County Hospitals Feeling Squeezed

By Daniel Lee, The Indianapolis Star

Jun. 17–Dennis Dawes admits he sometimes checks out how many vehicles are in Clarian West’s parking lot.

A sign at Hendricks Regional Health directs visitors around the growing, county-owned medical complex.

“I get my car washed in Avon,” said Dawes, president of Hendricks Regional Health, the Hendricks County- owned hospital based in nearby Danville. “It’s a nice drive for me to go by Clarian West.”

It’s not just the dirt on his car that he’s interested in. Clarian West Medical Center in Avon opened in late 2004, the first time Hendricks Regional has had to contend with a rival hospital on its home turf.

Hendricks Regional and other county hospitals around the metro area face more direct competition than ever from big players like Clarian.

Some, such as Hendricks Regional or Riverview Hospital in Noblesville, are fighting to stay fully independent.

In Morgan County, where Indianapolis hospital system St. Francis is expanding in Mooresville, local government officials in 2005 lost a legal battle to impose a moratorium on the construction of medical facilities to help protect the county-run Morgan Hospital and Medical Center in Martinsville.

Others, such as Hancock Regional in Greenfield, are looking for increased collaboration with the larger systems.

The county hospitals’ strategies differ, but one thing seems certain: Central Indiana’s building boom is not over.

In recent years, Indianapolis’ four major systems — Clarian Health, St. Vincent Health, St. Francis Hospital and Health Centers and Community Health Network — have committed more than $1 billion to building projects. Smaller hospitals have spent tens of millions more to expand or renovate.

In 2005, Marion County and its seven bordering counties had 29 hospitals with 5,156 beds, up from 25 hospitals with 4,800 beds in 2000 — a 7.4 percent increase in staffed beds, according to the State Department of Health.

The jump comes as the trend in medicine is to deliver more types of care to patients without admitting them into the hospital.

Much of that growth has been from the Indianapolis systems expanding from their urban roots into the suburbs, especially to affluent or fast-growing communities such as Carmel and Avon — areas where people tend to have comprehensive health insurance coverage.

Health-care experts and hospital administrators worry about the possible effects of the explosion of general and specialty hospitals and clinics.

“If you’re an independent hospital like these county- owned facilities, it’s going to be much harder to go it alone,” said Debra Draper, associate director of the Center for Studying Health System Change, a Washington research group that has studied the Indianapolis market since 1996.

Will the build-out lead to a shakeout among hospitals? That’s hard to say, but some experts see warning signs.

“There’s always been an issue in Indianapolis with overcapacity,” Draper said. “One of the things that happens when you have overcapacity, something has to come out of the system.”

With Hendricks County’s high rate of growth, Dawes said, the community seems able to support two hospitals. In 2006, Hendricks Regional had a profit margin of almost 7 percent and increased revenue by 9 percent.

In fact, county hospitals around the region say they are growing and turning profits.

However, Dawes worries about the effects of increased competition from so many new facilities, including potentially higher costs for consumers.

“I think there will be some consolidation. Whether that’s a hospital closing or merging . . . I don’t know the answer to that,” he said. “But I wouldn’t be surprised if we see both.”

In some ways, a shake-up already has begun. In March, St. Francis said it would end inpatient services at its original Beech Grove location and expand at its Far-Southside campus.

For generations, residents across Indiana have sought care, from births to surgeries, close to home from county hospitals. Cases requiring highly specialized care, such as brain surgery, were referred to the large urban hospitals.

“The local suburban community hospital is the backbone of health care for Hoosiers, not unlike small towns are the backbone for America,” said Ray Ingham, chief executive of Witham Health Services in Lebanon.

But now patients often can choose from several new or remodeled hospitals near home.

Mimi Dora of Noblesville said in the past her family has gone to St. Vincent for care, but she said she wants to support the local county hospital.

“Next time we’re going to Riverview,” said Dora, who said she has heard good things about Riverview’s recent expansions. “I like the idea of a little bit smaller hospital, hoping you get a little more attention.”

