Indiana Heart Hospital and Health Care and Clarian and Community Health Network and Doctors and Specialty Hospitals and Hospitals and Health Care & Life Sciences

Clarian buys piece of Indiana Heart Hospital

February 25, 2008

Clarian Health has acquired a controlling stake in a cardiology practice based at the Indiana Heart Hospital, which is owned by Clarian competitor Community Health Network.

Clarian will place several people on the board of directors of Heart Partners of Indiana, which includes nine cardiologists. Those doctors will begin to see patients at Clarian-owned or affiliated hospitals.

Heart Partners will continue to see patients at Community's hospitals. But Community officials aren't pleased by the deal, and say they're going to re-evaluate their relationship with Heart Partners.

"We hope those relationships continue. We just don't know how it's going to work," said Tom Malasto, Indiana Heart Hospital's CEO. "Heart Partners of Indiana has made a business decision, obviously. The Indiana Heart Hospital and Community Health Network have business decisions to make."

Heart Partners' deal with Clarian points up the value of heart doctors to hospitals, which have invested heavily in heart facilities to woo patients. Fighting to keep or steal heart specialists is just the latest front in a war playing out locally and nationally to capture the hearts and money of patients.

Dr. Ed Harlamert, president of Heart Partners, said the cardiologists have felt "negative pressure" from Community officials since informing them of their deal with Clarian in recent weeks.

"They're not happy that we're venturing out into other health care networks," Harlamert said.

Officials from Clarian declined to say how much Clarian paid to acquire control of Heart Partners, the largest of six physician groups at the Indiana Heart Hospital. But the latest move by the state's largest hospital system is sure to stir up further tension in the local health care market.

Leaders of Indianapolis-area hospitals have criticized Clarian for building for-profit hospitals in the Indianapolis suburbs of Avon and Carmel and for announcing plans to build one in Fishers. Clarian also has acquired land in Johnson County.

It's always a big deal for hospitals when cardiologists shift their allegiances. Local cardiologists say they are seeing more and more patients. Indianapolis' hospitals, all of which have specific hospital beds dedicated to heart patients, need a high volume of patients to keep those beds filled.

And heart patients can be lucrative. In fact, hospital consultants say the service lines with the largest profit margins are heart, cancer and orthopedic care.

"A lot of what happens in a hospital has to do with cardiology," said Mark Blessing, a BKD accountant who works with many physician practices. "Hospitals are always interested in making sure that they have specialists. They are putting in most of the volume."

Harlamert said that Community talked to Heart Partners late last year about acquiring the practice. However, Malasto said no Community official ever offered to acquire Heart Partners.

Harlamert said Heart Partners was attracted to the additional resources Clarian brings to heart care because of its close tie with the Indiana University School of Medicine.

Right now, Heart Partners' cardiologists see patients at three Community hospitals: the Indiana Heart Hospital, Community North and Community Anderson. Some of its doctors also see patients in Tipton and Greensburg.

Soon, Heart Partners doctors will begin to see patients at Tipton Hospital, which is closely affiliated with Clarian. Heart Partners also might do procedures at Methodist Hospital, said Dr. Richard Graffis, Clarian's chief medical officer.

The cardiologists also will see patients at the yet-to-be-built Clarian Fishers hospital. Clarian is looking for physicians to invest in its Fishers hospital, but Harlamert said Heart Partners has no plans to do so.

The Fishers hospital might cause the most problems for Community. Its Indiana Heart Hospital is in the Castleton area, just nine miles from the Fishers site where Clarian will build. That hospital is scheduled to open in 2010.

"I question the need for additional beds in this part of the community," said Malasto, the CEO of Indiana Heart Hospital.

That 88-bed hospital has been widely praised for its heart care. Thomson Healthcare, a market information company, named it one of the nation's top 100 hospitals for heart treatment. The St. Vincent Heart Hospital and St. Vincent Indianapolis were the only other Indianapolis-area facilities to make that list.

Heart disease is one of the most prevalent ailments in the nation. When heart patients need a procedure done, it's typically done in a hospital, or at least a hospital's outpatient center.

Medicare pays roughly $30,000 for each pacemaker or defibrillator a cardiologist implants. Commercial insurers such as Anthem Blue Cross and Blue Shield pay slightly more than Medicare. Clarian, which has a large Cardiovascular Center at Methodist Hospital, performed 154 of those procedures in 2006, according to its Web site.

Even more common procedures, such as catheterizations, can bring in significant money. Anthem says it pays Clarian at least $7,500 for each outpatient catheterization it does. Clarian doctors performed 332 such procedures in 2006.

However, the profit margins on heart procedures have come down in the last decade. As patients age, more of them are paying with Medicare, which typically pays the hospital for its costs but little more. Commercial insurers, which use Medicare payments as a benchmark, also have reduced the amounts they pay for heart procedures.

"They're feeling the pinch of decreasing reimbursement and increasing practice overhead," Bill Thompson, managing partner of the law firm Hall Render Killian Heath & Lyman, said of cardiologists. "They're working harder and making less."

But a hospital system can help a doctors' group negotiate contracts with health insurers, beef up information technology, and handle other administrative issues, Thompson said. Hospitals, meanwhile, have built up so much capacity--buildings, beds and technical staff--that they are desperate to have physicians bring their patients in for procedures.

"Everybody is sensitive about their [physician] staff because they think we're overbedded," said Graffis, Clarian's chief medical officer. "I think we're OK. I'm not concerned. We may even need to grow in the future."

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