Health Care and Insurance and Real Estate & Retail

St. V: ERs needed in suburbs: Traditionally unprofitable service could thrive in two growing areas

April 14, 2008

Building these facilities i n proven "growth markets" such as Boone and Hamilton counties, however, should prove more prosperous, insists St. Vincent CEO Vincent Caponi.

A more upscale demographic is the telling factor. Yet, the network of hospitals is not about to abandon its purpose of serving the needy.

"That doesn't mean the poor and underserved aren't going to be coming to our front door," Caponi said. "That's always been part of our mission. We will continue [to], and gladly, do that."

St. Vincent is set to open a $42 million, 120,000-squarefoot free-standing emergency department at Interstate 69 and Exit 10 in Hamilton County this fall. A similar, 42,500-square-foot facility at Interstate 65 and State Road 334 in Boone County should be ready sometime next year. Both will operate 24 hours a day in areas that are developing rapidly.

The Boone County project is a partnership with Witham Health Services in Lebanon and will cost $10 million to $12 million to build. It will be within the sprawling, 1,700-acre Anson development led by locally based Duke Realty Corp.

Duke's Health Care Real Estate Division is developing both medical facilities that, besides emergency serv- ices, will feature an outpatient surgery center and medical offices.

First of their kind

The two facilities are the first freestanding emergency departments it is embarking upon and, in fact, are the first of their kind in the state. A 2006 study by the Karlsberger Research Group, a health care architectural firm in Columbus, Ohio, reported emergency departments existed, or were in development, in 13 states. Indiana was not among those listed.

While the concept is several years old, according to Karlsberger, it is becoming more prevalent as part of hospitals' strategy to increase market share in lucrative suburban communities while establishing a presence in locations that ultimately might need a full-service hospital.

Locally based architectural firm BSA LifeStructures has designed emergency departments in Ohio and North Carolina. Two of them, in Raleigh, N.C., are serving patients similar to what St. Vincent is courting, firm CEO Sam Reed said.

"These are areas where there are a lot of transient professionals who are recruited by a large company and they may not have a primary care physician," he said. "Where do they go when they wake up at 2 in the morning and they need treatment? They crawl into an ER. That's how I met my physician."

Suburban hospitals in general are strategically located to attract middle-class patients with employer-sponsored, private insurance. That's where the profits are today in health care.

Constant changes to the methods in which health care is delivered, in particular a shift toward outpatient procedures, is driving the need for the facilities as well, Caponi said.

"Going out and building large hospitals in growing areas, in some cases, is replicating services," he said. "It just doesn't seem to make a lot of sense; it's very expensive."

More than 60 percent of procedures are performed on an outpatient basis, and health experts expect the amount will increase to roughly 75 percent during the next decade.

Populations growing

Unlike Boone County, where the health care market is virtually untapped, except for Witham's presence in Lebanon, Hamilton County is becoming a bastion for providers.

Near where St. Vincent is building its free-standing emergency department and medical offices, Clarian Health is constructing a hospital at Interstate 69 and Exit 10 as well. Within a few dozen yards stands one of Community Health Network's medical office pavilions.

Fishers and nearby Noblesville have been growing an average 7 percent per year in recent years, according to special estimates by the U.S. Census Bureau. The danger at I-69 is that there could be duplication and triplication of services without any cooperation between providers, said Ed Abel, director of health care services at Blue & Co., an Indianapolis accounting firm.

"That's part of the reason health care costs have gotten outrageous," he said.

St. Vincent's deal with Witham in Boone County makes more sense, he said, and represents what could be a trend of suburban hospitals forming partnerships with larger, tertiary care hospitals.

The affiliation between St. Vincent and Witham particularly is attractive to Dr. Ned Lamkin, president of the Indiana Employers Quality Health Alliance, a group focused on improving health care in Indiana.

"Each of them [is] trying to fill a void, and they're trying to do it with one facility, which makes sense," he said. "The question is whether there is an unmet need and can you justify the costs, and I don't know the answer to that."

The county's population exceeds 53,000 people, according to the latest available data from the Census Bureau. Once Anson is completely developed, the mixed-use development in Whitestown is projected to push that number up about 10 percent.

In addition, corporations such as Amazon.comInc. and mail order drug supplier MedcoHealth Solutions Inc. are opening distribution centers within Anson that collectively will employ more than 2,000 workers.

The details of the partnership between St. Vincent and Witham, in terms of ownership of the facility, have yet to be finalized, Caponi said.

St. Vincent chose Witham because the two have an existing relationship in which they share some services, and both are members of the Suburban Health Organization. It is composed of eight central Indiana hospitals cooperating to promote quality, efficiency and patient access.

Since the mid-1990s, St. Vincent Health has built up a network of 17 Indiana hospitals through a series of acquisitions. Annual billings by St. Vincent, including its flagship hospital on West 86th Street, have quadrupled during that time to nearly $2 billion.

With 11,600 employees, the not-forprofit chain is now Indiana's eighth-largest employer. St. Vincent is a subsidiary of St. Louis-based Ascension Health, the nation's largest operator of Catholic hospitals.
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