Two proposed freestanding Indianapolis heart hospitals may be duking it out to win the hearts and dollars of the Hoosier capital's cardiac patients.
In a scenario seen more and more in the U.S., the projects pit specialty physician groups not only against one another but against hospitals with which they've shared long-term relationships.
The race to build a heart hospital in Indianapolis also demonstrates the ability of for-profit specialty hospital companies to exert change in the healthcare market and the ability of large physician groups to win concessions by playing hospitals against one another.
Last year, Community Hospitals Indianapolis, a four-hospital, not-for-profit system, announced a joint venture with longtime affiliate Indiana Heart Associates, a cardiac specialty group, to build a for-profit heart hospital on the north side of the city.
The announcement followed a breakdown in joint-venture negotiations between Community and its cardiologists and Charlotte, N.C.-based MedCath, a for-profit company that builds, manages and owns specialty hospitals. In spite of Community's rejection, MedCath remained determined to build in the Indianapolis market, which it had researched for four years.
In December, MedCath, which operates eight heart hospitals with three more under development, signed a confidentiality agreement with one of the nation's largest cardiology groups, the Care Group of Indianapolis.
The Care Group, with 83 cardiologists and 45 primary-care physicians, has enjoyed a 25-year relationship with Community's crosstown rival, St. Vincent Hospitals and Health Services. A MedCath-Care Group heart hospital would compete with St. Vincent's Indiana Heart Institute, now the city's biggest and most prestigious heart program, potentially taking hundreds of the institute's patients.
A national trend
John Wyand, director of strategy services at Olive, an Indianapolis healthcare consulting group, says what's happening in Indianapolis is part of a national trend of physicians developing their own for-profit specialty hospitals.
Physician reimbursement rates aren't going up, and heart specialists are looking to gain a piece of the lucrative hospital share of the cardiac DRG-reimbursement dollar, says Wyand, a former St. Vincent executive.
Officials at St. Vincent and the Care Group confirm that so far St. Vincent has not been invited to participate in the deal. MedCath and the Care Group have signed an option for property on Indianapolis' north side.
Although MedCath President David Crane confirms that the company had been seeking Indianapolis partners and had negotiated with Community's cardiologists, he will not discuss the rumored deal with the Care Group.
"Our policy is that we will not comment on new deals until three things have occurred: The capital is in place, the land is purchased and the partnership formed," Crane says. "It's premature to make any statement."
But Crane says he's not concerned about Community's pre-emptive announcement.
"In the last two years, close to a dozen heart hospitals have been announced, but we're the only ones actually building heart hospitals," he says. "Just because someone announces something, it doesn't affect us. Community hasn't completed its syndication, raised its capital or raised its debt."
"Indianapolis is an attractive market, and we're interested in putting together a project there," says Dennis Kelly, MedCath's senior vice president of development. "We have nothing definite in place now, but there are some great groups of physicians in that market."
Lana Lehman, a senior vice president with the Care Group, also refuses to confirm the MedCath deal.
"This is a major consideration and a lot of due diligence needs to be done, and we're doing that," says Lehman, who adds that MedCath discussed a partnership with some members of the Care Group years ago. "We know them very well, but it wasn't the right time then."
She says the Care Group has done its market research and believes there is room for more cardiac services.
Nothing set in stone
Deeni Taylor, chief strategy officer and executive vice president of St. Vincent's parent company, Central Indiana Health System, recognizes his hospital could be the odd man out in a MedCath-Care Group heart hospital deal.
"We didn't know anything until we found out about the confidential agreement in December," Taylor says. "That was a shocker."
Taylor says he was unaware of any incident that provoked the cardiology group's action but hopes the relationship between the organizations will continue.
Community announced last fall that it would build a 64-bed, $60 million heart hospital on the campus of its Community Hospital North facility. Construction is expected to begin this spring and take 18 months to complete. David Veillette, formerly chief executive officer of the Oklahoma Heart Center in Oklahoma City, has been hired as the hospital's CEO and begins his tenure Feb. 26.
Michael Venturini, M.D., past president of the 22-physician Indiana Heart Associates and board chairman of Indiana Heart Hospital, says his group's rejection of MedCath last year was a business and strategic decision.
"MedCath does bring value and experience to a venture, but we had to decide the value of that experience when we looked at the cost of having them as a partner," he says. "We became convinced we could accomplish our goals without MedCath as a partner."
He said the heart hospital will replace the existing Community program, not compete with it.
Michael McCaslin, a consultant and certified public accountant with the Somerset Group in Indianapolis, says two new heart hospitals would raise the already high cost of healthcare in Indianapolis. McCaslin says he wouldn't be surprised if MedCath is rejected a second time, this time by the Care Group.
"I have significant doubts whether MedCath will be the final partner in this deal. They could get used twice," McCaslin says. "People in Indiana believe in homegrown products, and I'm not convinced the Care Group will leave St. Vincent's behind. Cardiology and heart care represent 50% of St. Vincent's revenue stream. You just can't let those doctors walk out."