Hospital executives from across Indiana warn they are grappling with Medicaid shortfalls and worsening finances that threaten health services, especially in rural and urban areas.
Methodist Hospitals and others say the number of uninsured patients has been rising, and Medicaid has not been covering the cost of care, putting services and patient access at risk.
A study commissioned by the Indiana Hospital Association, released Tuesday, found Indiana hospitals saw a 5.5% drop year-over-year in operating income in 2025, resulting in a $50 million loss in resources for patient care. Last year, Indiana hospitals pulled in a 1.9% median operating margin, as compared to a 2.6% margin nationally.
The study, by the consulting firm Kaufman Hall, projects Indiana hospitals could face $1 billion in annual losses over the next three to five years.
Methodist Hospitals in Gary and Merrillville have lost money for two straight years, President and CEO Matt Doyle said during a Tuesday morning online press conference hosted by the health association.
“At Methodist Hospitals, Medicare and Medicaid make up 80% of our payer mix, and the reimbursement simply does not match the cost of providing care,” Doyle said. “Our mission is to provide high-quality health care to all those in need, but as more patients move into government coverage programs or go uninsured due to gaps in coverage, hospitals like ours struggle to maintain the level of services our communities rely on.”
The Kaufman Hall study found Indiana hospitals' expenses increased by 4.7% last year, while revenue only grew by 4%. Labor expenses rose by 5.2% even as hospitals reduced reliance on more expensive contract labor by about 50%.
“These findings make clear that Indiana hospitals are approaching a breaking point,” said Scott Tittle, president of the Indiana Hospital Association, at the virtual press conference. “With the 8th lowest Medicaid reimbursement rates in the nation and rapidly rising costs, hospitals simply do not have the tools they need to continue providing the level of care Hoosiers deserve. Without meaningful policy changes, more hospitals — particularly in rural communities — will be forced to scale back or eliminate essential services."
Medicaid covers 57% of the cost of providing care while Medicare covers 82%, Doyle said.
"For every dollar of cost for a Medicaid patient, we're getting back 57 cents. For every dollar of cost for a Medicare patient, we're getting back 82 cents," Tittle said. "To absorb those challenges, there are very important federal and state programs to assist with facilities like ours, which are considered a true safety net organization for the communities that we serve."
Medicaid reimbursement could dip even lower in the future, Doyle said.
Methodist Hospitals suffered a $27 million annual reduction in federal funds over the last three years due to the Section 203 program that adjusted hospital funding, Doyle said. The hospital still provided $82 million in charitable care in 2024, and demand has only been increasing.
Methodist Hospitals suffered a negative operating margin in 2024 and again last year despite cost-cutting efforts and increased volumes.
"We're doing everything possible to ensure we can continue the mission to provide high-quality care to everyone in need in Northwest Indiana," Doyle said. "Our mission is to provide that care. We're dedicated to do so. We're working with state and federal lawmakers to find meaningful pathways for reimbursement reforms."
Rural hospitals are suffering some of the steepest financial losses. Greene County General Hospital delivered its last baby and shut down its obstetrics department, forcing expectant parents to travel farther to bring their children into the world.
“We could no longer sustain the OB unit because Medicaid and commercial insurance pay so far below the actual cost of care,” said Brenda Reetz, CEO of Greene County General Hospital. “This was a heartbreaking decision for our community. No hospital wants to cut services, but when reimbursement fails to cover even basic operating costs, we are left with no choice.”
© Copyright 2026, nwitimes.com, Munster, IN