“They are hemorrhaging cash,” Gary Young, director of Northeastern University’s Center for Health Policy and Healthcare Research, said of the two hospitals acquired by BMC, the former St. Elizabeth’s Medical Center in Brighton and the former Good Samaritan Medical Center in Brockton.

The bleeding comes at a time when BMC, like many hospitals, is grappling with rising costs and is likely to face cuts in Medicaid funding next year. Experts predict the cuts will have an outsized impact on safety-net hospitals like BMC, where roughly 40 percent of patients are on Medicaid, the government insurer for low-income and disabled people.

The state earmarked about $387 million over several years to help BMC acquire and upgrade the two former Steward hospitals, which were later renamed BMC Brighton and BMC South. But they are still proving a drag on the state’s largest safety-net health care system.

The red ink through March 31 recently prompted S&P Global Ratings to lower BMC’s bond rating, citing the hospital system’s “persistent trend of operating losses” largely “associated with the acquisition” of the two hospitals. That downgrade will likely make it more expensive for BMC to borrow money, if necessary. S&P deemed the system’s financial outlook negative.

The two former Steward hospitals are making millions of dollars in improvements, from replacing an old medical record system that struggled to bill for services to fixing broken elevators. Both hospitals are also working to rebuild their networks of patient referrals, which were broken up during the bankruptcy.

Compounding the situation for BMC are tensions with its unionized employees. Last month, the 475 nurses and other health professionals who belong to the Massachusetts Nurses Association at BMC South voted overwhelmingly to reject what the health system characterized as its “last, best, and final offer” in contract talks. The union has been talking about a possible strike.

Meanwhile, key provisions of President Trump’s One Big Beautiful Bill will take effect on Jan. 1, which could have major implications for BMC, as they will for other US hospitals. The legislation features a national work requirement for Medicaid recipients that the state estimates could cause an estimated 300,000 Massachusetts residents to lose their federal health insurance.

From left to right, President Trump spoke as Secretary of Health and Human Services Robert F. Kennedy Jr. and Dr. Mehmet Oz, the administrator for the Centers for Medicare & Medicaid Services, reacted during a roundtable at the White House in Washington, D.C., on Jan. 16.Chip Somodevilla/Getty

For BMC, such widespread loss of coverage would likely mean providing more uncompensated treatment.

In a statement on Thursday, BMC said it “stepped forward” to acquire St. Elizabeth’s and Good Samaritan with the help of the state two years ago to preserve vital patient care and keep two large employers in Boston and Brockton from going under.

“Unfortunately, the operational and financial realities were more significant than disclosed,” said BMC, which blamed Steward for “years of underinvestment” at the two hospitals.

Operating losses at BMC Brighton and BMC South accounted for $129 million of the $240 million in total losses that BMC had in fiscal 2025, which ended on Sept. 30, the statement said.

Despite operating losses, operating revenues for the first six months of fiscal 2026 rose by $93.4 million year over year, reflecting increased patient volume and an expansion of retail pharmacy services, according to BMC.

“We remain focused on maintaining high-quality care, rebuilding patient volume, supporting our workforce, and ensuring Boston Medical Center Health System can continue serving patients and communities across the Commonwealth long-term,” BMC said in its statement. “The challenges of achieving our mission in periods of significant financial pressure are not new to us.”

Still, state Senator William Brownsberger, a Belmont Democrat whose district includes BMC Brighton, said he’s concerned about the hospital system’s future and placed much of the blame on the private equity firm that had owned Steward.

“It’s clear that the private equity owners who were running BMC Brighton for a number of years did untold damage to the finances of the institution,” he said, referring to Cerberus Capital Management. “There’s an awful lot of good people working [at BMC Brighton] and a lot of good care provided, but it’s not strong financially.”

The Healey administration did not respond to requests for comment.

Young, of Northeastern University, said BMC’s problems are serious but not dire.

For one thing, he said, the health system has significant unrestricted reserves. (S&P said they totaled $1.6 billion and included enough cash to enable the system to operate for more than 64 days if revenue ceased.)

Young also said everyone recognizes the crucial role BMC plays in caring for patients in Massachusetts, particularly the most needy ones. The hospital — created in 1996 through a merger of Boston City Hospital and Boston University Medical Center — is both the principal teaching hospital for BU’s medical school and the largest safety-net hospital in New England, with about three-quarters of patients considered low-income. The patient population also reflects the racial and ethnic diversity of Boston and the surrounding communities, and includes a number of recent immigrants and refugees.

“They’re too essential to fail,” Young said of BMC’s hospitals.

Among the major challenges BMC faces in the near term is resolving its contract dispute with the union that represents nurses at BMC South. A BMC spokesperson said the hospital system has offered the Massachusetts Nurses Association chapter in Brockton a contract that includes a 7 percent wage increase over three years.

However, the union says nurses at BMC South would receive wages more than $10 an hour less than what the hospital system has offered MNA members at BMC Brighton. A tentative agreement with nurses at BMC Brighton is scheduled for a vote this month.

Joe-Ann Fergus, executive director of the union, said MNA members “understand the current challenges faced by BMC.” Nevertheless, Fergus said, BMC South had historically been among the five most financially successful hospitals in the state, “and we are prepared to partner with them to help make that a reality again.”

In its statement, BMC said it won’t budge in the dispute with the union.

“The final offer that we have put forth is responsible, reflects the financial realities facing the hospitals and broader healthcare industry, and the financial terms of that offer will not change,” BMC said.

Jonathan Saltzman can be reached at jonathan.saltzman@globe.com.