Indiana is gifted with a large philanthropic community. However, its enormous contributions to the vitality of our state are mostly canceled out by outflows of profits to our monopoly hospitals. One might be tempted to call our large nonprofit hospital system the anti-philanthropy of Indiana.
In 2023, the most recent year for which we have complete data, Indiana philanthropic foundations provided $2.3 billion to support a variety of activities: research, educational and human service programs, arts and culture, recreation and other worthy programs.
At the same time, Indiana’s five largest nonprofit hospitals earned net income of more than $1.8 billion. These were: IU Health ($1.13 billion), Parkview Health ($279.3 million), Ascension St. Vincent ($250 million), Franciscan Health ($45 million) and Deaconess Health ($109.8 million).
To add insult to injury, these hospitals received donations from in-state residents and philanthropies that range from $101.7 million to $121.7 million. After all, they are “nonprofits.”
My favorite example of this is in Muncie, where the philanthropic community proudly reported that in 2023 it donated $21 million to causes within the county. In that same year, IU Health Ball Memorial Hospital reported $58 million in net income.
Creating a local monopoly unfettered by state enforcement of antitrust laws is a great gig.
All of this comes against the backdrop of yet more research into the anti-competitive practices of Indiana’s hospitals that made national news. Zack Cooper, an economist and director of the Health Care Affordability Lab at Yale, outlined in the New York Times a lengthy study in which he and his colleagues found that hospital mergers eliminated community jobs and sent prices skyrocketing.
As has become common in the national debate on health-care monopolization, Indiana got special mention, this time for standing up to monopolies. It was a rare treat to read.
The hospital lobby, or what remains of it, is certain to take umbrage at these ugly facts. That’s what it is paid to do. Hospitals will also claim I am misreading the financial statements, or that I should not rely upon the IRS filings but instead focus on their audited financial statements.
Comparing the two is very useful.
You see, the IRS requires nonprofit firms to report charity care by citing the actual out-of-pocket cost to the hospital. In contrast, Indiana permits them to report the sticker price of those services in audited financial statements. Comparing the two offers insight into the markup these hospitals charge for their services.
In 2023, IU Health told the IRS that its out-of-pocket costs for charity care were $124.5 million, but told the state of Indiana that it was $301.7 million, a markup of 241%. A 2024 RAND Corp. study, which measured what private insurers pay relative to Medicare rates, found IU Health’s markup was 237%. The study analyzed 2020-2022 data, the most recent available.
Although these measure different things, both point to the same conclusion: These hospitals are charging far more than their costs.
The pattern held across systems. St. Vincent had a 245% markup in 2023, compared with 263% in the RAND study; Franciscan Health had a markup of 196%, compared with 271%. Parkview, which has come under intense national scrutiny as the benchmark monopolist, reported a 136% markup, compared with 262% in the RAND study.
Keep in mind that when these nonprofit hospitals offer a claim of community benefit, they are inflating it by several hundred percentage points.
One piece of good news is that the Indiana legislature is slowly taking them to task on these problems. But, they continue to engage in anticompetitive practices at a scale and pace that would’ve made John D. Rockefeller blush. In fact, when I teach two chapters of monopolization and antitrust, I’ve substituted Indiana’s hospitals for the textbook case of Standard Oil v. U.S.
That 1911 case saw Rockefeller’s company sued for vertical foreclosure (like buying up physician practices), predatory pricing (like undercharging competitors to run them out of business) and secret rebates to suppliers (like facility fees, anti-steering clauses in hospitals or turbo-charging list prices). This case set the stage for antitrust enforcement that seems to be dormant in Indiana.
It’s the best classroom example of anticompetitive behavior in America today, and that’s a damning fact about Indiana.
Now, I have to be honest, I’m tired of writing about hospital monopolies in Indiana. In the days after this column runs, I’ll get lots of messages and emails from physicians, nurses and staff members of Indiana’s hospitals encouraging me to continue writing.
But, I’m also sure the hospital lobby will do what it does best. The lobby will pen angry letters to my university president asking him to revoke my tenure and fire me. It will also bombard university trustees with lies about my financial involvement with hospital critics, which will make sure no one they donate to can do business with my research center.
Given the devastating array of facts aligned against them, crying and whining is about all they can do.
What surprises me, though, is that Hoosiers continue to abide paying $1,133 more per year for hospital care than the average American. That’s a whopping markup of 26% on hospital costs alone, driven almost wholly by the continued hospital monopolies that plague our state.
With an election coming up, it seems important for voters to ask how IU Health ended up with $8.8 billion in financial investments, how Franciscan rolled up $2.55 billion and how Parkview can sit on $1.87 billion. The money is parked on Wall Street and in Cayman Islands accounts, flouting the purpose and intent of our century-old not-for-profit laws.
It is well past time for the state of Indiana to take more aggressive action. If we lack the ability to stop hospitals from acting like the monopolies they are, it is well past time to rip away their nonprofit protections and tax them like any other business. Otherwise, we should just keep referring to them as the anti-philanthropy.
The views expressed here are solely those of the author and do not represent those of funders, associations, any entity of Ball State University, or its governing body.
This article originally appeared on Lafayette Journal & Courier: Hicks: Indiana’s 5 largest hospitals earned more than $1.8 billion
Reporting by Michael J. Hicks, Muncie Star Press / Lafayette Journal & Courier
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