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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. Cramer agrees...says don't buy it and sell it if you own it! Their "pay to play" cost is this issue. As long as they charge customers, they never will attain the critical mass needed to be a successful on company...Jim Cramer quote.

  2. My responses to some of the comments would include the following: 1. Our offer which included the forgiveness of debt (this is an immediate forgiveness and is not "spread over many years")represents debt that due to a reduction of interest rates in the economy arguably represents consideration together with the cash component of our offer that exceeds the $2.1 million apparently offered by another party. 2. The previous $2.1 million cash offer that was turned down by the CRC would have netted the CRC substantially less than $2.1 million. As a result even in hindsight the CRC was wise in turning down that offer. 3. With regard to "concerned Carmelite's" discussion of the previous financing Pedcor gave up $16.5 million in City debt in addition to the conveyance of the garage (appraised at $13 million)in exchange for the $22.5 million cash and debt obligations. The local media never discussed the $16.5 million in debt that we gave up which would show that we gave $29.5 million in value for the $23.5 million. 4.Pedcor would have been much happier if Brian was still operating his Deli and only made this offer as we believe that we can redevelop the building into something that will be better for the City and City Center where both Pedcor the citizens of Carmel have a large investment. Bruce Cordingley, President, Pedcor

  3. I've been looking for news on Corner Bakery, too, but there doesn't seem to be any info out there. I prefer them over Panera and Paradise so can't wait to see where they'll be!

  4. WGN actually is two channels: 1. WGN Chicago, seen only in Chicago (and parts of Canada) - this station is one of the flagship CW affiliates. 2. WGN America - a nationwide cable channel that doesn't carry any CW programming, and doesn't have local affiliates. (In addition, as WGN is owned by Tribune, just like WTTV, WTTK, and WXIN, I can't imagine they would do anything to help WISH.) In Indianapolis, CW programming is already seen on WTTV 4 and WTTK 29, and when CBS takes over those stations' main channels, the CW will move to a sub channel, such as 4.2 or 4.3 and 29.2 or 29.3. TBS is only a cable channel these days and does not affiliate with local stations. WISH could move the MyNetwork affiliation from WNDY 23 to WISH 8, but I am beginning to think they may prefer to put together their own lineup of syndicated programming instead. While much of it would be "reruns" from broadcast or cable, that's pretty much what the MyNetwork does these days anyway. So since WISH has the choice, they may want to customize their lineup by choosing programs that they feel will garner better ratings in this market.

  5. The Pedcor debt is from the CRC paying ~$23M for the Pedcor's parking garage at City Center that is apprased at $13M. Why did we pay over the top money for a private businesses parking? What did we get out of it? Pedcor got free parking for their apartment and business tenants. Pedcor now gets another building for free that taxpayers have ~$3M tied up in. This is NOT a win win for taxpayers. It is just a win for Pedcor who contributes heavily to the Friends of Jim Brainard. The campaign reports are on the Hamilton County website. http://www2.hamiltoncounty.in.gov/publicdocs/Campaign%20Finance%20Images/defaultfiles.asp?ARG1=Campaign Finance Images&ARG2=/Brainard, Jim

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