By SCOTT B. TITTLE
Guest Columnist
A recent analysis by the Employers’ Forum of Indiana claims there is “no uniform narrative of financial distress” among Indiana hospitals. The implication is that hospitals may be overstating their challenges and that warnings about service cuts or closures deserve skepticism.
That conclusion may sound reassuring. Unfortunately, it is built on bad data and worse math.
The Employers’ Forum analysis relies heavily on information funded by Arnold Ventures, a national organization with a well-known advocacy agenda aimed at limiting reimbursement and capping hospital prices. When advocacy-driven analyses are presented as neutral descriptions of hospital finances, policymakers and the public should pause and examine what the numbers actually represent.
Consider Memorial Hospital and Health Care Center in Jasper, located in Gov. Mike Braun’s hometown.
According to Memorial’s audited financial statements for 2023, the hospital posted an operating margin of -2.9 percent. Hospitals and their auditors face civil and criminal penalties for misreporting financials, so these figures reflect reality. In plain terms, a negative operating margin means the hospital lost money doing what it exists to do: caring for patients. Its costs to staff beds, operate the emergency department, pay nurses and physicians, buy supplies, and maintain the facility exceeded patient-care revenue.
Yet the Sage Transparency website – drawing on the same NASHP data cited by the Employers’ Forum – reports that Memorial Jasper posted a 41 percent profit margin that same year.
Both numbers cannot be true in any meaningful sense. The difference is not efficiency or management. It is Sage Transparency’s misleading accounting.
For a household, a positive operating margin means income covers monthly bills. For a business, it means revenue covers payroll, rent, utilities, and supplies.
If a family earns $80,000 but spends $82,000 on housing, food, childcare, and transportation, it is not financially healthy, even if its investments performed well. Investment gains do not pay grocery bills or keep the lights on.
Hospitals operate under the same logic. That’s why hospitals, banks, and credit rating agencies all define operating margin as patient-care revenue minus the full cost of providing that care. Investment income is kept separate because hospitals cannot reliably staff units or sustain services using stock market projections.
The Employers’ Forum analysis combines numbers that were never meant to go together. It counts nearly all revenue – including hospital services, physician clinics, and investment income – but includes only a narrow subset of expenses based on what Medicare deems “allowable” hospital costs.
These Medicare cost reports were never designed to measure financial viability. Their purpose is to determine reimbursement for specific services, not whether a hospital can keep its doors open.
At Memorial Jasper, this approach excludes more than $100 million in real 2023 expenses while still counting the associated revenue. Excluded costs include physician compensation, clinic staff and overhead, anesthesia coverage, and other essential services. Any household or business would count those expenses when judging financial stability. The Employers’ Forum does not.
It is the equivalent of claiming a household is thriving because it counted full income but ignored the mortgage and grocery bills.
Audited financial statements are not advocacy tools. They are independently reviewed documents used by lenders, bond markets, and regulators to assess risk.
When Memorial Jasper’s audited statements show an operating loss, that is what banks consider when financing equipment and what hospital leaders weigh when deciding whether they can afford labor-intensive services like obstetrics or behavioral health. No serious lender would rely on calculations that omit tens of millions of dollars in real expenses.
Indiana’s hospitals vary in financial strength, but dismissing warnings based on distorted calculations carries real consequences. It shifts attention away from chronic Medicaid underpayment, rising labor and supply costs, and growing numbers of uninsured patients.
The results are not theoretical. They appear as closed units, reduced services, and longer drives for care – especially in rural communities.
Hoosiers know financial health cannot be measured by pretending major expenses do not exist. Hospitals should not be judged that way either.
If the Employers’ Forum analysis were an accurate reflection of hospital finances, Gov. Mike Braun’s hometown hospital would still be independent today. It is not.
Memorial Jasper’s margins were not sustainable on their own, and its transition to Deaconess Health System reflects that reality. Deaconess thankfully stepped in to provide the resources and stability needed to ensure Dubois County residents continue to have a hospital serving their community.
That outcome deserves recognition, and it underscores the central point: honest math matters. When we misrepresent hospital finances, we don’t strengthen health care. We put access to care at risk.
Scott B. Tittle serves as the president of the Indiana Hospital Association.