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St. Vincent to buy Care Group, city's largest cardiology practice

January 30, 2010

St. Vincent Health is near an agreement to take over The Care Group LLC, the city’s largest independent physician practice and largest cardiology group in the nation.

In discussions that are not yet complete, St. Vincent would employ Care Group’s 139 physicians and a total staff of nearly 700.

The deal would need approval from Ascension Health, the St. Louis-based parent organization of St. Vincent Health. But Care Group employees already were told about the likely impact on them at a meeting in early January.

Kevin Speer, St. Vincent’s chief strategy officer, said he expects the deal to close in the next few months. Financial terms have not been finalized.

“We believe and they believe that—based on what’s occurring in the health care market and in Washington, D.C.—there would be additional opportunities to improve quality and care,” Speer said about the rationale for the deal.

The Care Group would bring to St. Vincent 94 cardiologists, who are key for filling operating rooms with high-dollar heart procedures. The Care Group also includes 41 primary care physicians.

The Care Group long has treated most of its patients at St. Vincent facilities. Some physicians with The Care Group are joint investors in the St. Vincent Heart Center of Indiana on North Meridian Street in Carmel.

But it’s been harder for cardiologists to remain independent following a shift in federal policy in the past decade, which has driven down reimbursement for cardiologists, as well as for other specialists. The Care Group is the fourth Indianapolis-area cardiology practice to sell out to a hospital in the past two years—and by far the largest.

St. Vincent had sat on the sidelines of the recent trend of hospitals acquiring specialist physicians. But in November, it bought a stake in OrthoIndy’s hospital and agreed to allow OrthoIndy to oversee orthopedic care at St. Vincent’s hospitals.

Local hospitals are all involved in a race to lock up specialist physicians in anticipation of major changes to the financing of health care.

Dr. Ben Park, CEO of American Health Network, the second-largest independent physician practice in the region, said there’s a bidding war for physicians.

“This is not going to lower health care costs,” he warned. He said the federal Medicare insurance program now pays cardiologists $500 if they use their own facilities to do an outpatient catheterization procedure. But if they do the same procedure at a hospital, Medicare will pay the hospital $3,000.

The St. Vincent/Care Group deal is coming together at a time cardiologists are feeling increased financial pressure. Just this year, the Medicare program ordered a 13-percent cut to cardiologists’ reimbursement.

The changes are a big deal because Medicare insures people 65 and older, who have the highest incidence of heart problems. Also, private health insurers often follow Medicare’s lead on reimbursement policy.

Nationally, those changes have led a flood of cardiology practices into the arms of hospitals in the past two years, said Bob Cimasi, president of Health Capital Consultants in St. Louis, a financial adviser to hospitals and physicians.

“A lot of our [physician] clients have taken the view that, ‘Look, the handwriting is on the wall,’” he said, adding that physicians view the intent behind the shift in federal policy as essentially “relegating physicians to be either sharecroppers or hired help.”

Calls to Care Group administrators were not returned.

Flurry of deals

The local scramble for cardiology practices got going in early 2008. Community Health Network was trying to buy out and employ all the heart doctors practicing at its Indiana Heart Hospital.

But one group, Heart Partners of Indiana, rebelled against the idea. Heart Partners instead sold 51 percent of its practice to the Clarian Health hospital system.

Heart Partners, which includes nine cardiologists, intended to practice at a new Clarian hospital in Fishers, but construction on that project was temporarily stopped last year, pushing back its opening date.

Meanwhile, Community came to terms with the other physician groups at the Indiana Heart Hospital. In December 2008, it bought out their investment stakes in that hospital and brought them on as employees.

The physicians are now co-managing a new subsidiary called Community Heart & Vascular, which handled cardiology work at all five of Community’s Indianapolis-area hospitals.

St. Francis Hospital & Health Centers also got in the game last year. In July, it acquired Indiana Heart Physicians Inc., a 23-doctor cardiology practice on the south side of Indianapolis.

Community has extended beyond cardiology. It has either hired or signed integration contracts with more than 250 physicians in other specialties, including lung, breast and diabetes doctors. Those deals have shifted physician reimbursement from being entirely on volume of procedures to new factors, such as how well physicians communicate with other doctors and how satisfied patients are with their care.

Not be outdone, Clarian launched two initiatives to bring on more physicians. It launched a joint venture with the Indiana University School of Medicine, the Indiana Clinic, which hopes to employ more than 1,500 physicians by 2011.

Clarian also started a program called Clarian Quality Partners, which aims to sign up physicians to new contracts that base compensation on quality of care and communication with other doctors, in addition to activity levels.

“By and large, what we’re seeing now is pretty much an employment contract with a physician which usually has both productivity and other incentives built into it,” said Mark Grube, a partner at Kaufman Hall & Associates, a health care consulting firm in Skokie, Ill.

Improving care

The stated goal of these deals is to coordinate care better between doctors, eliminating duplicative tests, guiding patients through complex health systems, and, ultimately, producing better results.

Medicare and private insurers are experimenting with issuing one payment to a group of doctors and hospitals for an episode of care, such as a heart surgery, and letting them decide how to divvy up the money.

That will be far easier to do, health providers say, if all the doctors and hospitals are on the same team.

But being on the same team also will give hospital systems a stronger negotiating hand with health insurers, said Ed Abel, a hospital accountant at Blue & Co. in Indianapolis.

“If it’s all one big package, it’s much easier to market,” he said.

Cardiology has received so much attention partly because the physician practices in that area already had merged to become quite large. The Care Group, for instance, formed in 1999 following the merger of three smaller cardiology practices and 16 primary care groups.

But cardiology is also important because of the money involved. At St. Vincent’s flagship Indianapolis hospital, where Care Group physicians practice, the average heart patient racked up $22,000 per stay in 2008. For patients receiving heart surgery, average charges totaled $77,000 per case, according to data reported to the federal Medicare program.

With those kinds of numbers, it’s not surprising that cardiologists, particularly those who do surgeries and catheterizations, are handsomely paid.

According to a survey by the Medical Group Management Association, median compensation for cardiologists ranges from $427,000 a year for non-invasive cardiologists to $505,000 a year for the docs putting stents and pacemakers in patients’ chests.

St. Vincent and The Care Group have developed a strong reputation for cardiac care in recent years. Health Grades, a Colorado-based hospital quality rating company, has ranked the St. Vincent Heart Center as Indiana’s best place for heart care five years in a row.

“Cardiology is a huge product line for St. Vincent. They have been clearly on the forefront of a lot of things,” Abel said. “It’s a strong market and it’s going to get stronger.”•

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