What “Nonprofit” Means for Indiana Hospitals—and What’s Missing from the Cost Debate

Written by Scott B. Tittle, IHA President

Hoosiers want affordable healthcare, strong communities, and institutions they can trust. On that, we all agree. But recent commentary suggesting Indiana’s nonprofit hospitals are “antiphilanthropy” misrepresents how hospitals operate, how healthcare is financed, and what nonprofit status actually means—and it overlooks one of the most concentrated and powerful forces in Indiana’s healthcare system: the insurance market.

At the most basic level, nonprofit does not mean non‑earning. It means hospitals reinvest dollars back into what is required for patient care and sustaining community services, instead of distributing profits to shareholders or investors. Indiana’s nonprofit hospitals do not send profits to owners—they use operating margins to keep hospitals open, expand services, improve quality, and meet rising healthcare demands in a market where a small number of insurers largely dictate prices and payment terms, including what is authorized and ultimately covered.
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Margins are not “profits”—they allow hospitals to keep their doors open‍

Hospital “net income” is often mistaken as excess profit. In reality, it is what allows hospitals to:

• Maintain and update aging facilities and replace outdated equipment
• Expand access to mental health, obstetrics, and rural care
• Absorb unpaid care when insurers do not pay or patients are unable to pay
• Recruit and retain healthcare workers in a national labor shortage

In fact, nearly half of Indiana hospitals operate at a loss or near break‑even margins, a reality routinely overlooked in sweeping claims about “hospital profits.” Large systems must generate reserves because healthcare is volatile—pandemics, workforce shortages, cyberattacks, drug and supply price spikes, and reimbursement cuts are constant realities.

It is also important to recognize that Indiana hospitals have already reduced prices. Recent state‑commissioned analyses confirm that Indiana’s largest nonprofit hospital systems lowered their commercial prices year‑over‑year, with prices now well below the benchmark set by the General Assembly. Those reductions reflect meaningful progress on affordability—yet hospital pricing is too often discussed as if nothing has changed.

Any serious economic analysis must also account for the negotiating imbalance hospitals face. Indiana has roughly 100 hospitals/systems, but the insurance market is controlled by two dominant payors that together command nearly 90% of the market. Hospitals do not set prices in a vacuum—they negotiate under extraordinary pressure from insurer leverage and then fight to get paid after delivering medically necessary care.
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Donations do not inflate hospital “profits”

Philanthropic gifts to hospitals are almost always restricted by their donors—used for cancer centers, scholarships, rural clinics, or specific community programs. They cannot be diverted to general operating income, and they do not pad financial margins.

Equating hospital donations with profits misrepresents both nonprofit accounting and donor intent. Hoosiers give to hospitals because they want better care close to home—and that’s exactly where those dollars go. These charitable dollars do not counter balance insurer payment practices or replace revenues lost to underpayment, denials, or delayed reimbursement.
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The “markup” argument is misleading

Comparisons between IRS charity care reporting and hospital financial statements once again misrepresent hospital reporting. Hospitals report:

• Costs to the IRS, as required, meaning charity reported is what it actually costs the hospital to provide care. IRS reporting is done on a hospital-by-hospital basis, meaning a separate report is filed for each hospital and entity within a system.
• Like IRS reporting, charity is reported at cost on audited financial statements, not as charges or “sticker price.” Audited financial statements, however, reflect consolidated financial information, meaning all hospitals and entities within a system are combined into one audit report.

These figures serve different regulatory purposes, and comparing one hospital’s IRS report to a consolidated audited financial statement is like comparing apples and oranges. Under standard accounting practices, audited financial statements reflect revenue based on expected collections from insurers, government payors, and individuals—not gross charges. Using different reports filed for different reasons to imply price gouging obscures the real driver of healthcare costs: high utilization, Indiana’s poor health measures, labor pressures, drug and supply prices, government underpayments, and harmful insurer practices.

Hospitals’ unique role in caring for all

An essential part of understanding hospital finances is recognizing that hospitals are legally required to treat anyone who walks through an emergency department door, regardless of insurance status or ability to pay. That obligation represents an incalculable contingent liability—one no insurer bears, and no other sector is expected to shoulder.

Last year alone, emergency department visits in Indiana surged 16.8%, compared with a 1.4% increase nationally, driving higher utilization at the most expensive site of care. At the same time, charity care continues to rise as more Hoosiers lose coverage, including a roughly 20% year‑over‑year decline in Medicaid enrollment. Indiana hospitals now provide more charity care than the national average, reflecting a sustained commitment to ensuring patients can access needed care even as financial pressures intensify.

What’s missing from the cost debate

Notably absent from this debate is the role of insurance companies, many of which post record profits while raising premiums, denying or delaying care, narrowing provider networks, and increasing administrative burdens on patients and hospitals alike. In Indiana, the picture becomes even clearer: two insurers control 87% of the market—71% held by Anthem and another 16% by UnitedHealthcare—creating a de facto duopoly that would concern any credible economist.

If the claims about hospital monopolies controlling prices were accurate, independent hospitals would still dominate Indiana’s landscape. Instead, insurer market power has steadily increased, forcing hospitals—especially smaller and rural ones—into affiliations with larger systems simply to survive under one-sided contracts dictated by dominant payors.

Hospital reserves protect communities

Hospital reserves are not offshore slush funds. They are governed by boards, audited annually, and required to:

• Meet bond covenants that require hospitals to maintain specific reserve levels and financial ratios so they can borrow affordably for buildings, equipment, and critical services
• Fund capital improvements, such as replacing aging facilities and medical technology
• Ensure hospitals can survive downturns, emergencies, and reimbursement cuts

The pandemic made painfully clear what happens when hospitals lack financial reserves. Reserves are necessary to protect access to care—especially in rural and underserved communities. Insurance companies face no comparable obligation to reinvest profits locally, maintain access in underserved areas, or keep facilities open during crises.

Antitrust policy deserves facts
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Healthy competition matters. Hospitals support oversight and transparency. But portraying Indiana hospitals as a modern-day Standard Oil ignores a complex healthcare system shaped by labor shortages, extraordinary insurer concentration, federal reimbursement cuts, and rising demand for care.
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If the simplistic claims being made were true, hospitals like Ball Memorial in Muncie would still be independent today, rather than navigating an environment where the largest payors ultimately control reimbursement, network inclusion, and financial viability.
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The real consequences of targeting nonprofit hospitals
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Punitive taxation of nonprofit hospitals would not lower costs for patients. It would divert resources away from care, accelerate hospital closures, and reduce access—especially in rural communities—while leaving the most powerful drivers of cost in Indiana’s healthcare system untouched.
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A better path to lower costs
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If Hoosiers want real solutions, we must look honestly at how our system is structured. A market dominated by two insurers controlling nearly 9 out of 10 covered lives, compared with dozens of hospitals spread across the state, is not a recipe for competition or affordability.
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Addressing insurer market power, improving transparency, and ensuring fair reimbursement will do far more to protect access and contain costs than targeting nonprofit hospitals that reinvest in the communities they serve.