Indiana University Health, Indianapolis, will enter a two-hospital joint venture with Community Health Systems, Franklin, Tenn., as Indiana's largest health system scales back acute-care operations.
Community Health Systems, one of the nation's largest publicly traded health systems, will acquire 80% of IU Health's hospitals in La Porte, Ind., and Knox, Ind., under a newly announced deal. The move comes as IU Health pursues an aggressive plan of outpatient care expansion and set its sights on growth of its health insurance arm.
The system's decision to divest two hospitals comes after it closed another IU Health hospital in April and also announced it would launch a dozen urgent care clinics through 2016. The 92-bed IU Health Morgan Hospital in Martinsville, Ind., closed last spring and now operates an emergency room and offers outpatient care. The first urgent care clinics opened in September. Officials outlined the system's new strategy in a recent filing to investors, describing the status of their efforts as “in the implementation stage.”
The deal, which is expected to close in the first quarter next year, will leave IU Health with 15 hospitals. Terms of the deal were not disclosed.
“It's important that LaPorte and Starke have a partner that enables regional network density which is critical in population health management and which CHS provides,” said IU Health spokeswoman Whitney Ertel.
A greater focus on population health is among the priorities of IU health's five year strategic plan, Ertel said.
The new direction is one of several changes for IU Health. The system picked up hospitals and physicians in a growth push that lasted eight years and ended in 2012. That was followed by a plan to slash operating expenses. That resulted in layoffs but bolstered its operating margin. In September, the system announced new president and CEO Dennis Murphy.
IU Health ended the first nine months of the year with an operating margin of 13.2% on revenue of $4.5 billion. The system's premiums from health plan enrollees increased 66% to roughly $300 million compared with the first nine months a year ago.
Community Health System will operate 11 Indiana hospitals after the deal.
“We will support the work of these hospitals to improve the overall health of their communities by investing capital and expanding resources for physicians and employees to deliver high quality care,” said Wayne Smith, chairman and chief executive officer the company in a news release.
The deal, which is expected to close in the first quarter next year, will leave IU Health with 15 hospitals. Terms of the deal were not disclosed.
“It's important that LaPorte and Starke have a partner that enables regional network density which is critical in population health management and which CHS provides,” said IU Health spokeswoman Whitney Ertel, *A greater focus on population health is among the priorities of IU health's five year strategic plan."
IU Health's insurance arm has also grown rapidly and was among three insurers chosen at the end of 2014 to operate Indiana's $4 billion Medicaid program. MDwise, along with Anthem Blue Cross and Blue Shield and Managed Health Services of Indiana, will receive lump-sum payments to provide coordinated care for 84,000 aged, blind and disabled Medicaid enrollees who also qualify for Medicare, a population often referred to as dual-eligibles.
