IU Health operating income pressured by rapidly rising expenses
October 27, 2022
INDIANAPOLIS – Indiana University Health posted lower operating income for the third-quarter and nine-month periods versus last year, as it faced higher expenses due to increased investments in patient care and its workforce.
Income from operations fell to $65 million in the third quarter and to $56.5 million for the nine months, compared to $88.7 million and $503 million for the respective periods last year. Operating revenue grew to $2.04 billion in the latest quarter and $5.95 billion over the nine months, up 5.2% and 3.5% from the year-ago periods.
Similar to other healthcare organizations, IU Health operations experienced rising costs for labor in a period of high inflation. Despite the pressure, the system has initiated a multi–year strategy and affordability plan that essentially hold year-over-year pricing flat when considering all payers and services to reduce the cost of care for Hoosiers. Operating expenses rose 12.4%, to $5.89 billion, in the first nine months of the year from last year, driven by a 21% jump in salaries, wages and benefits. Investments in labor were necessary due to labor shortages and growing patient demand.
“Although hospitals face intense financial and operational challenges, IU Health remains committed to its pledge to bring its commercial prices to the national average by 2025, while continuing to make significant investments in major new hospital projects and delivering nationally recognized care,” said Jenni Alvey, senior vice president and chief financial officer. “High healthcare costs are a major national concern and IU Health is committed to doing its part by delivering more than $1 billion in savings to Hoosiers from 2021 to 2025.”
IU Health’s 16-hospital system saw high utilization, with surgery cases up 5%, ER visits up 5.5% and radiological exams up 3% over the nine-month comparable period. As the only academic health center in the state, IU Health has served as a safety net as other healthcare providers have struggled financially.
When including the performance of its investment portfolio and other nonoperating items, IU Health reported a total loss for the nine months of $1.08 billion, largely due to declines in the global financial markets. This represents a $2.03 billion swing from the $947 million in income from the prior year.
Despite the year’s fiscal challenges, IU Health continues to invest in planned capital projects, the communities it serves, and healthcare innovation. IU Health’s notable capital investments, which aim to modernize facilities and maintain a high level of care for patients, include the consolidation of its two Indianapolis adult acute care hospitals and an expansion of IU Health Saxony Hospital in Fishers.
IU Health is a national leader in community health initiatives. It recently doubled the size of its Community Impact Investment Fund, to $200 million, to provide more grants to Indiana communities to address social issues that worsen health outcomes and the cost of care for Hoosiers. With the additional resources, the fund will expand its annual grant-giving to community partners across the state to support place-based initiatives, educational attainment, and workforce development.
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