Indiana hospitals are facing worsening financials, IHA says
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Indiana hospitals are facing worsening financials, IHA says The Indiana Hospital Association wants state and federal lawmakers to modernize the Medicaid reimbursement rate and take other measures to support financial stability.
Acute Care By Susan Morse , Executive Editor | January 28, 2026 | 10:57 AM Hospital ER in Bloomington, Indiana Photo: Jeremy Hogan/Getty Images Indiana hospitals are facing a worsening financial outlook that threatens access to essential health services across the state, according to a new analysis prepared by Kaufman Hall for the Indiana Hospital Association. Rural hospitals are particularly affected.The report reveals that Indiana hospitals operated on a median operating margin of 1.9% in 2025, below the national median of 2.6%. Operating income fell 5.5% year-over-year, representing nearly $50 million, the IHA said.Kaufman Hall modeling shows a high probability of $1 billion in annual losses for Indiana hospitals over the next three to five years."These findings make clear that Indiana hospitals are approaching a breaking point," said Scott B. Tittle, president of the Indiana Hospital Association. "With the eighth-lowest Medicaid reimbursement rates in the nation and rapidly rising costs, hospitals simply do not have the tools they need to continue providing the level of care Hoosiers deserve. Without meaningful policy changes, more hospitals – particularly in rural communities – will be forced to scale back or eliminate essential services."WHY THIS MATTERSThe Kaufman Hall analysis showed expenses increased by 4.7% for Indiana hospitals in 2025, outpacing revenue growth of 4%. Labor expenses rose by 4.2%, even after hospitals reduced reliance on more expensive contract labor by nearly 50%. Nonlabor expenses, including medical supplies and purchased services, also grew.Indiana emergency department visits grew 16.8% in 2025, exceeding the national average of 1.4%, according to the report. "We were the busiest we have ever been last year – and we still ended up with a negative margin," Michael Schroyer, president of Baptist Health Floyd, said in a statement. "That is not sustainable. Hospitals cannot continue absorbing these losses year-after-year. Legislative reform is urgently needed to ensure we can continue meeting the needs of our patients and our communities."Under the most likely scenarios, Indiana hospital operating margins are projected to fall to minus 3%.The IHA wants state and federal intervention to modernize Medicaid reimbursement rates; reduce insurer-imposed delays and denials; and support financial stability, particularly for hospitals in rural areas.THE LARGER TRENDEarlier this year, Greene County General Hospital shut down its obstetrics department due to chronically inadequate reimbursement, the IHA said."We could no longer sustain the OB unit because Medicaid and commercial insurance pay so far below the actual cost of care," said Brenda Reetz, CEO of Greene County General Hospital.Urban safety net hospitals face Medicaid underpayment and shifts in the payer mix."At Methodist Hospitals, Medicare and Medicaid make up 80% of our payer mix, and the reimbursement simply does not match the cost of providing care," said Matt Doyle, president and CEO of Methodist Hospitals. ON THE RECORD"Indiana hospitals have demonstrated remarkable resilience, but resilience alone cannot fix a fundamentally unsustainable financial environment," Tittle said. “We stand ready to work with our state and federal policy makers on solutions that will protect access to care for all Hoosiers.” Email the writer: [email protected] Topic: Accounting & Financial Management, Acute Care, Ambulatory Care, Medicare & Medicaid, Operations, Policy and Legislation