In spite of all the consolidation lately among hospitals, Community Health CEO Bryan Mills says the future of hospital systems will hinge more on partnerships like the one Community struck last week on its rehab hospital.

Indianapolis-based Community is partnering with Nashville-based Centerre Healthcare to operate a new $23 million rehab facility in the Castleton area.

The hospital, which will include 60 beds in 63,000 square feet of space, is scheduled to open in the second quarter of 2013. Construction on or near the Community Hospital North campus will begin next year.

Community’s inpatient rehabilitation program, called Hook Rehabilitation, will move its services and staff to the new facility when it opens and close the 42-bed unit in Community Hospital East.

The new location is immediately off an Interstate 465 exit, and Mills said he expects that proximity to immediately draw more patients than currently come to the east-side location.

Centerre, which has developed a specialty running rehab centers, is providing nearly all the $23 million in capital and will manage the facility, Mills said. Yet Community will retain majority ownership and most likely will continue to employ the facility’s staff.

“If we can improve our service, improve our access, improve our outcomes, and do that with little or no capital and maintain our control, we’re satisfied,” Mills said. And he’s looking to do similar partnerships where he can find them.

“If we look at health care of the future, this is a series of partnerships. We can’t be all things to all people,” Mills said, adding he’s interested in partnerships with employers, long-term-care facilities and even health insurance companies. “Who can we partner with such that we can continue to be responsible for the overall care of people without having to do everything on our own?”

Partnerships may appeal more to Community than its larger peers. Even though Community's five hospitals have achieved the No. 2 market share in Indianapolis and its eight surrounding counties, Community does not have pockets as deep as Indiana University Health and St. Vincent Health, each of which has 20 hospitals throughout the state.

While IU Health and St. Vincent have been aggressively adding to their far-flung networks in recent years, Community has acquired only one hospital, Indianapolis-based Westview Hospital. Community also entered a partnership with Johnson Memorial Hospital in Franklin.

Community has acquired more physician practices than its competitors, pulling in more than 500 doctors to its fold. But now IU Health and St. Vincent are catching up.

Hospitals have been merging with one another and with physicians as the federal Medicare program and even private health plans are pushing them to enter payment arrangements that require health care providers to take responsibility for the health of patients, no matter what kind of care they need. That change, coupled with flattening reimbursement levels and the need to spend on electronic medical record systems, has pushed health care providers to join forces to handle the financial strain.

So far in central Indiana, the consolidation story has been one of Indianapolis-based hospital systems acquiring county-owned hospitals. But Greg Pemberton, a health care attorney at Indianapolis-based law firm Ice Miller LLP, said that even Indianapolis-based organizations may find themselves needing to join forces or join larger groups. Locally based St. Vincent, for example, is part of the far larger Ascension Health system of Catholic hospitals based in St. Louis.

"I think the larger health care systems will find themselves questioning whether they can remain independent," Pemberton said. "The real challenges long term will be access to capital."

Mills said Community is “100 percent committed” to its Community East Hospital, which has at times struggled financially as the number of patients in its area that pay with lucrative employer-sponsored health insurance has declined.

Mills said moving the rehabilitation facility out of Community East is part of an ongoing effort to reduce the space used at the hospital, which was built in the 1950s for 900 inpatient beds. If it were built today, Mills said, changes in medicine and health care funding would require it to have only 200 inpatient beds.

“We are committed to the east side,” Mills said, but added, “We just have a much larger facility than we need.”