Franciscan, IU Health woo more docs

June 6, 2011

So much for that prediction. A week after a report declared Indianapolis hospitals nearly saturated on physician hiring, two more deals were announced.

Franciscan St. Francis Health acquired Kendrick Regional Center for Colon and Rectal Care, adding Kendrick's six surgeons to its 150-doctor St. Francis Medical Group.

And Indiana University Health Physicians nabbed the remaining nine (out of 13) physicians of University Dermatology Inc., bringing its total employed physicians to more than 550.

Both deals closed June 1—just five days after the Center for Studying Health System Change issued a report saying Indianapolis was nearing a saturation point on hospital employment of physicians.

Indianapolis’ major hospital systems have been trying to gobble up physicians for the past three years. Especially attractive to them are surgical specialists, such as the Kendrick doctors.

Kendrick had a close connection to St. Francis, with its surgeons practicing at St. Francis’ Beech Grove, Indianapolis and Mooresville hospitals. The surgeons also perform surgeries at other hospitals.

Kendrick operates a colorectal surgery residency program and its physicians participate in clinical trials of new products and procedures for colon cancer and rectal cancer.

University Dermatology is filled with physicians who are also professors at IU School of Medicine. IU Health has been trying for more than two years to consolidate physicians employed by IU med school and its Methodist Medical Group. The practice has eight locations in the Indianapolis area, with one more opening in July.

Physicians are interested in becoming hospital employees because their reimbursement rates have been crimped and opportunities to enhance their revenue streams—through physician-owned surgery and imaging centers—have been curtailed. At the same time, physicians are being forced by the federal government to adopt electronic medical records systems, a significant expense.

Hospitals are happy to employ physicians to increase referrals to their facilities. Also, health plans are adopting payment methods to require physicians and hospitals to work closely to keep patients healthy long term or to split payments for complex episodes of surgeries.

The Center for Studying Health System Change, based in Washington, D.C., said hospital employment of physicians got going sooner and has proceeded faster in Indianapolis than in other markets.

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