Care New England cuts leadership jobs amid forecasted FY26 budget deficit

Care New England is cutting more than 30 leadership and nonclinical positions to help close an estimated $20 million budget gap for fiscal 2026, the health system announced on Tuesday.

The layoffs come as hospitals nationwide, including in Rhode Island, face shrinking margins amid federal Medicaid funding and policy overhauls. Uncompetitive state reimbursement rates compared with neighboring states have also made it difficult to attract and retain staff, Dr. Michael Wagner, CEO and president, said.

“Current financial conditions have made additional cost-saving measures unavoidable, but decisions like these that affect our workforce are especially difficult because they impact valued employees, colleagues, and the patients and communities we serve,” Wagner said in a statement. “However, the financial realities facing healthcare providers in Rhode Island require immediate action to preserve essential services and maintain long-term stability for a system uniquely committed to caring for even the most vulnerable Rhode Islanders.” 

Wagner did not elaborate on which positions are being cut, or any potential service impacts. A company spokesperson did not immediately respond to requests for additional details on Wednesday.

Care New England spent more than $10.8 million on salaries and other direct compensation for its 35 top executives in fiscal 2024, the most recent federal tax information available. That included $1.7 million in direct compensation for Wagner and $1.3 million for its former leader, Dr. James Fanale, who stepped down at the end of 2022. 

As the second-largest hospital operator in Rhode Island, Care New England employs more than 8,000 people across Butler, Kent and Women & Infants hospitals and associated provider groups.

Cost pressures have dragged down its balance sheet for years, most acutely during the pandemic when elective surgeries were suspended. An attempt to rejuvenate its struggling system through a merger with its major competitor, then known as Lifespan Corp., was rejected by state and federal regulators in 2022 under anti-trust provisions.

Lifespan later went on to forge a partnership with Brown University, changing its name to Brown University Health, with a $150 million, seven-year cash infusion from the academic and research partner. But Brown Health has dipped back into the red in recent months too, with executives citing underperformance at the two Massachusetts hospitals it bought in 2024. The health care system posted an $18.9 million operating loss for the second quarter of fiscal 2026, which ended March 31. 

Brown Health revealed during a post-earnings call on May 21 with reporters that it was consolidating leadership of its Massachusetts hospitals, St. Anne’s and Morton, as part of cost-cutting measures. No additional layoffs were announced at the time, though Peter Markell, executive vice president and chief financial officer, said future cuts were not off the table. 

However, its commitment to preserving the Newport Hospital birthing center hinges upon $4.9 million in annual, additional funding from the state and philanthropy.

Brown Health also forecasted a $100 to $200 million annual operating loss from federal policy changes under the One Big Beautiful Bill Act.

The most recent quarterly financial statements for Care New England were not immediately available. However, Care New England also ended the last fiscal year at a loss, closing its fiscal 2025 which ended Sept. 30 at a $10.8 million deficit, according to news reports. 

Wagner said the company is “aggressively pursuing margin improvement initiatives” to offset its projected fiscal 2026 deficit. Details on these measures were not immediately available. 

Hospital executives and advocates across Rhode Island have decried the financial and care consequences of the One Big Beautiful Bill Act which will simultaneously restrict eligibility to Medicaid, leading to a rise in uncompensated care, and cap several key sources of state pass-thru funding to hospitals and healthcare providers.

Wagner used the layoff news as a call for action — and money — from state lawmakers, a priority shared by other hospital leaders and the Hospital Association of Rhode Island. The group has asked for another $70 million in state Medicaid funding in the fiscal 2027 budget, which when combined with federal matching funds would make nearly $200 million available for hospitals and healthcare providers.

“With Rhode Island facing a healthcare crisis, this investment represents an opportunity to protect patient access, preserve healthcare jobs, and strengthen hospitals and providers across the state,” Wagner said in a statement. “Without meaningful action, Rhode Island risks continued erosion of healthcare access, longer emergency room wait times, reduced services, and additional job losses throughout the healthcare sector. We urge state leaders to prioritize investments that strengthen healthcare and protect access to care for all Rhode Islanders.”

Gov. Dan McKee’s fiscal 2027 budget proposal already includes $441 million for hospitals, of which $147 million would come from state revenue. The breakdown of money to each hospital has not been determined, but is set by federal formulas based on the mix of Medicaid, Medicare and commercial patients.   

McKee did not immediately respond to requests for comment on the additional hospital funding. Spokespeople for House Speaker Christopher Blazejewski and Senate President Valarie Lawson remained noncommittal, noting that all budget requests must go through the standard legislative review process in an emailed response.