A commentary published last week included inappropriate and incorrect observations about some of Indiana’s finest health care institutions. Given the current debates in the General Assembly, it is vital that the record be corrected.
Ball State University Economist Michael Hicks has little experience in healthcare economics or the real world of this sector. For starters, he likes to reference IRS data as opposed to independent CPA-prepared financial reports. Credible financial professional don’t rely on the Federal Form 990 for financial operating results because this is not the purpose of the form. Form 990 is an IRS income tax form., while audited financial statements display true financial results.
Hicks’ commentary published last week states that 2020 is the most current year financial data is available. But after a quick review of the Indiana Department of Health’s online database, the 2022 audited financial statements for Ascension (parent organization to St. Vincent) and IU Health are readily available. These financial statements were prepared and presented by an internationally respected CPA firm with extensive expertise in this area.
Using the most current data available, we get a much different picture. For 2022, IU Health’s expenses over revenue showed a net loss of -$715 million on operating revenue of $8.0 billion or a margin loss percentage of -8.81%. This is in sharp contrast to the 24% gain reported by Hicks, a material difference of 33%.
Ascension Indiana had revenues over expenses of $192 million on operating revenue of $3.7 billion or a margin percentage of 5.2%, which is obviously well below Hicks’ profit number of 41%.
To say that any health system has a 41% margin, especially in our current environment, is ridiculous.
Legislators, policymakers, and the general public all need to understand the real numbers as reported by independent experts, not by someone who is trying to influence public policy to have a material, adverse impact on the state of Indiana. Indiana’s not-for-profit hospitals are not perfect, but IU Health and Ascension provide major benefits to citizens and communities across the State of Indiana.
Charity care and more
Both IU Health and Ascension provide well in excess of $100 million annually in charity care and are actively involved in numerous community organizations. They are committed to bringing world-class treatment to Indiana so that Hoosiers don’t have to travel far from home to receive their healthcare.
Instead of taxing hospitals as proposed by Hicks’ commentary, we should address the impact of the two dominant insurers that control roughly 75% of Indiana’s healthcare market. Hicks suggests it is inappropriate for hospitals to come together to provide better, more robust services, but apparently it’s fine for health insurance companies to operate in this manner. Those duopoly insurance companies have denied annual inflation increases to physician fee schedules for more than a decade, but when the physician becomes employed by a hospital (so they can get an annual inflation update) it is now harmful to the public in his opinion?
Studies have shown that Indiana hospitals are paid at Medicaid rates significantly below their costs of providing care to every Hoosier who walks through their doors. Indiana hospitals’ Medicare rates are also well below costs, and they are also below the Medicare rates paid in comparable states. The RAND reports often used to attack Indiana hospitals demonstrate this. If Medicare and Medicaid pay less than cost, Indiana hospitals have two choices: shift costs to others or close.
Hicks fails to address any of the federal payment impacts or insurance duopoly consequences. Instead, he wants to tax the not-for-profit hospitals and add additional stress to an already over-burdened system.
Before we make serious changes in the current payment system or tax charitable organizations, it is critical state leaders understand all aspects of our current environment.
There is a bright spot I see out there. Historically, Indiana has been on the low end of per capita public health care spending. However, the state is now serious about improving public health funding.
This is fabulous and long overdue. It will greatly assist in improving the health outcomes and should reduce hospital stays. This is an outstanding plan to reduce health care costs without punishing those who are providing the care.
EDMUND ABEL
Mr. Abel is a retired Director-in-Charge of Healthcare Services for Blue & Co., LLC. Included in over 40 years of exclusive service to the healthcare industry are three years as the Director of Finance at Methodist Hospital of Indianapolis (now IU Health), the largest hospital in Indiana. He has served on several boards and committees at the state and federal level, staying abreast of current developments impacting healthcare providers.
