Indiana may not be among the top tourist destinations in the U.S., but it appears to be an increasingly popular pit stop for investor-owned rural hospital chains.
Having saturated regions such as the Southeast and Southwest, some hospital companies, hungry for acquisitions, are branching out into less familiar turf. This month alone, two for-profit rural hospital chains have made forays, one successful and one not so far, into Indiana, which has seen its number of investor-owned facilities increase and the number of county- or city-owned hospitals slide in recent years. Investor-owned hospital chains often market themselves, sometimes unsolicited, to public hospitals that are often cash-strapped because they must compete with other public services for funding.
The focus on Indiana is similar to the attention for-profit chains have been paying to other predominantly not-for-profit states such as Pennsylvania and, more recently, New Jersey (Oct. 15, p. 14).
On Oct. 4, Province Healthcare Co. said it acquired the Medical Center of Southern Indiana, in Charlestown, for $16 million. The 80-bed hospital, owned by a stand-alone, not-for-profit corporation, had been managed by another for-profit company since 1991. It became Province's second hospital in Indiana.
"We think Indiana is obviously a state in which we don't mind having a hospital, since we've just acquired a new one," quipped Merilyn Herbert, a spokeswoman for Brentwood, Tenn.-based Province.
She and officials from other rural for-profit chains generally say they do not have geographic acquisition strategies, but as a group, these chains have been making inroads into states that have not traditionally been their stomping grounds.
Robert Moore, vice president of the Indiana Hospital and Health Association, said that the state's number of county- or city-owned hospitals has declined in recent years. Of the state's 116 acute-care hospitals (excluding two veterans' hospitals), 39 are owned by counties or cities, 38 are community not-for-profits, 29 have religious affiliations and 10 are investor-owned.
When Moore arrived at the hospital association in 1987, Indiana had only three for-profit hospitals, he said. In addition, before 1995, at least 48 of the hospitals were publicly owned.
"I think that certainly they're looking for good facilities, good hospitals, good communities, and that when the opportunity presents itself to make a presentation or an acquisition, they're going to do that," said Ken Stella, president of the hospital association. "I think the investor-owneds are looking for good communities in the Midwest, looking for opportunities, and then I think there's also the hospital that is looking for capital and needs to modernize its plant."
Stella said Indiana may be attractive because it has no certificate-of-need law and has favorable reimbursement rates and minimal regulatory oversight.
Health Management Associates, another rural chain, also has its eye on the Midwest, especially on Valparaiso, Ind. However, so far, it has not gotten its foot in the door.
The Southeast and Southwest are HMA's primary markets, said John Merriwether, an HMA spokesman. But a few years ago, HMA's former chief executive officer and current chairman, William Schoen, drove from Colorado to the company's headquarters in Naples, Fla.
"He saw a lot of opportunities just driving through that part of the country," Merriwether said. "When he got back, he decided that if it was a nonurban market that met our acquisition criteria, we'd certainly be interested in the Midwest."
Earlier this month one of HMA's acquisition vice presidents, Mike Mastej, visited Valparaiso with an eye on Porter Memorial Health System, a county-owned 279-bed hospital.
"Valparaiso is a college town, a very nice area," said HMA Senior Vice President Gary Bell. "It would be very nice if we could be chosen for a place like that."
But so far, HMA's initial approach has been rebuffed.
"It's not for sale," said Larry Sheets, president of the Porter County board of commissioners, who received the e-mail from Mastej about HMA's interest.
Andrew Snyder, a hospital spokesman, said HMA did not contact the hospital directly. He said the hospital board of trustees, as well as the county commissioners, have resisted HMA's initial courtship.