shift by the time the project is complete.
“You look at all the numbers, you make your bets, but you never really know and yet you have to make the decision anyway,” Bailey said.
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COMING DOWN: The administrative wing at The Miriam Hospital along Summit Avenue in Providence is being prepped for demolition to make way for a new emergency department and other facilities, a project that will cost as much as $130 million.
PBN PHOTO/MICHAEL SALERNO[/caption]
‘OUT OF SPACE’
Aimee Brewer remembers the stress of planning to build a new emergency department for Sturdy Memorial Hospital at the height of the COVID-19 pandemic.
“There’s never a good time; there’s continued uncertainty,” said Brewer, CEO of Sturdy Health, which operates the hospital in Attleboro. “We were saying to ourselves, ‘We need to both coexist with the pandemic and plan for our future. We can’t be in this stalemate.’ ”
Looking back, Brewer is relieved the health system took on the project now.
The new 38,000-square-foot emergency department at Sturdy Hospital, which cost $113 million, could have cost as much as 20% more if Sturdy executives had hesitated much longer. That’s because they secured subcontractors, materials and larger items before economic factors such as tariffs started to spike construction costs, Brewer says.
And it comes on the heels of Sturdy’s $60 million project to construct a 60,000-square-foot cancer and specialty care unit. Hospital executives cut the ribbon on that building in September.
For Sturdy, a new emergency department was a matter of demand, and it’s been that way for years, Brewer says.
Right now, the hospital struggles to accommodate 50,000 patients a year, but Sturdy has experienced an influx of far more patients since the closure of two nearby hospitals, including Memorial Hospital in Pawtucket in 2018, which also diverted more patients to Miriam.
“We started to see that we really were out of space,” Brewer said.
When complete in 2027, the expanded ER will have double the capacity – 50 exam rooms – and will feature two trauma rooms, on-site imaging and CT scanning. There will also be a 12-bed unit offering acute therapeutic intervention for patients facing a mental health crisis and waiting to go to a specialized facility. The new emergency department, which is under construction, will accommodate 60,000 patients annually.
According to Sturdy financial documents, the project is being financed with a $50 million tax-exempt bond, and the remaining $63 million will be covered through fundraising, equity and Sturdy’s reserve funds.
In Providence, a $12 million short-stay unit that opened in June 2024 at Butler Hospital was also a matter of demand.
The 25-bed unit at the psychiatric hospital – recently the site of a three-month labor strike – has helped relieve some of the behavioral health issues that nearby hospitals were dealing with in their emergency departments.
In early 2022, Butler relied on temporary beds set up in a conference room to relieve the state’s emergency rooms that had become overwhelmed with the surge in demand for behavioral health care in the wake of the COVID-19 pandemic.
Now the short-stay unit – paid for with $8 million in COVID-19 relief funds allocated by the state and a $4 million federal earmark secured by Sens. Jack Reed, D-R.I., and Sheldon Whitehouse, D-R.I. – now allows patients with mental health challenges to receive treatment at the new facility instead of overcrowded emergency departments.
The opening of the unit has had a “measurable” effect on the hospitals, says Scott Van Steeden, vice president of operations at Butler.
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LUXURY UPGRADES: Women & Infants Hospital in Providence opened its new Brown University Labor and Delivery Center last spring with features such as larger rooms equipped with technology meant to improve the patients’ experience.
PBN FILE PHOTO/KATIE CASTELLANI[/caption]
PRESSURE POINTS
There were different pressures playing a role in Brown Health’s decision to begin a $1 billion overhaul of its flagship Rhode Island Hospital, which is expected to take a decade over multiple phases.
Part of the reasoning behind the massive overhaul is functional, as the hospital has a laundry list of maintenance projects, says Peter Markell, chief financial officer of Brown Health.
But leaders of the state’s largest health system – which reported an operating income of $44.7 million in fiscal 2024 but a $3.8 million loss in the quarter that ended June 30 – also want to keep up with other hospital groups. Brown Health also purchased two Massachusetts hospitals for $175 million from Steward Health Care, which has also been a drag on the bottom line.
“If we want to be the brand we want to be, we need to have better facilities,” Markell said.
The pressure Markell feels comes from the need to compete with both local and regional hospitals that are moving ahead with major upgrades.
“Everybody’s doing this stuff, whether it’s ambulatory or inpatient, because they feel they need to do it to compete,” Markell said.
Ideally, according to Markell, the health system would reach its long-standing goal of a 3% operating margin before making a major capital investment. That hasn’t happened since before the pandemic, but he says Brown Health is on track to reach that target.
That said, the plan includes designated “exit points,” if the economics do not hold, Markell says.
C. Richard Panico, founder and CEO of Integrated Project Management Co. in Burr Ridge, Ill., which has handled capital project management for hospital expansions, says he’s noticed more projects in the pipeline as hospitals try to keep up with an aging population and to attract a smaller number of health care workers.
“Health care is at a unique point in that it really has become much more competitive,” Panico said. “Competition has had a huge impact on capital spend.”
While emergency departments are often swamped with patients, health systems mainly compete for those with more-complicated cases who might be willing to travel further for care, observers say. So, health systems feel the need to offer the latest technology in newer and more comfortable spaces that patients are looking for.
“There’s a direct connection in the facility, the working environment and technology that’s applied,” Panico said. “Everyone is looking to be the patient’s choice.”
This is true for Women & Infants Hospital.
