Indiana University Health is the latest system to attribute a dismal 2022 financial performance to rising costs and investment-related losses.
Indianapolis-based IU Health on Friday reported a $715.11 million loss in 2022, compared with a $861.51 million gain a year earlier. The nonprofit system’s annual loss included $698.16 million lost due to poor performance in the financial markets.
Annual operating revenue grew 2.8% to $8.09 billion, including a 4.6% bump in patient service revenue with volume increases in surgeries, emergency department visits and radiological procedures. Hospital admissions fell slightly. Expenses for 2022 increased 3.3% to $7.97 billion, driven by labor, drug and supply costs.
IU Health will seek to overcome the economic headwinds by limiting capital spending, optimizing resources and implementing operational efficiencies, the hospital said in a news release.
As Indiana’s largest healthcare system, IU Health operates 16 hospitals and more than 300 physician offices, surgical centers and other care facilities.
IU Health also noted its ongoing price-reduction plan was having a negative impact on revenue. In late 2021, IU Health announced it would take measures to bring its average commercial prices as a percentage of Medicare in line with the national average by 2025 — a move expected to cost the system more than $1 billion in revenue. IU Health previously came under fire for the higher prices it charged commercial customers.
In 2020, commercial prices were 280% of Medicare prices, falling to 269% in 2021. Prices were at 265% as of the first nine months of 2022, the latest available data.
A spokesperson said IU Health recorded $120 million in reduced revenue in 2021 as a result of the price-reduction plan. That equates to 1.5% of the system’s total operating revenue that year. The spokesperson did not provide a number for 2022.
“IU Health has recognized and accepted its responsibility to help address cost of healthcare in Indiana. We acknowledge that hospital prices for commercial customers in our state are higher than the national average, and we are the only health system to date that has not only committed publicly to reducing them but which has actually taken concrete steps to do so,” the system said in a statement last year.
The system has so far reached a 45% average price reduction in radiology services, a 30% reduction in specialty pharmacy and a nearly 24% reduction in ambulance services. IU Health said almost all laboratory services are at Medicare prices or lower. The system is planning similar price adjustments in 2023.