Brown University Health is back in the black, but its financial forecast remains grim as costs associated with uncompensated care, insurance denials and federal Medicaid restrictions take hold.

“If you’re sitting at zero, you’re not where you need to be,” Peter Markell, executive vice president and chief financial officer, said during a virtual call with reporters Thursday.

A $23.4 million third-quarter profit is a significant improvement after two consecutive quarters of operating losses. But the -0.4% operating margin for the first nine months of the fiscal year, which ends Sept. 30, is a far cry from the 3% margin Markell considered a signal of long-term financial stability. 

Especially as the ramifications of the One Big Beautiful Bill Act, also known as H.R. 1, take hold — capping federal funding funneled to hospitals and other health care providers while increasing costs associated with treating a rising group of uninsured patents, no longer covered under Medicaid or the state health exchange. 

Asked if he expected to see profits continue as federal restrictions take hold, Markell answered, “No. It’s going to be a challenge.”

Not mentioned during the 40-minute virtual call with investors, but top of mind for Aquidneck Island: the fate of the Newport Hospital birthing center. The award-winning labor and delivery unit was thrust into limbo a year ago, after Brown Health executives threatened closure amid financial pressures. The health care giant quickly reversed course amid public backlash. But the promise came with a caveat: $4.9 million in additional to annual revenue to keep the birthing center open, none of which Brown Health was willing to pay on its own. Instead, company executives looked to philanthropy and state support to close its estimated gap. But details of how the company will do so remain murky as the company has refused to release the consultant report that it said produced this figure, citing proprietary information.

The Rhode Island General Assembly offered one-third of the funds, tacking a $1.6 million birthing center earmark into its fiscal 2027 budget. 

The budget allocation was born out of a separate, standalone piece of legislation by Rep. Lauren Carson, a Newport Democrat. Carson’s bill called for three, equal $1.6 million contributions from the state, Brown Health, and philanthropy, funneled into a state-managed fund with regular financial reporting and other conditions tied to the money.

The final fiscal 2027 budget includes no restrictions on the money, nor does it address the $3.3 million still outstanding.

Nicole Searles, a spokesperson for Newport Hospital, confirmed via email Thursday night that the hospital’s philanthropy team and separate foundation board of directors are developing fundraising plans. It is not clear whether those plans will include a birthing center-specific donation campaign, similar to the $2.5 million fundraiser in 2025 to buy a robot-assisted surgical tool. 

The sound of silence 

Despite wide public concern over the fate of the birthing center, there’s been little public outreach or communication from hospital executives, said Cassie Voll, co-founder of Moms over Margins and one of the leading organizers of a grassroots coalition formed to save the birthing center.

“People ask me all the time, ‘how long is the birthing center going to be open?’” Voll said in an interview Thursday. “The best answer I can give is through the end of fiscal 2027, which is Sept. 30, 2027. Beyond that, we don’t know.”

Lack of information has been a recurrent pain point for community advocates like Voll, who also cited the work of a community advisory panel, which the hospital convened in the fall to help shape its plans for the birthing center. The 12-member panel of health experts and community advocates met four times, concluding in April, but its meetings were not open to the public, and members were required to sign confidentiality agreements.

“We really thought there was going to be some communication with the outside community about what was going on, and there wasn’t,” Voll said. “It’s frustrating, absolutely.”

Searles did not immediately respond to requests for comment on the critique over communication.

There’s been similarly little information on the aftermath of a December 2025 data breach, reported in July that compromised personal information of more than 300,000 patients, mostly in Massachusetts. Markell on Thursday said the cause of the breach, which affected its affiliated medical practice in Dartmouth, Massachusetts, remains under investigation.

“So far, there’s no evidence any of the information from this data breach has been used for anything,” Markell said. “There’s no evidence anything was exfiltrated out of the server, we just know the server was penetrated.” 

No Rhode Island practices or patients were affected, Markell confirmed.

Security remains a top priority, as the health care operator rolls out new internal and patient-facing software systems, some aided by artificial intelligence, across its hospitals and associated physician groups in Rhode Island and Massachusetts.

Among them: an electronic wait list tool that automatically notifies patients when earlier appointments are available. Average wait times for appointments have decreased by 61 days since facilities began using EPIC FastPass, Adam Landman, senior vice president and chief digital information officer, told investors Thursday.

The rollout of the EPIC enterprise resource planning (ERP) system across Brown Health’s two hospitals and associated physician groups in Massachusetts, did not go smoothly, contributing to continued operating losses.

The Massachusetts problem 

The technical glitches are mostly fixed, but the former Steward Health Care-owned facilities in Massachusetts, which Brown Health bought in 2024 after Steward declared bankruptcy, are still struggling.

The Massachusetts operations, including St. Anne’s Hospital in Fall River, and Morton Hospital in Taunton, ended the first nine months of the fiscal year with a $110.5 million operating loss. By contrast, Brown Health’s Rhode Island facilities, including Newport, Rhode Island, Miriam and Bradley, ended the same nine-month stretch with a $97.4 million profit. 

Profit margins by hospital were unavailable.

The stronger performance in Rhode Island comes despite lower state Medicaid reimbursement rates than its Commonwealth counterpart, a long held complaint of health care providers and operators. And payment rates for both states’ government-subsidized healthcare plans remain significantly below the cost to treat patients, a problem Markell expects to only intensify as federal Medicaid restrictions and funding caps take hold.

Meanwhile, Brown Health has seen a surge in denials by health insurance companies, along with bad debt and “charity cases,” in which the health care system agrees ahead of time to take on care for patients who cannot afford to pay for it themselves. The $90.5 million in costs associated with insurance denials, debt and charity care for the third quarter is 54% higher than the same costs in the third quarter of fiscal 2025, and represents more than 8% of the company’s net revenue.

“That is significant money,” Markell said. “We recognize we should deliver some level of charity care, but getting up to 8% is stretching it.”

Regarding insurance denials, Markell blamed insurers for “wasted energy in the healthcare supply chain.” For example, insurers are increasingly rejecting claims to cover costs for a patient who is readmitted to the hospital shortly after being treated for the same or similar condition. Delays in recognizing physician credentialing — which insurers verify separately after the same review is done by the healthcare operator — also lead to denials.

One solution being contemplated by Brown Health is a surcharge to insurance providers and third-party payors to defray the extra expenses. And, as negotiations continue with the three commercial insurers who provide coverage with Brown Health facilities in Rhode Island — Blue Cross Blue Shield Rhode Island, Neighborhood Health Plan of Rhode Island and Point32Health — Brown Health is looking to one-year contracts rather than the typical three-year term. 

Trouble ahead?

Markell acknowledged such solutions were unlikely to be received well by insurance companies, which look for predictability to help determine their own expenses and requested rate increases from the Rhode Island Office of the Health Insurance Commissioner. 

Contract disputes have already terminated coverage for United Healthcare Medicare Advantage patients at Brown Health facilities, starting with non-emergency visits at Brown Health hospitals in July 2025. One year later, on July 1, 2026, additional breakdowns in negotiations meant 1,900 seniors and disabled residents on UnitedHealth Medicare Advantage could no longer see their primary care and specialty providers through Brown Health unless they wanted to pay out of pocket.

Markell acknowledged that the financial pressure facing healthcare providers and insurers raises the stakes of already tense contract discussions, which could mean more terminations.

“Anything is possible,” he said. “In negotiations, there’s a lot of back and forth that goes into it. But there’s no guarantee at the end that you reach agreement on it.” 

Spokespeople for Blue Cross, Neighborhood and Point32Health did not immediately return requests for comment on Friday.

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