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IU Health suffers small decline in 2013 profit

March 31, 2014

Indiana University Health’s business deteriorated last year in every area except one—outpatient visits to Indianapolis-area facilities.

That performance led IU Health to bring in slightly less money from its operations, according financial statements the Indianapolis-based hospital system filed Friday.

IU Health earned $323.6 million last year, down 41 percent from the year before. Revenue from operations fell 5.9 percent to $5.2 billion.

But the the results weren't quite as bad as they look. Excluding one-time gains and losses from each year, IU Health would have earned $261.3 million last year, down by 2.5 percent.

A key reason for the lower income was higher losses by the ambulatory surgery centers in which IU Health owns a non-controlling interest. Excluding those losses from both years, IU Health would have enjoyed a 5.6-percent increase in profit.

IU Health was able to combine price hikes and an increase in outpatient visits to its Indianapolis facilities to actually increase its revenue from patients.

“Net patient service revenue ... increased by $65.5 million for the year ended December 31, 2013, over the prior year, which reflects the effect of rate increases of approximately 8 percent and increased volumes for outpatient services, which in aggregate, more than offset the decline in admissions,” IU Health officials said in financial documents.

IU Health is the second major Indiana hospital system to report 2013 finances, a year in which congressional cuts to hospital funding and declining patient volumes caused hospitals to lay off hundreds of workers.

In February, Franciscan Alliance reported that its operating income fell by 48 percent when compared apples-to-apples with its results from 2012.

Franciscan earned $16.9 million last year, when adjusted for differences between the two years, down from $32.5 million in adjusted profit the year before. Revenue fell in 2013 by 1.2 percent to $2.4 billion.

The problem at IU Health was that fewer patients showed up at its facilities.

Inpatient visits to its hospitals, meaning a patient stayed overnight, fell 5.7 percent. The number of days patients were in the hospital also declined, 4.5 percent.

And surgeries—a vital source of revenue for hospitals—were down. The number of inpatient surgeries fell 3.7 percent and the number of outpatient surgeries fell even more, 4.3 percent.

Even emergency room visits and imaging tests were down, 2.1 percent and 3.8 percent, respectively.

But the one thing that increased was the number of outpatient visits to IU Health facilities.

Statewide, IU Health recorded 2.64 million visits, up 2.9 percent from the year before. But in central Indiana, which includes IU Health’s facilities in Avon, Carmel, Fishers, Indianapolis and Tipton, outpatient visits soared 13.3 percent, to more than 390,000.

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