Health Care

Courting continues between Clarian, Morgan: Both sides look to build on months-old agreement

December 18, 2006

A working relationship Clarian Health Partners started in March with Morgan Hospital & Medical Center might evolve into something much bigger in the new year.

Representatives of both systems say they want to strengthen their regional development agreement, and they count an acquisition of the county-owned hospital by Clarian-the largest hospital system in the state-as one of many possibilities they might examine.

"I think both sides have considered a number of options from clinical affiliations to consolidation," Clarian spokesman Jon Mills said, adding that nothing is off the table.

But hold the wedding bells. Indianapolis-based Clarian and Martinsville's Morgan also are fuzzy on how to proceed next.

"I think it's in both our interests to get closer in 2007. We just don't know what that means yet," said Tom Laux, Morgan's CEO.

So far, the agreement has given Morgan better access to high-level care and allowed Clarian to expand its patient base in the south-side back yard of a competitor, St. Francis Hospital & Health Centers.

Their expanding relationship reflects a long-standing trend among Indiana's county-owned hospitals and their private counterparts and makes sense for both sides, several health care observers said.

After launching their five-year development agreement last spring, Clarian and Morgan focused cooperation on cancer care, women's services and orthopedics.

Clarian also has worked with Morgan to improve advanced life support services in southern Morgan County, Laux said.

In January, the two hospitals will launch a pediatrics telemedicine program involving Clarian's Riley Hospital for Children. That will allow Riley specialists to consult on patients in Martinsville, with neither side having to make a long commute.

Clarian also includes Methodist and IU hospitals in Indianapolis and the suburban Clarian North and West medical centers.

Morgan also has a couple of construction projects in mind, and hospital officials have talked about asking Clarian for help as those plans develop. The hospital wants to start building a 77-bed patient tower on its Martinsville campus next year.

In addition to that, it owns 35 acres of land at the intersection of state roads 144 and 37. Morgan officials already have received preliminary approval to build a medical office building and clinic there.

Even if Clarian provides no direct assistance for those projects, the development agreement between the two systems can help the smaller county hospital arrange financing, noted Bob Brandenburg, a partner with the Indianapolis office of BKD LLP, an accounting and advisory firm.

"There's more security there for the bondholders," he said.

Neither system would offer details about possibilities for future cooperation. Laux said such discussions at this point would "really be conjecture." He added that the two hospitals probably will draft a plan after seeking input from the public, elected officials and others.

"This will be an open process, as I see it, involving Clarian and Morgan Hospital & Medical Center and the public," he said.

Merging the hospital with Clarian is just one option, Laux said, adding that such a plan would have to survive several layers of approval and public hearings first.

"If and when there were to be a formal proposal, we'd of course consider it," he said. "We would need to see a real benefit to the community."

A purchase wouldn't be unusual. Indiana had about 50 county hospitals 20 years ago and now has 37, said Bob Morr, vice president of the Indiana Hospital and Health Association. He attributes much of that decrease to the acquisition of county hospitals by their private counterparts.

Clarian's agreement with Morgan gives it more of a presence in a growing section of central Indiana. Morgan County's population is expected to increase 9 percent this decade, according to projections from Indianapolis-based Health Evolutions Inc.

Neighboring Johnson and Hendricks counties are expected to grow 21 percent and 18 percent, respectively.

This might soften the impact of Clarian's presence in the area. For instance, nearby Hendricks Regional Health hasn't seen a sharp drop in business since Clarian West opened in Avon in 2004.

"The party line has been they have not felt large shifts of patients," said Edmund Abel, director of health care services for the Indianapolis consulting firm Blue & Co.

"The Clarian people will tell you, financially, they are ahead of where their plan was, so that tells me there hasn't been a world of hurt."

Other health care providers already serving the market include the 80-bed St. Francis Hospital-Mooresville.

That hospital hasn't seen a drop in patients since Clarian's arrival, Executive Director Larry Heydon said.

Clarian's talks to expand its relationship with Morgan didn't surprise him, especially now that it has established Clarian West.

"This seems the next logical place to concentrate on the southwest side of Indianapolis," he said.
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