Nate Kaufman: Let’s fix what’s broken—not break what still works

Indiana lawmakers are charging ahead with plans to “rein in” nonprofit hospitals. Their latest laws—like House Bill 1004—threaten price caps and tax-exempt status. Their message is clear: Hospitals drive up health care costs, and something must be done.

But that diagnosis misses the mark. And the cure they’re prescribing could collapse care in the communities that need it most.

Let’s start with the facts. Indiana’s health care spending is in line with the national average. According to a 2024 report from Indiana University, our per-capita spending is $10,517—nearly identical to the national average of $10,191. Meanwhile, large insurers in Indiana are profiting far beyond the norm, making over three times the regional average in profits per member in 2022 and 2023.

Hospitals are not driving the cost crisis—they’re holding the line in a system where other parts of the infrastructure have been allowed to fail. In 2023, Indiana hospitals had a median operating margin of just 0.9%, far below the national median of 2.3%. That’s not a signal of waste. It’s a sign of strain.

And when hospitals are forced through regulation to “cut costs,” they don’t do it in boardrooms. They do it on the ground—by closing birthing units, delaying rural care expansion, and freezing hiring for doctors and nurses. Since 2023, 10 birthing units in Indiana have already closed. More are at risk.

If care feels unaffordable to Indiana families, hospitals aren’t the reason—insurance design is.

Indiana has one of the highest rates of high-deductible employer health plans in the country, 63.7%, compared with a national average of 53.6%. That means patients pay more out of pocket, not because the care costs more but because their coverage was built to shift risk to them.

This shift didn’t happen in a vacuum. It happened in a state where investment in public health has steadily eroded. Indiana’s approach has focused on reducing government spending while private insurance plans profit from the gaps left in care, effectively placing the burden on patients.

And profit they have. From 2019 to 2023, insurer profits per member nearly tripled—from $179 to $434. That’s not efficiency. That’s margin growth at the expense of patients’ health and providers’ jobs.

Some lawmakers claim nonprofit status is a “privilege,” but in practice, nonprofit hospitals are the ones that stay when the math no longer works for for-profit operators. Over the last decade, for-profit systems like Community Health Systems and HCA have pulled back from Indiana. Anthem left Indiana’s ACA marketplace in 2018 when profits dropped.

Nonprofits stay. Not for profit, but for mission. Their tax-exempt status helps fund physician recruitment (to the tune of $300,000 per doctor in Indiana), rural access programs and charity care. Take away that status, and we don’t just lose infrastructure—we lose equity.

When we reduce health care policy to sticker prices and nonprofit labels, we ignore the delicate balance that keeps the system running: cost, quality and access. You can’t cap one without compromising the others.

Lawmakers should ask deeper questions before they legislate based on headlines and understand the unintended consequences of their actions. What does Indiana lose when rural care disappears? Who fills the gap when physician practices collapse? And why are we targeting those barely breaking even while insurers post record profits?

Indiana’s nonprofit hospitals aren’t loopholes. They are vital institutions, especially for the communities the private market has abandoned.

The passed legislation might sound like fiscal reform, but if implemented, the policies could become a blueprint for the erosion of health care services. Indiana deserves better. Let’s fix what’s broken—but not by breaking what still works.•

__________

Kaufman is managing director of Kaufman Strategic Advisors and a nationally recognized health care strategist with over 47 years of experience.