Daniel Evans, chief executive of Clarian, said the Clarian North and West hospitals were opened to serve two of the fastest-growing counties in the nation, Hamilton and Hendricks.

“We’re following our patients to those growth areas,” he said.

Evans said such an expansion is needed not only to meet the needs of patients but also to help keep Clarian’s core locations — Methodist Hospital, Indiana University Hospital and Riley Hospital for Children — financially healthy. He called the three hospitals the destinations for the “sickest of the sick.”

In the complex world of health-care economics, hospitals make money from services such as radiology and cardiology and by treating patients covered by commercial insurance plans, which reimburse at higher rates than the government programs Medicare or Medicaid.

Hospitals often lose money on highly complex cases or by caring for the uninsured or underinsured.

As Clarian and others expand, some county hospitals are striking up partnerships. One such example is Hancock Regional in Greenfield working with Community Hospitals to build a surgery center.

“We’re willing to consider any partnership where we can take better care of our community,” said Bobby Keen, chief executive of Hancock Regional.

Other partnerships are on smaller scales, such as the sharing of specialized physicians or patient-referral agreements.

To the south, Johnson Memorial Hospital in Franklin — faced with the specter of Clarian recently buying land in nearby Bargersville and plans by St. Francis to expand its south campus — has expressed a desire for more collaboration with a larger system.

“My ultimate goal is to make sure Franklin has a high-quality hospital that is viable for years to come,” said Gregg Bechtold, president of Johnson Memorial. “If we can do that on our own, that’s great.”

Johnson Memorial, which has seen its profit margin fall to about 2 percent, already faces tough competition. The hospital said its market share for inpatient care among Johnson County residents is about 24 percent, compared with about 28 percent for St. Francis and 20 percent for Community Health Network.

Other hospitals, though, express little interest in major joint ventures with the large Indianapolis hospitals.

Hendricks Regional increased its operating profit and revenue last year. It is in the process of opening a new medical office building and is making other investments, such as renovating its labor and delivery rooms and intensive care unit.

Riverview Hospital in Noblesville has expanded its women’s center and emergency department as it faces increased competition from St. Vincent Carmel, the recently built Clarian North and the recently expanded Community North on the northeast edge of Indianapolis. St. Vincent and Clarian also are eyeing Fishers for expansion.

Riverview CEO Pat Fox said her hospital is working to provide cutting-edge care — such as becoming the only suburban county-run hospital to offer open-heart surgery — that’s close to home.

“Increasingly, the residents are looking for ease of access as the counties become more and more crowded,” Fox said.

HOSPITALS AT A GLANCE:

Witham Memorial Hospital:

–Location: Lebanon.

–Established: 1915.

–Staffed beds: 48.

–2006 revenue: $61.6 million.

–2005 revenue: $50.8 million.

–2006 inpatient admissions: 2,092.

Hendricks Regional Health:

–Location: Danville.

–Opened: 1962.

–Staffed beds: 140.

–2006 revenue: $136.8 million.

–2005 revenue: $125.4 million.

–2006 inpatient admissions: 7,324.

Johnson County Memorial Hospital:

–Location: Franklin.

–Opened: 1947.

–Staffed beds: 149.

–2006 revenue: $79.4 million.

–2005 revenue: $73.4 million.

–2006 inpatient admissions: 5,105.

Major Hospital:

–Location: Shelbyville.

–Opened: 1924.

–Staffed beds: 56.

–2006 revenue: $70,413,205.

–2005 revenue: $61,838,054.

–2006 inpatient admissions: 2,943.

Hancock Regional Hospital:

–Location: Greenfield.

–Established: 1951.

–Staffed beds: 101.

–2006 revenue: $79 million.

–2005 revenue: $71.6 million.

–Inpatient admissions: 4,759.

Riverview Hospital:

–Location: Noblesville.

–Established: 1909.

–Staffed beds: 165.

–2006 revenue: $133 million.

–2005 revenue: $123 million.

–2006 inpatient admissions: 6,101.

Sources: Hospitals. Information for Morgan Hospital in Martinsville was not available.

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