Against the backdrop of legislation that aims to curb health care costs, Indiana’s hospitals report that a combination of pandemic-related factors have strained their finances to the point where some are considering cutting services and others fear that they may have to close altogether.
The state’s hospitals faced record-high expenses last year largely because of a steep increase in labor costs at the same time as they weathered losses in operating income, according to an analysis by the consulting firm Kaufman Hall for the Indiana Hospital Association. Overall, Indiana’s hospitals didn't bring in as much money as they spent in 2022.
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While legislators mull passing laws that would penalize hospitals that do not lower their fees, many hospital leaders say they’re struggling.
“What we don’t need are new policies that would be punitive or harmful,” said Brian Tabor, Indiana Hospital Association president. “This is a difficult environment for all health care systems. … There is a lot of pain across the board.”
Advocates for cutting Indiana’s health care costs cite numerous studies that have found that hospital prices in this state are among the highest in the nation. This data has prompted a movement to bring down the price of care.
Hospital leaders say the legislature should consider increasing Medicaid reimbursem*nt rates, static for more then three decades. Typically Medicaid pays a little over half of the cost of care and about 2 million Hoosiers now rely on the program for insurance, Tabor said.
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High expenses combined with a shifting payer mix led Beacon Health System, which runs Memorial Hospital in South Bend and other facilities in northern Indiana, to see its first-ever loss in 2022, said Kreg Gruber, CEO. He attributed some of the $14 million loss to the decision to bump nurses’ salaries to increase retention and reduce reliance on more costly travel nurses.
At the same time, the hospital's payer mix shifted. While Medicare and Medicaid patients have nearly reached pre-pandemic levels, the hospital has not seen patients with commercial insurance return at the same rate, leading to a dramatic dip in revenue, Gruber said.
Some hospitals may face closure. Woodlawn Hospital, a 25-bed facility in Rochester, is likely one of the seven Indiana hospitals the Center for Healthcare Quality and Payment Reform has deemed at greatest risk of closing, said its CEO, Alan Fisher.
In 2021 the hospital saw an operational loss of $4.5 million. Last year that loss increased to $6.3 million. This year, said Fisher, the hospital hopes to lose “only” $1.5 million, placing the hospital in “a dire situation.”
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If the hospital manages to stay open, it may discontinue obstetric services, Fisher said, leading to an even larger maternity desert in the area. The unit loses nearly $2 million annually as more than 60% of babies at Woodlawn are born to mothers on Medicaid.
Cyber attacks can take a toll on health care
Cyber attacks, which are becoming more common for hospitals, can also take a toll. In early 2022, as the latest COVID-19 wave waned, Norton Healthcare King’s Daughters’ Health CEO Carol Dozier was hoping the hospital would be able to recover. Then, the hospital was hit with a cyber attack.
During the attack, the hospital saw people forfeit care, wary of going to the hospital. The hospital had to spend time and money bringing its electronic health record back online. Some services had to be postponed as the attack affected equipment.
And, for months the hospital could not bill for services, which led to many battles with insurers, who typically only pay if they receive a claim within 90 days. Then, the hospital upgraded its cybersecurity, another costly undertaking. The hospital finished the year significantly in the red.
“I would say it’s impacted everything,” said Dozier, board chair of the Indiana Hospital Association. “We are still recovering.”
Methodist Hospitals in Northwest Indiana did not face a cyber attack. Nor did it see a shift in its payer mix, which was largely Medicaid both before the pandemic and today, said Lauren Trumbo, the system’s CFO.
But the omicron wave at the start of last year filled the system’s ICU, created staffing challenges and led to the suspension of elective surgeries, further hurting the hospital’s finances, she said.
Last year the hospital had an additional $75 million in expenses over 2019 and saw an operating margin loss of 4.6%, Trumbo said.
“This is unsustainable to continue, and we do have concerns with 2023,” Trumbo said.
Contact Indystar reporter Shari Rudavsky at shari.rudavsky@indystar.com
