IU Health operating income improves, with continued investments in team members and communities.

INDIANAPOLIS – Indiana University Health posted improved operating revenue and income in the year ended Dec. 31, 2023 compared to a year ago. With the rebounding financial markets that favorably impacted IU Health’s investment portfolio and a focus on containing expenses and growing revenue, IU Health reported a net gain compared to a loss in 2022. (Financial details below.)

After three years of the global COVID-19 pandemic, in April 2023, President Joe Biden signed a bipartisan congressional resolution to end the Public Health Emergency (PHE), a major pivot from the year prior when IU Health was forced to suspend non-urgent surgeries and procedures due to the surge of COVID-19 patients early in 2022. While inpatient medical and surgical volumes did not return to pre-pandemic levels, IU Health saw strong outpatient growth in 2023.

Salaries, wages, and benefits were comparable to the year ended December 31, 2022. Annual and market-based wage increases, as well as benefit program enhancements for 2023, were partially offset by declines in clinical premium pay programs. As part of its annual market analysis, IU Health adjusted pay for nursing roles and other critical clinical positions, ensuring competitive wages to recruit and retain the best talent to care for patients. IU Health continues to invest heavily in its workforce of 38,000 team members as staffing shortages persist, which includes $85 million of incremental investments to address current workforce challenges and ensures sustainability in delivering care to Hoosiers.

“While overall financial performance improved in 2023 compared to the year prior, strong investment performance helped boost IU Health’s bottom line,” said Jenni Alvey, senior vice president and chief financial officer. “Increased volumes and growth in year over year operating income is promising, but we must continue our disciplined fiscal stewardship and commitment to reducing the cost of care to achieve our care affordability promise while still delivering high quality care.”

Revenue growth during the year also was limited by IU Health’s pledge, unique among Indiana hospital systems, 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 pricing plan, hundreds of thousands of patients have benefited from focused reductions in prices in radiology, lab work, specialty pharmacy and ambulance services. Total savings for patients and employers from the pricing plan are expected to exceed $1 billion by 2025. IU Health also assists patients with a price transparency program that offers comprehensive estimates, including out-of-pocket costs, for all medical procedures. The popular service provides over 150,000 estimates a year.

“Three years into our commitment to bring our commercial hospital prices to the national average by 2025, our plan remains on track and has provided hundreds of millions of dollars in cost savings to Indiana employers. We have achieved significant price reductions in services used most frequently by our patients,” said Dennis Murphy, president and CEO. “Nevertheless, we still have work to do. We must navigate a careful and delicate balance between our care affordability plan and the rapidly changing dynamics of our environment.”

Though challenges persisted, high-quality patient care remained the top priority. A major milestone was met when 100% of IU Health hospitals, the nurses working in them, and the nursing care provided across the system, achieved national recognition for excellence (Pathways or Magnet designations). In addition, IU Health met its quality and safety targets in 2023, continuing to decrease healthcare-acquired infections and reducing harm events by 48% since 2018.

Focus on innovation

IU Health continued deploying innovation funds in 2023 to drive enhanced care for patients through digital transformation and partnerships. Last year saw the rollout of Artificial Intelligence (AI) to enhance therapeutics, including computer vision tools to help surgeons evaluate and document surgeries. The IU Health Board of Directors recently indicated broad support for the system’s long-range Information Services plan to support the goals of the organization, which will help IU Health to prioritize investments in new technologies to enhance our clinical capabilities, develop new care models, become more efficient, and increase patients’ ability to engage and interact with the system digitally.

An innovative health screening program in barbershops launched in Indianapolis was immediately successful in identifying and treating people with high blood pressure. It is part of a growing effort by IU Health to help historically underserved patient populations with high social needs and connect them with the appropriate resources to meet their needs.

Investing in the community

IU Health is a leader amongst its peers in community benefit as percentage of expenses (15.7%). In addition, the 2022 Community Benefit Report published in November 2023 reported IU Health’s total community investment of $1.17 billion including financial assistance, research and financial contributions. Community health investment is especially important in a state that ranks low in many health measures. 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.

IU Health has expanded access to behavioral health and social work resources in its primary care clinics, introduced the BIPOC (Black, Indigenous, People of Color) Doula program to support qualifying expectant mothers from historically underrepresented communities, and is collaborating with Cradle Indy, a place-based partnership intended to reduce infant mortality in Marion County.

The Community Impact Investment Fund, created with $200 million to improve the health and well-being of all Hoosiers, awarded $9.63 million to 14 community organizations dedicated to addressing critical community health needs around the state. These awards were made in support of various social needs including childhood development, transportation access, reliable housing, workforce development, food security and behavioral health.

Capital projects

Construction picked up on the new downtown Indianapolis hospital that represents the largest investment in healthcare in Indiana with planned total expenditures of $2.31 billion for the construction of an expanded medical campus that will consolidate two existing downtown adult hospitals, and $1.98 billion for additional investments to the downtown Indianapolis campus and its neighboring property holdings. It will create a premier academic health center and downtown health district that will be a magnet for healthcare investment and the recruitment of leading skilled professionals. 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. In addition, groundbreaking occurred on two critical support buildings for the hospital: a central utility plant and a logistics/parking structure.

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 2025 and to be renamed Indiana University Health Fishers. Also, IU Health opened a primary and specialized care medical office building in Fort Wayne, continuing a broad expansion into the second-largest Indiana market. A shared services pharmacy opened at the Integrated Service Center in Plainfield in July after years of planning and build-out. The first-of-its-kind pharmacy in Indiana provides centralized pharmacy services for the statewide system that will significantly speed up deliveries of medicines to patients, along with operating efficiencies that will enable the facility to be paid off over about five years.

Financial results

Highlights for 2023 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, grew 6.9% over 2022 to $8.64 billion, driven by higher inpatient and outpatient surgeries and medical inpatient discharges in 2023 compared to a year ago. Operating expenses rose 4.2% to $8.30 billion, driven by rising labor, supply and drug costs.
• Operating income increased from $121 million in 2022 to $343 million in 2023, with a 4% operating margin.
• Total earnings (revenue over expenses), including $931 million in investment gains, increased to $1.13 billion, from a year-earlier loss of $715 million.