Indianapolis-based Indiana University Health is pressing forward with large capital investments and Epic integration plans after the system posted an operating income of $50 million (0.5% margin) in 2025, down from an operating gain of $257 million (2.8% margin) the year prior.
“We knew we were going to have some pressure,” Jenni Alvey, senior vice president and CFO of IU Health, said during Becker’s “CFO+Revenue Cycle Podcast” episode. “We’ve been transparent about having [the pressure] in 2025, 2026 and 2027 as we take on some big, one-time endeavors that we believe are setting us up for the future.”
Some of IU Health’s endeavors include a new, $2.3 billion downtown Indianapolis hospital and expanded campus, a 140-bed hospital near Fort Wayne, and a systemwide Epic EHR transition. The health system integrated IU Health North Hospital in Carmel and IU Health West Hospital in Avon into the Academic Health Center structure within the Metro region. It also consolidated its former West Indiana and East Indiana regions into a newly established North Indiana Region.
IU Health’s multiyear care affordability plan has also resulted in over $1.4 billion in savings to Indiana residents, including price reductions in radiology, lab services, specialty pharmacy and ambulance services.
“We have a long-range plan that will continue to strengthen our margin and operating income, as well as our balance sheet,” Ms. Alvey said. “We feel really good about where we are financially and where we’re headed, especially keeping our mission and our vision in the front of our minds.”
On the healthcare policy side, Ms. Alvey said IU Health has partnered closely with Indiana on its state direct-to-payment programs and supplemental Medicaid funding, which have become “increasingly critical to hospital economics.”
IU Health has also partnered with peer systems and organizations to work with the state on prioritizing Medicaid patients and reducing commercial prices.
“Across the nation, we have to focus on the changes in the Medicaid policies, particularly the work requirements and eligibility changes,” she said. “They sound straightforward on paper, but in practice, they create a lot of coverage, churn and emotion as it relates to uncompensated care. It can introduce a significant financial burden for patients and create administrative barriers for patients to get the care they need, or for hospital organizations to be able to provide the care.”
She also pointed to concern surrounding the broader regulatory and payer environment.
“Even small policy changes can really have a material impact on our cash flow and revenue predictability,” Ms. Alvey said.
Her solution for managing the ongoing uncertainty: scenario planning, internal playbooks and disciplined long-range financial modeling.
“A strong balance sheet becomes increasingly important to be able to continue to deliver on our mission or respond in times like COVID, and be ready for emergencies,” she said. “A lot of us across the country are trying to diversify our revenue streams and think about that from a planning perspective. Everyone needs to continue to be committed to care affordability. We’ve made a lot of public commitments to private transparency, reducing patient financial burden, and that really requires balancing the margin protection with access and equity.”
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