Indiana University Health, the large academic hospital system that controls large portions of the Hoosier state, grew its top line in 2015 thanks in large part to the state's conservative Medicaid expansion.
Higher volumes of outpatient surgeries and physician office visits also contributed to IU Health's booming revenue base. The number of outpatient surgeries at IU Health sites increased nearly 14% in 2015.
Republican Gov. Mike Pence made a deal with the federal government last year, agreeing to the Affordable Care Act's provision to expand Medicaid eligibility to people who earn up to 138% of the federal poverty level. Pence's plan, called the Healthy Indiana Plan, offers different levels of medical and dental coverage, and it also requires some beneficiaries to make monthly payments into health savings accounts.
Hospitals in the state cheered the plan, saying that thousands of people would gain health coverage while hospitals would benefit from an influx of new, mostly federally funded revenue. The inaugural year of the Medicaid expansion plan led to a 19% decrease in Indianapolis-based IU Health's bad debt in 2015, according to IU Health's financial statements. The system's total revenue jumped 6.5% to $6.1 billion.
While Medicaid expansion and surgical volumes drove a lot of IU Health's growth in 2015, the system's burgeoning insurance division, IU Health Plans, became a larger force, financial documents show. Premium revenue at IU Health Plans surged 52%, and about one-third of the health system's entire annual increase in revenue stemmed from higher premium revenue. IU Health has about 16,400 Medicare Advantage members, a 38% jump from March 2015.
IU Health's operating margin declined slightly year over year, from 13.9% in 2014 to 12.8% in 2015. However, that margin still ranks well above average among not-for-profit health systems.
Officials attributed the slight decrease to how it recorded the state's Medicaid provider fee, not to any change in day-to-day operations, and also assured bondholders the system was adapting to an environment that likely involves tighter revenue growth.
“As the healthcare landscape continues to change, management has taken many steps to ensure (IU Health) can continue to provide a top level of care to patients into the future in anticipation of further reductions to reimbursement,” executives wrote in an accompanying financial document.
Some of those steps have included scaling back inpatient operations. IU Health recently sold majority ownership of two hospitals to for-profit hospital chain Community Health Systems. The academic system also plans to open urgent-care clinics. Inpatient admissions at IU Health facilities fell 4.3% last year, while emergency room visits soared 8.7%.
IU Health ended 2015 with almost 28,700 full-time-equivalent employees, a 4% hiring boost from 2014 and a much different tone from when the system initiated mass layoffs in 2013. Hospitals hired employees in droves last year, in part to help treat the growing insured population.