IU Health's plan to lower prices: 5 things to know

Indianapolis-based Indiana University Health shared its plan with state regulators March 31 to lower its prices in an effort to bring Indiana's healthcare costs down to the national average. 

Indiana legislators warned healthcare organizations in the state in a December 2021 letter that they would "pursue legislation to statutorily reduce prices" if they did not share a plan by April 1. In the letter, the legislators acknowledge the healthcare industry is complex but that Indiana ranks fifth in the country when it comes to hospital facility fees.

In its plan, IU Health said it is taking a fiscally responsible approach to addressing patient care cost through three elements: affordability, value-based care and public health investment. 

Five takeaways from the plan:

1. IU Health believes it can achieve the national average commercial pricing by Jan. 1, 2025. For 2021, IU Health said it held its commercial prices flat from 2020 to 2021 and realized savings of $124 million for consumers. With this plan to freeze prices, IU Health expects to realize more than $1 billion in savings for consumers. 

"We do not enter into this commitment lightly," IU Health said. "IU Health has sustained operating losses in the first two months of 2022. We will soon report that our first-quarter results were dramatically impacted by higher-than-projected labor costs due to the premium pay required to retain critical clinical professionals to care for extraordinary patient volumes and unfavorable revenue due to the cancellation of nonurgent surgeries and procedures during the COVID-19 surges."

2. IU Health said it will make accountability a top priority by continuing to report on its progress on lowering prices at annual public forums and meeting one on one with business leaders in its regions to discuss per-unit pricing adjustments. It also said it is compliant with the CMS price transparency rule, which helps measure performance against the affordability plan. 

3. IU Health, which noted that per-unit price of healthcare services is only one component of the cost of care, is adopting a value-based healthcare delivery model. The model will encourage providers to offer alternative care venues to patients that are less expensive than hospitals and reduce excessive utilization of care, the letter said.

"As a health system that owns and operates a health plan, we are uniquely positioned to innovate in this area," IU Health said.

4. IU Health also said it will use what it learned from its Medicare ACO to non-Medicare, IU Health Plan beneficiaries. Under IU Health's ACO model, IU Health generated about $65 million in consumer savings for 2019 and 2020. 

5. IU Health also said it must invest in public health to help lower costs in the state, saying "we simply cannot ignore that Indiana’s poor public health indicators are a contributing factor." IU Health outlined several investments it plans to make, including smoking cessation opportunities, reducing infant and maternal mortality, increasing access to behavioral health and cardiovascular health. It also said it will invest in community health by allocating $500 million for community development in neighborhoods surrounding Indianapolis. 

"We acknowledge that more must be done to address the growth of healthcare costs, which is why we’ve put together this comprehensive plan which seeks to reduce per unit pricing, shift to value-based benefit designs, and invest in public health," IU Health said. "However, we cannot do this alone. In addition to the work you’ve done to promote greater transparency in healthcare pricing, eliminating waste in healthcare delivery, you have the capability to invest in Hoosier health by investing more in public health."

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