Executives at Brown University Health never mentioned the Newport Hospital birthing center during a 30-minute call with investors Thursday, nor was it included in a 17-slide PowerPoint presentation detailing the health care system’s first quarter financial results.
But the accredited labor and delivery unit — the only one on Aquidneck Island — appears to be on shaky ground amid quarterly operating losses and gloomy projections about the effect of federal budget cuts.
Brown Health concluded the first quarter of its new fiscal year, which ended Dec. 31, with a $17.6 million operating loss. The dramatic drop in profits — down $35 million compared with the same three months in 2024 — was dragged down by poor performance at its two Massachusetts hospitals.
Low patient volume and staff shortages at St. Anne’s Hospital in Fall River and Morton Hospital in Taunton have proven a recurring problem since Brown Health bought the facilities from bankrupt Steward Health Care in 2024. And as the company anticipates $100 million to $200 million in net annual operating losses from restricted Medicaid eligibility and funding cuts under the One Big Beautiful Bill Act.
“It will come down to two things: maximizing revenue performance, and then, we will have to take a hard look at our expenses, and say, ‘what can we afford and what can’t we afford to do?’” Peter Markell, executive vice president and chief financial officer for Brown Health, told investors during the virtual earnings presentation.
Markell did not specify what services or programs might face cuts. But the health care company has already indicated that the Noreen Stonor Drexel Birthing Center in Newport Hospital might be on the chopping block.
Alarm bells began ringing last July when the health system said it was looking at ways to cut costs in Rhode Island, including, potentially, shuttering the birthing center at Newport Hospital. Public pressure from residents, local and state leaders prompted executives to reconsider and keep the landmark unit open and funded through Sept. 30.
A community advisory panel tasked with assessing the birthing center operations began meeting in the fall; the 12-member panel has met twice, in November and February, with a third meeting scheduled for April 28, Nicole Searles, a hospital spokesperson, said in an email Thursday.
Hurry up and wait
Both Searles and Markell remained vague about the forthcoming recommendations.
“As you know, Newport Hospital is actively exploring a range of potential strategies to ensure the birthing center’s long-term future and to preserve access to high-quality women’s healthcare,” Searles said. “As the panel’s work advances, we will update the community on our progress.”
The advisory board is expected to complete its review and issue recommendations this summer, Sharon Torgerson, a company spokesperson, confirmed.
Hospital executives previously cited declining demand for the labor and delivery unit, which has reported 400 births annually in recent years. But across the profile of Brown Health’s Rhode Island hospitals, including Rhode Island Hospital, The Miriam Hospital and Bradley Hospital, operations remain in the black, Markell said.
“Massachusetts is still our major challenge,” Markell told investors. “Rhode Island is profitable, and consistently profitable.”
A breakdown of operating income by hospital was not included in the first-quarter earnings. However, audited financial statements from fiscal 2025, which ended Sept. 30, show operating profits at Rhode Island Hospital, Miriam, and Bradley. Newport Hospital ended the year with a $3.8 million operating loss, while St. Anne’s and Morton reported $16.3 million and $6.2 million losses, respectively.
Prospective cuts to programs and services would “heavily focus” on Massachusetts, Markell confirmed when asked.
“We want to try to avoid across-the-board actions that hit everybody equally, because some places are performing and meeting their budgets. Others aren’t,” Markell said in an interview Thursday after the investor call.
And despite a fiscal 2025 loss, Markell still labeled Newport Hospital as a “performing” facility. Just not necessarily the birthing center.
“We want to run a first-class, high-quality birthing center in Newport, but the revenue has got to be there,” he said.
Smith Hill to the rescue?
Markell declined to comment when asked about legislation introduced by Democratic Newport state lawmakers that would require a rigorous application and review process before any birthing center could be closed or have services and staff reduced.
“It’s like everything,” Markell said. “It’s easy to have legislation and do those things, but where’s the funding that allows the revenue to cover the cost of those facilities?”
The companion bills, sponsored by Rep. Lauren Carson and Sen. Dawn Euer, have not been scheduled for preliminary hearings before their respective chambers’ committees as of Thursday.
The lopsided balance sheet looks especially troubling in light of federal policy changes that restrict Medicaid eligibility and limit discounts for state health exchanges. A rise in un- and underinsured patients is expected to hurt health care systems nationwide, including Brown Health, which projects an extra $20 million to $90 million in annual costs for uncompensated care by 2034. New caps on pass-through federal funding from states to hospitals that treat Medicaid patients are expected to create another sizable hole: $50 million to $117 million a year, according to Brown Health’s projections.
“This is not minor,” Markell told investors.
But he also noted how shifting winds in Congress, after the 2026 midterm elections could soften projected losses.
“We need to plan, but what we’re not going to do is be dictated by how things play out in Washington,” Markell said.
The first quarter earnings report also reflects an Oct. 1 merger with Brown Physicians Inc., a similarly named but unrelated 500-physician practice. The partnership authorized by the Rhode Island Office of the Attorney General, circumventing the standard review of state and federal anti-trust protections, accounted for $1.1 million of the first-quarter net operating loss across Brown Health’s services and facilities.
As part of the AG’s approval for the merger, Brown Health must take on 40,000 new primary care patients by the end of 2029, hiring at least 27 new primary care providers to treat the influx. Markell said it was too early to comment on hiring progress Thursday, but that the initial integration was “making good progress.”
This story was originally published by the Rhode Island Current.
