Looks like business growth is slowing down at Indiana hospitals

Times are good at Indiana hospitals, but there are growing signs that the boost they’ve received from Obamacare is starting to fade.

Indianapolis-based Community Health Network reported on Nov. 18 that its third-quarter revenue totaled $521.9 million, up 6.7 percent from the same quarter last year. All parts of Community’s business—from hospital stays to surgeries to physician work to imaging scans—are up over the same quarter last year.

Community continues to credit the growth to an increase in the number of its patients covered by Anthem health insurance purchased on the Obamacare exchange and to the Healthy Indiana Plan, which has expanded rapidly using Medicaid money approved by Obamacare.

Those factors have slashed the amount of uncompensated care at Community’s facilities by 27 percent in the past year, saving Community about $18 million so far this year.

But growth on the Obamacare exchanges is now leveling off. The Obama administration expects only about 10 percent growth in enrollment on the exchanges in 2016.

The Healthy Indiana Plan has added more than 200,000 additional members since February, and state leaders expect it to add about 180,000 more by the end of 2016. Some of those customers, however, were previously buying coverage on the Obamacare exchanges.

As enrollment in those publicly subsidized programs slows down, the benefit to Community and other hospitals is decelerating. Indianapolis-based Indiana University Health, which operates 19 hospitals around the state, and Tennessee-based Community Health Systems Inc., which has nine hospitals in Indiana, each reported weaker patient volumes for the third quarter.

Against their strong 2014 results, hospital chains have a tougher comparison this year to demonstrate higher volumes as well as upside from the Affordable Care Act, which is beginning to moderate, said A.J. Rice, an analyst at UBS, in a report by Modern Healthcare magazine. Moreover, the third quarter is typically the weakest of the year, he added.

“For our part, we think we're setting up like we do in many years for the group to bottom out,” Rice told investors last month. He expects hospitals’ performance to “gradually rally post-earnings for the six months into the spring of 2016.”

Community Health Network’s profits from its operations totaled 8.6 percent of operating revenue at the end of September, compared with 9.3 percent at each of the first two quarters this year.

Its inpatient visits and surgeries are up 2.3 percent during the first nine months of the year, but they were up 4.3 percent at the end of June and 8.4 percent at the end of March.

Likewise, emergency room visits are up 7.7 percent at the end of September, but they were up 9 percent at the end of June and 13.3 percent at the end of March. And physician relative value units, a measure of productivity, were up 8.3 percent at the end of September, compared with increases of 13 percent at the end of June and 21.1 percent at the end of March.

At Indiana University Health, inpatient hospitalizations have slowed to a halt, growing by just 19 visits in the third quarter, compared with the same period a year ago. That’s out of nearly 98,000 hospital visits statewide in the quarter.

In the second quarter, hospitalizations rose 2 percent and in the first quarter they surged 5.4 percent.

IU Health’s revenue grew a healthy 6 percent in the third quarter to nearly $1.6 billion, as IU Health saw more patient visits to physicians and for outpatient surgeries, more members in the insurance plans it operates, and lower amounts of unpaid patient bills.

But IU Health’s third-quarter profit from operations, when adjusted for differences between the two quarters, was flat. It actually declined by $861,000, or 0.5 percent, to $174.7 million.

IU Health’s adjusted profit from operations also fell 3 percent in the second quarter, after rising 32.5 percent in the first quarter.