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Community Health eyes expansion as it closes Westview merger

June 28, 2011
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As part of its agreement to add Westview Hospital to its system, Community Health Network will assume $10 million in debt, spend $7.5 million on upgrades, and help open an outpatient center in Speedway, the two hospitals announced Tuesday morning.

They will also look for more locations in western Indianapolis to add outpatient centers.

Indianapolis-based Community on Friday closed its merger with Westview, a 67-bed hospital at West 38th Street and North Guion Road, along with its HealthPlex sports club and 180-member physician network.

Westview will maintain its own board, and will oversee credentialing of physicians and operations of its medical training programs. Community has a similar relationship with Community Hospital Anderson, in contrast to its four other hospitals, all of which are jointly governed by Community itself.

Community and Westview first announced in November they were in talks to form a “strategic alliance.” On Friday, Westview’s board approved the merger.

The deal should have no impact on Westview’s 750 employees, said Westview CEO Jon Anderson. The hospital could grow its staff by adding new services, although exactly what kinds of services will be determined by Community and Westview during the remainder of this year.

Westview needed to get bigger, Anderson said, because the 2010 health care reform law and other national trends are pushing hospitals to have some of their revenue hinge on whether they keep a specific population of patients healthy.

“When you’re asked to take risk, you need a lot of volume, a lot of lives, to spread that risk,” Anderson said. He added that the system, which employs 40 physicians, also needed more “clout” with insurers.

Westview had annual revenue of $106 million in 2009, the most recent figure available. Community is more than 10 times as large, with 2010 revenue of $1.3 billion.

From Community’s perspective, Westview helps it expand into the western portion of Indianapolis for the first time. In addition to Anderson, Community has hospitals in the southern, eastern and northeastern suburbs of Indianapolis.

Community wants to make sure it has facilities accessible on all sides of the city in order to be attractive to employers who want to contract with a hospital system—either directly or through an insurer—that will take responsibility for keeping the employees healthy.

But local employers have workers that live all over central Indiana, noted Community CEO Bryan Mills.

“We can’t do that just by sitting on the east side. So we’ve got to expand,” Mills said. “We’ve got to expand north, south, east and west, if we’re going to make ourselves the easiest system to access.”

In February, Community won a three-way race for a close clinical partnership with Johnson Memorial Hospital, besting Franciscan St. Francis and Indiana University Health.

The deal, while not an acquisition, solidified Community’s presence in the fast-growing southern suburbs of Indianapolis, where it already maintains a 150-bed hospital along County Line Road. Johnson Memorial, nearly 15 miles south, is licensed for 101 beds.

And Community isn’t done.

“We’ll continue to look for other types of relationships in central Indiana to be in a [good] position,” Mills said.

By merging with Westview, Community will also be close to the new medical school being developed by Marian University. It will train 150 students per year to be doctors of osteopathy, the same brand of medical training most doctors at Westview have.

Mills said he hopes by having those students train in Westview and Community facilities, they can attract many of them to the Community system. Primary care physicians, already in short supply, are key for managing the overall health of patients. They also, by referring patients for more expensive specialty procedures, produce more than 10 times their annual pay in other hospital revenue.

All Indianapolis-based hospitals have been aggressively buying or partnering with smaller hospitals in a bid for referrals and economies of scale. The smaller hospitals want larger partners to add physician specialty services, to expand service lines, and to have easier access to capital.

Indianapolis-based Indiana University Health has been the most aggressive acquirer of other hospitals, signing merger agreements with three county-owned hospitals in the past 10 months.
 

 

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