Indianapolis-based Indiana University Health has overhauled its operating model, consolidating regions and integrating hospital operations as part of its push to standardize care delivery and strengthen long-term financial sustainability.
The changes, outlined in financial documents published Feb. 27, are designed to simplify governance, clarify leadership accountability and accelerate systemwide decision-making.
The system merged Carmel-based IU Health North Hospital and Avon-based IU Health West Hospital into the Academic Health Center structure within the Metro region. It also combined its former West Indiana and East Indiana regions into a newly formed North Indiana Region.
Under the revamped model, IU Health shifted from six regions to four, streamlining oversight while aiming to preserve local responsiveness. Leaders said the restructuring supports long-term operational sustainability and value-based performance through greater enterprise standardization.
Outpatient reset sharpens ASC portfolio
IU Health also restructured its ambulatory surgery center portfolio through a series of acquisitions and divestitures intended to simplify ownership and strengthen operational focus.
Last year, the system purchased and sold membership interests in certain less-than-wholly-owned subsidiaries for a net purchase price of $176.8 million. IU Health saw a $66.3 million gain tied to the sale of membership interests, recorded in other operating revenue.
Following the transactions, IU Health now has 100% ownership of five ASCs, a controlling interest in one and has fully exited three others. IU Health said the portfolio shift positions the system for long-term outpatient growth and greater alignment with its broader operating strategy.
Digital overhaul and major capital investments
The organizational reset comes as IU Health prepares for a systemwide Epic EHR implementation after board approval of the platform. The rollout is expected over the next 18 months, with patient and provider launch targeted for mid-2027.
Construction is also progressing on IU Health’s new downtown Indianapolis hospital and expanded campus, which will consolidate two existing adult hospitals and deepen collaboration with the IU School of Medicine. The project remains on track to serve its first patient in the fourth quarter of 2027, though the board approved an additional $450 million to address construction inflation, supply chain delays and labor shortages.
Additional capital projects include a new 140-bed hospital near Fort Wayne set for completion in the second quarter of 2027, as well as a new hospital and cancer center in West Lafayette. Construction on those facilities is expected to begin in 2026, with openings projected for 2028.
Margin pressure, investment gains and affordability focus
IU Health reported 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.
Operating revenue increased 2.9% year over year to $9.5 billion in 2025. Expenses rose 5.3% to $9.4 billion, reflecting higher labor, supply and drug costs, along with investments in digital infrastructure and academic support, according to the health system.
After accounting for nonoperating items, including investment returns, IU Health reported a $1.2 billion net income in 2025, up from $966 million in 2024.
“We continue to absorb inflation through operational efficiencies and disciplined cost management so that patients, employers, and communities are not asked to shoulder those pressures alone,” Jenni Alvey, senior vice president and CFO, said in a Feb. 27 news release. “Disciplined balance sheet management enabled us to continue to focus on affordability while also investing in growth, improving access to care.”
Through its multiyear care affordability plan, IU Health said it has delivered more than $1.4 billion in savings to Indiana residents, including price reductions in radiology, lab services, specialty pharmacy and ambulance services.
“Our focus has been clear. We are improving quality, expanding access and removing financial barriers to care across the state,” Dennis Murphy, president and CEO, said. “The people we serve deserve healthcare that is both excellent and affordable, and we are committed to delivering measurable progress on both.”
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