Johnson Memorial Health Advocates to Raise Medicaid Reimbursement for Hospitals

Ever since the one-two punch of the COVID-19 pandemic and the impact of inflation, the cost of operations for Indiana hospitals has skyrocketed. At the same time, government reimbursements continue to leave shortfalls that fail to cover these rising costs, while insurance companies deny payments for care altogether – care that has already been provided to patients.

That makes it extremely difficult for hospitals like Johnson Memorial Health to continue offering the high standard of care that its patients expect.

“We’re being asked to do more with less. Until reimbursement improves, we’ve had to make some tough choices,” said Dr. David Dunkle, president and CEO of Johnson Memorial, in an interview with the Daily Journal.

In fact, as much as 70% of Johnson Memorial’s business comes from Medicaid and Medicare. But the reimbursement rates that have been in place in Indiana since 1991 have fallen short of covering the costs to care for its patients, Dunkle said. For every dollar for care, hospitals receive 57 cents for Medicaid and 82 cents for Medicare claims.

This situation is simply not sustainable.

“The good thing is our care remains excellent. We continue to provide top-quality care that puts the patient first in everything we do,” he said. “But as a family physician at heart, I worry that we’ll be able to provide the same number of services in the future.”

Unfortunately, the financial challenges faced by Johnson Memorial are not unique. Indiana’s hospitals function with a 0.9% operation margin, which is far below the average 2.3% margin for hospitals nationwide.

And yet, according to a 2023 report by Kaufman Hall, medical supply and drug costs rose higher than the national average in the Hoosier State.  

Another increase that hits Indiana hospitals especially hard is the Hospital Assessment Fee, which hospitals pay to fund Indiana Medicaid. The tax went up 9.5% in 2023 even though Indiana’s Medicaid reimbursement rates rank far below the national average.

According to the Kaufman Hall report, Indiana hospitals experienced a decline in income of $731 million. And that’s a big concern for all hospitals, whether urban or rural.

“The financial strain on hospitals is of great concern as expenses rise and government reimbursement covers far below the cost of care — especially in Indiana,” said Laura Kracher, vice president of public affairs and communications at the Indiana Hospital Association. “Our hospitals remain committed to providing quality care across the state, but we must ensure they have the resources they need to remain viable in their communities.”

Making the problem worse are the strategies of insurance companies that deny payments for care, which leaves hospitals to cover those costs.  

“A lot of people don’t understand that we provide the service and hope we get paid for it — that we’ve dotted every ‘i’ and crossed every ‘t',” Dunkle said. “This isn’t just at JMH; if you look across the country at the number of denials, the number continues to increase.”

What this means for hospitals like Johnson Memorial is that it is becoming increasingly more difficult to invest in the people and technology needed to ensure 24/7 access to the high-quality health care that patients deserve.

IHA will pursue legislation in the 2025 session of the Indiana General Assembly to update the Hospital Assessment Fee program to allow hospitals to leverage additional federal funding to raise Medicaid reimbursement for hospitals at no cost to the state. Importantly, the funding would follow the patient, meaning that hospitals would receive enhanced Medicaid funds based on their share of the patients the funding is intended to help. Quality metrics would also be tied to enhanced Medicaid reimbursement for the first time through this program.

The additional funding could bring Medicaid reimbursement up to around 80% of cost if passed in its original form. While it still would not cover the total cost of care, it would protect access to the critical services Hoosiers rely on.  

“This is an innovative, comprehensive proposal to modernize Medicaid, protect access, and increase quality, with no new state funds,” said Kracher.

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