IU Health cares for more patients, continues strategic investments amid economic challenges

INDIANAPOLIS – Indiana University Health posted higher operating revenue in the year ended Dec. 31, 2024; however, operating income decreased compared to the year before. While increased revenue was driven by more patients receiving care at IU Health, the organization reported a lower operating margin of 2.8% compared to 4.0% in 2023. (Financial details below.)

IU Health saw increased inpatient and outpatient surgeries and medical inpatient discharges in 2024 compared to 2023 and is now back to pre-COVID-19 pandemic levels. Salaries, wages, and benefits also increased. In addition to annual and market-based wage increases, the rise relates to growth in full-time equivalent (FTE) employees to support higher patient volumes. IU Health continued to make strategic investments to support its vision of making Indiana one of the healthiest states in the nation with the selection of a new electronic health record (EHR) platform and continued facility expansions to serve more patients across the state.

“Economic challenges including inflation continued to create financial pressures throughout 2024,” said Jenni Alvey, senior vice president and chief financial officer. “Despite the difficult circumstances, we have kept our commitment of reducing the cost of care and achieved our care affordability promise. While revenue growth is positive, we must continue our focus on reducing expenses and improving operational efficiencies to ensure that increased expenses do not surpass revenue growth.”

Revenue growth during the year was again limited by IU Health’s pledge to bring average commercial prices as a percentage of Medicare consistent with national averages by 2025, while still delivering nationally recognized care. Thanks to the care affordability plan, by the end of this year IU Health will have delivered more than $1 billion in savings to Hoosiers without compromising quality or access to care. Hundreds of thousands of patients have benefited from focused reductions in prices in radiology, lab work, specialty pharmacy and ambulance services and a price transparency program that offers comprehensive estimates, including out-of-pocket costs, for all medical procedures.

In 2024, IU Health announced significant strategic investments to drive improvement in core areas of the organization while also creating material efficiencies to offset the cost of rising inflation. In November 2024, IU Health implemented a new organizational structure with fewer layers and is working on job architecture to define clear career pathways. The new regional structure transitioned from six regions to four to improve patient care models and better align with future expansions. The transformation is part of a broader effort to drive continuous improvement benefiting Hoosier patients.

Similarly, IU Health sold its fully insured commercial group and Medicare Advantage products – IU Health Plans – to Elevance Health, Inc. IU Health expects to continue its work on population health through other risk arrangements and the team member health plan, and it can do so without the administrative burden of operating a health plan.

The beginning of 2025 also saw the launch of IU Health’s statewide medical group combining five separate medical groups into a unified one that can leverage the strength and scale of IU Health and the IU School of Medicine. Some key benefits include statewide access to clinical trial enrollment and biobanking, simplified processes and improved flexibility around employment, expanded clinical placements for students and residents and shared responsibility for the academic mission across the health system, while making it easier for patients to engage with IU Health.

“As an organization, we made decisions that set us on a course of improvement in areas core to who we are as a system – including our commitment to quality and talent which enable our success. From this work I expect enhanced employee engagement and retention with more connected and responsive leaders, employees empowered to use their talents optimally, and improved clarity and speed of decision making,” said Dennis Murphy, president and CEO. “Our focus this year and moving forward will be on growth, innovation, and making a positive impact on our communities.”

Though challenges persisted, high-quality patient care remained the top priority. IU Health continues its focus on achieving its quality and safety targets, continuing to decrease healthcare-acquired infections and reducing harm events by 49% since 2018. Ongoing work to improve its mortality index has led to all of IU Health’s regions performing in the top quartile, and among the very best in the nation, with more than 2,500 patients alive today because of these efforts.

Focus on innovation

IU Health continued deploying innovation funds in 2024 to drive enhanced care for patients through digital transformation and partnerships. After an extensive evaluation of EHR platforms, the IU Health Board of Directors approved Epic as the new EHR provider for the IU Health system. Full implementation across the organization is expected to occur over the next two and a half years, with an anticipated launch for patient and provider use in mid-2027. IU Health expects the integration of this platform across the system will help advance patient care, employee experience, organizational operations, research and communications. It will also create substantial efficiencies and automation which will improve patient experience and allow clinicians to practice at the top of their license.

Capital projects

Construction continued on the new downtown Indianapolis hospital and expanded medical campus that will consolidate two existing downtown adult hospitals and develop neighboring property holdings including a central utility plant and logistics/parking structure. Upon completion, the new hospital will save $50 million a year in operating costs by consolidating two, large, acute-care hospitals, eliminating duplication of many services.

To more holistically meet the needs of one of the state’s fastest growing communities, the significant expansion of IU Health’s hospital in Fishers continued, with completion slated for late 2025 and to be renamed Indiana University Health Fishers. Also, IU Health announced the next phase of its investment in the Fort Wayne community with the construction of a new hospital. The $421 million investment will expand access to affordable, high-quality healthcare in the region. IU Health expects to welcome its first patients at the 140 bed, Fort Wayne hospital in Q2 2027.

Investing in the community

IU Health reported its total community investment of $1.07 billion including financial assistance, research and financial contributions in the 2023 Community Benefit Report, published in November 2024. Community health investment is especially important in a state that ranks low in many health measures, including ranking near the bottom for public health spending. At the heart of IU Health’s mission is a desire to eliminate the social impediments to health in the communities we serve, recognizing that these factors play a pivotal role in the overall well-being of Hoosiers. With these investments, IU Health hopes to make a lasting impact and facilitate positive change that will resonate throughout our communities, ultimately fostering a healthier and more vibrant Indiana for everyone.

The Community Impact Investment (CII) Fund, created with $200 million to improve the health and well-being of all Hoosiers, awarded $6.1 million to 12 community organizations dedicated to improving the livelihoods of people across the state by addressing critical community health needs. These awards were made in support of various social needs including affordable housing, employment training, community development and mental health services. Since the fund’s inception in 2018, IU Health has awarded more than $38 million in CII Fund grants to dozens of organizations across Indiana. IU Health Foundation has also obtained an additional $3.6 million in donations to support the contributions from IU Health.

Also in 2024, IU Health joined business and community leaders in Indianapolis to announce the launch of Indy Health District, Inc., a non-profit organization focused on addressing key socioeconomic and health disparities within the 1,500-acre area that stretches from the north end of downtown Indianapolis to Crown Hill Cemetery, at the heart of which sits IU Health’s new downtown medical campus. As part of this effort, IU Health disbursed funds previously designated in 2019, for the purpose of creating improved health outcomes. Working with our grantmaking partner, we will seek to leverage this investment to improve the quality of life and overall health of those living in the Indy Heath District.

Financial results

Highlights for 2024 for IU Health’s 15-hospital system, which also includes surgery and urgent care centers, five physician networks and a health insurance company:

• Operating revenue, primarily related to volume, increased 6.7% over 2023 to $9.22 billion, driven by higher inpatient and outpatient surgeries and medical inpatient discharges in 2024 compared to a year ago. Operating expenses rose 8.0% to $8.97 billion, driven by growth in FTEs, supplies and drugs to support higher inpatient and outpatient volumes.
• Operating income decreased from $343 million in 2023 to $257 million in 2024, with a 2.8% operating margin.