Indiana Hospitals Urge Meaningful Medicaid Relief in State Budget (HB 1001)

April 21, 2023 (INDIANAPOLIS) — Indiana hospitals are calling on lawmakers to provide Medicaid relief in the state budget bill, HB 1001. This comes as policymakers in neighboring states like Kentucky and Illinois are advancing policies to address their hospitals’ Medicaid shortfalls. Indiana hospitals have experienced their most difficult financial year since the beginning of the pandemic last year, according to a February analysis by Kaufman Hall.  

A new report by the American Hospital Association (AHA) details the extraordinary financial pressures continuing to impact hospitals nationwide. The report found that hospitals across the U.S. saw double-digit increases in 2022 compared to pre-pandemic levels, including for workforce, drugs, medical supplies, equipment, and other essential operational services. These factors led to the most financially challenging year for hospitals since the beginning of the COVID-19 pandemic, leaving over half of hospitals in the nation operating at a financial loss at the end of 2022, and with negative operating margins continuing into 2023.  

“Urban and rural safety net hospitals throughout Indiana are at their breaking point. Rising expenses for labor, drugs, and medical supplies coupled with sicker patients, longer hospital stays, and low Medicaid reimbursement rates that cover only 57% of the cost of care have created an unprecedented financial strain on hospitals,” said Indiana Hospital Association (IHA) President Brian Tabor. “Lawmakers have prioritized lowering health care costs for consumers and businesses, but this requires addressing the costs that are shifted to private insurance because of insufficient state Medicaid payments. There is an urgent need to address this in the state budget, HB 1001.”

Indiana hospitals operated on a -2% median operating margin last year, declining 22% compared to pre-pandemic levels. The median hospital operating margin for the state of Indiana was at or below the national median each year, the report found. As a result, Indiana hospitals saw significant declines in days cash on hand—a key measure of cash reserves. In 2022 alone, Indiana hospitals experienced a nearly 20% median decline in their number of days cash on hand compared to 2021.

“Despite these challenges, Indiana hospitals remain committed to reducing health care costs in a sustainable manner,” said Tabor. “This cannot be achieved without addressing Indiana’s low base Medicaid payments for hospitals, which have not been raised in over 30 years.”

According to Tabor, Indiana hospitals face a $1.2 billion Medicaid shortfall just to achieve parity with federal Medicare rates, which would still cover less than the actual cost of serving patients.

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