Scott B. Tittle: More hospital services at risk if state ignores the real data

Johnson Memorial Health’s very difficult decision to close its maternity care center is heartbreaking — and it should be alarming, not just for Johnson County but for state leaders and Indiana’s health care system as a whole.

For nearly eight decades, families in Franklin have relied on their community hospital to deliver babies close to home. That service is ending because reimbursement has failed to keep pace with the actual cost of care. Johnson Memorial reports it has been losing roughly $2 million a year providing maternity services, citing low insurance reimbursement rates and rising costs as key drivers.

This decision was not driven by quality concerns or mismanagement. It reflects a broader, statewide pattern. Johnson Memorial is now the 16th hospital in Indiana to close its obstetrics department since 2020, with most of those closures occurring in just the last three years. Each closure reduces local access, increases travel times for patients and places new strain on neighboring hospitals.

Recent data makes clear that these closures are not isolated cases. An independent analysis conducted by Kaufman Hall for the Indiana Hospital Association shows that Indiana hospitals are operating on increasingly thin margins. The median operating margin in 2025 was just 1.9%, compared with a national median of 2.6%. Even more concerning, Kaufman Hall found that 45% of Indiana hospitals are operating at a loss. Hospital operating income declined 5.5% year over year in 2025, representing nearly $50 million in diminished resources available to support patient care, workforce retention and service expansion. Further, modeling indicates a high probability of $1 billion in annual losses for Indiana hospitals over the next three to five years.

When margins are this narrow, hospitals have little flexibility. A single service line that consistently loses money can force difficult decisions. Obstetrics is among the most resource‑intensive services hospitals provide. It requires 24/7 staffing, specialized clinicians, strict safety protocols and constant readiness — regardless of patient volume. Yet reimbursement often covers only a fraction of those costs.

At Johnson Memorial, roughly 70% of patients are covered by Medicare or Medicaid. In Indiana, Medicaid reimburses hospitals at about 57% of the cost of care, while Medicare covers about 82%. Hospitals must absorb those shortfalls elsewhere — and for many, there is no longer enough margin to offset them.

Despite these realities, a persistent incorrect narrative suggests that hospitals across the board are financially strong. That perception is fueled by analyses that rely on incomplete or misleading data. The only reliable way to assess financial performance is through audited financial statements. These statements are independently reviewed and used by lenders, regulators and credit rating agencies to evaluate true financial viability. They reflect whether patient‑care revenue covers the full cost of providing care. Hospitals cannot staff units, maintain emergency departments or sustain services based on accounting shortcuts or investment volatility.

Ignoring factual data has consequences and shifts attention away from the true drivers of financial strain: chronic Medicaid underpayment, rising labor and supply costs, insurer denials and recoupments, and a growing uninsured population. The outcomes are tangible — service reductions, unit closures and diminished access to care, particularly in rural and underserved communities.

If public policy is based on flawed data rather than the real financial pressures hospitals are facing, more hospital services will be at risk. Protecting access to care requires accurate data, sound policy and a willingness to confront the financial realities facing hospitals today. The future of health care access in Indiana depends on it.•

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Tittle is president of the Indiana Hospital Association.