IU Health suffers first-quarter operating loss

Winter pandemic pressures ease while expenses continue to rise

INDIANAPOLIS — Indiana University Health posted a first-quarter operating loss of $29.8 million as expenses tied to the COVID-19 pandemic outpaced gains in operating income. Pandemic pressures from the latest surge eased during the quarter, with fewer COVID-19 patient admissions, but staffing issues remained a concern.

The response to the global pandemic continued to require significant healthcare resources and heightened precautions. Expenses in the quarter rose 16% over the year-ago period, led by a jump in salaries, wages and benefits for frontline clinical staff. The increase resulted from nursing premium pay initiatives, utilizing more contract and temporary labor, higher starting wages, and base pay increases. Operating revenue in the quarter rose 3% to $1.925 billion as IU Health treated higher-acuity patients due to delayed preventative care during the pandemic. IU Health saw increases in hospital admissions, radiological exams and emergency room visits while experiencing a decrease in surgery cases, as compared to the year-ago period. As the viral outbreak eased in Indiana, IU Health began rescheduling thousands of non-emergent surgeries that had been postponed through February due to COVID-19.

“We continue to work through the labor shortage by investing in our workforce, particularly patient-facing roles, to ensure we can meet patient demand,” said Jenni Alvey, senior vice president and chief financial officer of IU Health. “Additional workforce investments are expected throughout 2022. These investments are made in order to provide the best possible clinical care and to improve the health and wellbeing of Indiana. The challenges from the pandemic again show the critical need for hospital systems to maintain a strong financial position to be able to manage unforeseen operating challenges and continue serving the patients who depend on us.”

The health system needed to rely on its balance sheet to manage through first-quarter losses, even as negative effects of rising interest rates on equities and bonds caused its investment portfolio to sustain losses of nearly $300 million in the quarter. IU Health remains committed, even in the face of first-quarter losses, to its price affordability plan to bring commercial prices to national parity by January 2025. The plan, which began last year, includes reducing prices for commonly used services and will save patients and payers more than $1 billion after inflation from 2021 to 2025.