The hospital is operated by Rhode Island’s second-largest hospital group, Care New England, which finished fiscal 2024 with an operating income of $15.2 million but stumbled in the quarter ending June 30 with a $4.4 million loss due to the strike at Butler.
Even though more than 80% of babies in Rhode Island are born at Women & Infants, the hospital unveiled a new $40 million labor and delivery center in March as it looks to maintain its dominant market share.
The project – which overhauled 20 labor rooms, making them bigger with private baths – was fully covered by donors following a four-year fundraising campaign.
“The design, technology and amenities now match the high standard of clinical care provided,” said Edward Robbins, senior project manager and architect for Care New England. “In a region with strong academic and health care institutions, our facilities must reflect that same level of excellence.”
Ducharme says she’s confident that the improvements to Miriam’s emergency room will boost recruitment and retention of medical staff, noting that it’s already been a morale boost for existing personnel before construction started.
“People come to work, and they want to do a good job; they want their patients to be satisfied and comfortable and happy,” Ducharme said.
Indeed, observers say some capital projects are more about patient care than competition.
Brewer says Sturdy’s emergency department expansion is meant to serve the community more than compete with other hospitals. Patients don’t want to drive to Boston or Providence for emergency care, Brewer notes. Even if they do, those emergency departments are often full.
Nevertheless, the improved patient experiences and staff retention can lead to long-term boosts to the bottom line, according to Lindsley Withey, principal with health care consulting firm ECG Management Consultants in Boston.
Along with boosts to recruitment and patient revenue, more-modern spaces usually offer better and more efficient workspaces, leading to lower long-term maintenance and utility costs, she says.
But before a hospital group embarks on a capital project, Withey says, it should have a deep understanding of the community’s need for it, how ready the company is to make an investment and whether any inefficiencies can be solved with better use of its existing resources.
“It is critically important that systems understand, from a business perspective, an operational perspective, the impact of bringing on a new facility,” she said.
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DO IT AGAIN: A recently completed 60,000-square-foot cancer and specialty care building at Sturdy Memorial Hospital in Attleboro peeks over a sign marking the groundbreaking ceremony for a 38,000-square-foot emergency department expansion in August.
PBN PHOTO/MICHAEL SALERNO[/caption]
RIGHT MOVES?
Everyone agrees that Rhode Island is still facing a health crisis that includes a shortage of primary care doctors, gaps in access to care and low insurance reimbursement rates. But not everyone agrees that capital investments will help health systems escape the crisis.
Alan Sager, a professor at Boston University’s School of Public Health, is critical of capital projects as part of a solution for financial struggles. If there was a free market for health care, it would make sense that renovation and construction projects at hospitals could help. But that’s not the case, he says.
In some cases, it’s necessary to renovate old buildings. But often, hospitals undertake projects to boost finances in the long run by attracting high-paying, privately insured patients, which doesn’t help those who are uninsured or on Medicaid or Medicare, Sager says.
“The hope that hospitals will be able, through capital improvements, to spend their way to breaking even is very unrealistic,” Sager said, adding that health systems should be better at cutting wasteful spending instead of major construction or renovations.
Markell defends Brown Health’s decisions on capital projects.
While there are some projects that tend to benefit wealthier patients more, Markell said that’s usually not the case, such as the Miriam emergency department project. Also, he adds, wealthier patients can pay more for their care, which boosts hospitals’ bottom lines so the hospital group can invest more in services that help those who are underinsured or uninsured.
Earlier this year, Brown Health executives were considering postponing the renovation of Rhode Island Hospital – and cutting other services and programs – because of financial pressures as the health system struggled with rising costs of labor, supplies and drugs along with lagging Medicaid reimbursements.
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. But Markell says the first phase of the hospital’s planned renovation is moving forward, including the replacement and relocation of major utility lines on campus.
It can take as many as 15 years before a health system starts to see returns on major capital investments, although this varies widely depending on the size of the project and services offered, Withey says. And if they’re mainly mission-driven, there might never be a definitive return.
But when weighing major financial decisions, observers say, the health system must also factor in its obligation – especially as a nonprofit – to provide needed health care services to the community.
Anna Matos-Mournighan, director of the health care administration graduate program and visiting assistant professor at Salve Regina University, doesn’t see Rhode Island’s health care crisis easing soon.
Not only is recently passed federal legislation expected to take tens of thousands of Rhode Islanders off Medicaid, but the state is also facing growing budget deficits.
“Financing is at the heart of the issue,” Matos-Mournighan said.
That said, she sees capital improvements as essential investments.
“There is a great deal of competition in the health care industry, so having upgraded and efficient facilities and technology is important … to meet the needs and preferences of patients, but also to remain sustainable,” she said.
Hospital leaders echoed that balance between financial strain and the need to invest.
“We want to best take care of our patients,” Ducharme said. “This is sort of survival, but it’s always been like a little bit of a seesaw because we don’t always have the margins to reinvest.”
As of now, Ducharme says plans call for about $100 million of Miriam’s renovations to be paid for by donors. And while the health system’s margins have been thin, it has finally reached a point where it can move forward with the project.
She’s optimistic that Miriam’s renovation and other projects like it will lead to a stronger health care system.
“It’s like an old house that people have added on to,” Ducharme said of the Miriam project. “But we’re not looking for charm. We’re looking for efficiency. Hospitals have to be efficient in the face of challenges.”
