PROVIDENCE, R.I. (WPRI) — Rhode Island’s two major hospital groups struggled financially over the last year, according to newly released annual reports that reveal large losses at the organizations.
Lifespan said its operations lost $77 million during the 2021-22 fiscal year, which ended Sept. 30, a sharp reversal after an operating profit of $89 million during the prior year. Lifespan owns Rhode Island, Miriam, Bradley and Newport hospitals, and is the state’s largest employer.
The disclosure comes months after the unexpected departure of Lifespan’s longtime chief executive, Dr. Timothy Babineau, who announced his resignation in April. The board has tapped John Fernandez, a Boston hospital executive, to succeed Babineau early next year.
In a statement, Lifespan blamed the poor performance on a 9% slump in inpatient volume, partly because most elective procedures were suspended for a period last winter due to a resurgence of COVID-19. Staffing costs have also jumped amid a nationwide shortage of medical personnel.
Arthur Sampson, Lifespan’s interim president and CEO, told 12 News in a statement: “We have received some financial assistance from the state and federal governments, which we are grateful for, but it’s not enough to offset lost revenue and increased expenses.”
The federal and state governments have awarded Lifespan nearly $300 million since the start of the pandemic to stabilize its finances, but only $34 million of that total was left to put toward this year’s operations. Similarly, Care New England received about $164 million since the pandemic began, but only $24 million of that amount was this year.
Sampson added, “These challenges are not unique to Lifespan; nearly every health care organization across the country is in a similar situation.”
Care New England, which is smaller than Lifespan but still one of Rhode Island’s biggest employers, said its operations lost $34 million during the 2021-22 fiscal year, compared with an operating profit of $16 million the prior year. Its hospitals are Women & Infants, Kent and Butler.
Like Lifespan, Care New England is going through a leadership transition: Dr. James Fanale was succeeded last week as president and CEO by Dr. Michael Wagner, an executive at Tufts Medicine in Boston.
In a statement just before he stepped down, Fanale emphasized that Care New England had managed to provide care and satisfy its bond requirements “in spite of dealing with the global COVID-19 pandemic for a third year in a row, which brought with it staffing shortages.”
Lifespan and Care New England are both trying to find their footing after the pandemic, though they faced financial pressures well before that. Attorney General Peter Neronha last winter rejected a proposed merger of the two organizations as monopolistic, leaving them to go it alone.
Roughly three out of every four patients who used a hospital in Rhode Island last year went to a Lifespan or Care New England facility.
While Care New England has been viewed as the financially weaker of the two hospital groups, its board of directors announced in July they had voted to remain independent rather than seek a new merger partner after the collapse of its proposed tie-up with Lifespan.
Brown University — whose medical school has close ties to both hospital groups — has been taking steps to help Care New England. The school paid $7 million in June to purchase four Jewelry District properties from the hospital group, and later announced it would contribute $5 million toward construction of a new birthing unit.
“I’ll be honest — it is unusual,” Brown President Christina Paxson said on WPRI 12’s Newsmakers last week. “In most places funds flow from the hospital to the university, not the other way around.”
“We know that Care New England has to behave really aggressively and strategically to regain financial health to survive as a standalone health care organization,” Paxson said. “And it’s important to Brown that that happens.”
In another bid to bolster revenue at Care New England, Lifespan in October gave its blessing for the rival group to build a new 30-bed women’s surgery unit at Women & Infants, which leases its land from Lifespan-owned Rhode Island Hospital and is subject to various restrictions on its activities under the terms of the agreement.
The two hospital groups disclosed even larger net losses, an amount that accounts not only for operating losses but also the yearly rise and fall in their investments. Lifespan reported a net loss of $188 million for the fiscal year, while Care New England reported a net loss of $87 million. Both had operated in the black the prior year.
Matt Sheaff, a spokesperson for Gov. Dan McKee, declined to respond directly when asked how the governor reacted to the hospitals’ financial losses. But Sheaff noted that they received $45 million of the state’s American Rescue Plan Act funds in the current budget, and that discussions about their funding levels in the next budget “are ongoing.”
Ted Nesi (email@example.com) is a Target 12 investigative reporter and 12 News politics/business editor. He co-hosts Newsmakers and writes Nesi’s Notes on Saturdays. Connect with him on Twitter and Facebook