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Holdman: An update on the status of Indiana's "not-for-profit" hospital financial reserves

Submitted for use on: Jan. 3, 2024
Word Count: 617

Contact: Paige Gehlhausen

An update on the status of Indiana's "not-for-profit"
hospital financial reserves

By State Sen. Travis Holdman (R-Markle)

By now, it's well known to many that Indiana has some of the highest health care costs in the country. We got another reminder of that unfortunate reality in December when the Indiana Chamber of Commerce released a new report showing our state has the second-highest health insurance premiums of all 50 states.

My colleagues and I in the General Assembly have been working for a few years now to get our hands around this problem, and the more we dig, the more supposed explanations we uncover. A lack of price transparency, monopolization, outdated payment models, Hoosiers' poor health, and alleged inadequate government funding have all been suggested as explanations for Indiana's high costs.

No doubt this is a complex issue. But we shouldn't let complexity cause us to miss certain obvious factors that are staring us in the face. The billions of dollars in the coffers of our largest not-for-profit hospitals are one of those obvious factors.

According to the latest audited financial statements filed with the Indiana Department of Health, each of the five largest not-for-profit hospital systems in Indiana has over $2 billion dollars in unrestricted net assets. To put this into perspective, they are all sitting on enough assets to run their operations without any new revenue for at least two-thirds of a year.

I am concerned these hospitals use their massive reserve accounts as investment arms, keeping money in the stock market and other investment ventures, rather than lowering costs for patients and supporting their local communities.

All five of these hospital systems enjoy tax-exempt status because they are supposed to operate as not-for-profits with a charitable mission. If so much money from Hoosiers is entering their coffers, only to wind up in a Wall Street investment fund, where is the charity in that?

The hospitals would push back that their net assets declined in 2022. But they find themselves in a situation where their asset balances are so large, even losses that sound drastic to an average person leave them with billions still remaining.

For example, IU Health's net assets declined $682 million in 2022. But they still ended the year with $9.6 billion.

IU Health's financial statement indicates that over $6 billion of their assets are in "board designated investments." This phrase does not exclusively mean the money is invested in the market, but it is generally a term used to indicate money being invested and set aside for future obligations like construction, acquisitions and improvements.

Under the same metric, Parkview Health has $1.66 billion set aside, Franciscan Alliance has $2.55 billion, and Community Health Network has $1.04 billion. Ascension has a whopping $22 billion, but in fairness to them, Ascension operates in at least 12 states, so that is not an Indiana-specific total.

As I review these numbers, the question that occurs to me is, how much is too much?

As the chair of the Indiana Senate's Tax and Fiscal Policy committee, I sometimes come across Hoosiers who think the state government holds on to too much taxpayer money because we have a goal of keeping 10% to 12% of our annual spending in reserves. I remind people that total covers only about 40 days of operating expenses for the entire state government serving 6.8 million citizens, whereas some of these hospital totals could cover over a year.

As the state government's revenue has grown, Indiana has cut taxes over and over. We are one of only six states with an automatic taxpayer refund when reserves exceed our needs.

If only our largest not-for-profit hospitals had the same concern for returning money to their customers, perhaps Indiana would not find itself fairing so poorly on health care cost rankings.


State Sen. Travis Holdman (R-Markle) represents Senate District 19,
which includes Adams, Blackford, Jay and Wells counties and a portion of Allen County.
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