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IU Health buying docs in hospital ventures

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Indiana University Health is now quietly unwinding the physician ownership of its hospitals in Carmel and Avon—which sparked loud controversy when they opened in 2004 and 2005.

The move by IU Health, formerly known as Clarian, will remove two of the most recognizable examples of physician-owned hospitals, leaving the Indiana Orthopaedic Hospital as the only Indianapolis-area hospital that is majority-owned by physicians.

The culprit is the 2010 health care reform law, the Patient Protection and Affordable Care Act. It stipulates that physician-owned hospitals cannot increase their total number of beds, operating rooms and procedure rooms—or if they do, they will no longer be eligible for payments under the federal Medicare program.

Since Medicare, which covers all Americans 65 and older, is the largest health plan in the nation, no health care provider can operate profitably without it.

Carmel and Avon are growing communities, and IU Health wanted to have the option of expanding its hospitals there as needs arise, said Ron Stiver, IU Health's senior vice president of engagement and external affairs.

“Nothing’s inevitable at this point, but we’d like to have that opportunity,” Stiver said. “It was a no-brainer.”

The hospital in Avon, IU Health West, was 20-percent owned by physicians. They will all be cashed out within a month, Stiver said, though he declined to disclose the details of the buyouts.

At IU Health North in Carmel, the process is just getting started to cash out the physicians, who own 36 percent of that hospital.

Both the Avon and Carmel hospitals will be converted to not-for-profit status, according to IU Health officials.

Also, IU Health had intended to sign up physician investors for its next hospital, IU Health Saxony in Fishers. But that option is now off the table.

Physicians surged into ownership of their surgery centers and even hospitals in the 1990s as a way to better control patient care—and to boost their incomes. In  Indianapolis, the Indiana Orthopaedic Hospital and the IU Health Hospital were joined by two physician-owned heart hospitals: The Indiana Heart Hospital in Castleton and the St. Vincent Heart Center in Carmel.

The physicians owners of the Indiana Heart Hospital were bought out in 2008 by Community Health Network. And St. Vincent Health, by acquiring The Care Group physician practice in 2010, has control of the St. Vincent Heart Center.

Physician-owned hospitals like the Indiana Orthopaedic Hospital have produced the best patient outcomes, but were criticized harshly for siphoning off the most lucrative patients from community hospitals, who claimed they were stuck with too many money-losing patients to turn a profit.

Those arguments finally gained traction during the 2009 debate over health care reform, and the growth restrictions made it into the final law.

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  • Maintain Journalistic Quality
    In the interest of unbiased reporting, I suggest that the author use the word "impetus" rather than "culprit" in the paragraph three reference to the 2010 health care reform law. If avoidance of property tax was the real impetus, however, then that sentence becomes a misstatement of the facts, rather than just a biased statement.
  • Tax Exempt Yet Uninsured Sent To Governments Wishard To Keep Profits Up.
    JK,

    Whats going on between the city of Indianapolis and IU Health on converting everything to tax exempt status.

    How does that impact IU Health's expansion plans downtown and our tax base?
  • The Truth
    The reason IU Health is converting these hospitals to non-profit organization has more to due with avoiding paying property/income taxes than a obscure footnote in the healthcare bill.

    They calculated that it was far cheaper to buy these doctors out than to lose the tax exempt benefits on all the existing and new hospitals they are building or acquiring around the state.

    There tax exempt status has become an issue as they expand rapidly statewide playing a shell game with profits between their mix of for profit and tax exempt subsidiaries.

    In fact, Indianapolis is backing a $200 Million expansion of IU Health based upon the fact these new buildings would be taxed to pay back the taxpayer bonds.

    Appears IU Health had no intention of keeping its end of this deal.

    Life Sciences Project Could Mean 2,400 Jobs

    Mayor Ballard said â??This development also means remediation of brownfield sites and unsafe buildings, adding exempt properties back to the tax base, investment in public infrastructure, and investment in public safety.â??

    http://www.insideindianabusiness.com/newsitem.asp?id=44163
  • NOT just claims..
    Privately owned hospitals don't have to live up to the expectation of not for profit. They can turn away patients. AS such, the non insured are medicaid patients that don't pay the bills get siphoned to the not for profits. EMTALA law also requires NON-profits that take medicare to see ANYONE and provide stabilizing care, which makes essentially a non-funded government mandate. NO other profession or business is subject to so large a degree. As far as quality of care--when your patients can all afford their aftercare and follow up, they will have better results. Their educational levels also tend to be a higher level. So please look at all the facts before being critical of non-profit institutions.

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  1. By Mr. Lee's own admission, he basically ran pro-bono ads on the billboard. Paying advertisers didn't want ads on a controversial, ugly billboard that turned off customers. At least one of Mr. Lee's free advertisers dropped out early because they found that Mr. Lee's advertising was having negative impact. So Mr. Lee is disingenous to say the city now owes him for lost revenue. Mr. Lee quickly realized his monstrosity had a dim future and is trying to get the city to bail him out. And that's why the billboard came down so quickly.

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  3. Yes it does have an ethics commission which enforce the law which prohibits 12 specific items. google it

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  5. 1. There is no allegation of corruption, Marty, to imply otherwise if false. 2. Is the "State Rule" a law? I suspect not. 3. Is Mr. Woodruff obligated via an employment agreement (contractual obligation) to not work with the engineering firm? 4. In many states a right to earn a living will trump non-competes and other contractual obligations, does Mr. Woodruff's personal right to earn a living trump any contractual obligations that might or might not be out there. 5. Lawyers in state government routinely go work for law firms they were formally working with in their regulatory actions. You can see a steady stream to firms like B&D from state government. It would be interesting for IBJ to do a review of current lawyers and find out how their past decisions affected the law firms clients. Since there is a buffer between regulated company and the regulator working for a law firm technically is not in violation of ethics but you have to wonder if decisions were made in favor of certain firms and quid pro quo jobs resulted. Start with the DOI in this review. Very interesting.

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