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Community entity wants to know where to grow next: Visionary Enterprises may test markets in several states

August 8, 2005

Community Health Network first exported its expertise in surgery-center management a few years ago. Now, the Indianapolis-based network wants to see how far beyond state lines it can push the growth for this moneymaking venture.

The not-for-profit hospital network is exploring Kentucky, Illinois, Ohio and other Midwestern states as possible growth sites for Visionary Enterprises Inc., according to Community CEO William Corley.

The for-profit arm of Community already runs an office and three locations in Michigan, along with five in Indiana. In 2003, it brought in $4.8 million in revenue, according to documents filed with the Internal Revenue Service.

Expanding a business like Visionary beyond state lines is unusual for hospital networks in Indianapolis, and doing it successfully can be tricky, according to accountants familiar with the local health care scene.

Corley said discussions on VEI's expansion are preliminary, and the entity represents a small slice of Community's for-profit business compared with its Indiana Heart Hospital.

Even so, he said, "this is an important endeavor. It gives us an opportunity to generate some additional profit in other markets."

VEI-which was founded in 1991 and later changed its name from Voluntary to Visionary Enterprises-makes most of its money through joint ventures with physicians on surgery centers. It also manages office buildings and doctor practices.

Not-for-profit hospital networks form for-profit entities so they can partner with doctors in a business and not worry about losing their tax-exempt status, said Edmund Abel, director of health care services for the Indianapolis-based consulting firm Blue & Co.

Neither Abel nor Katz Sapper & Miller partner David Charles knows of another Indianapolis hospital network taking this approach to growth. Charles said most systems try to build in Indiana or in areas around their hospitals.

Two-St. Vincent Health and St. Francis Hospital & Health Centers-have parent companies with extensive out-ofstate businesses.

Charles said he thinks Community is well-positioned to handle an expansion, because it has strong management as well as a good relationship with doctors.

"It's a business venture, and I don't think it's a lot different than other consulting companies or practice-management companies going out into other territories," Charles said.

However, Abel has seen hospital ventures outside core markets fail in other cities because they did not have enough strong managers to run the far-flung locations.

Community, he noted, has experience with that management challenge because its Indianapolis network "is a little spread out and they do a good job with it."

Corley said VEI started out with no plan to move into other states. It began as a joint venture with surgeons who wanted to build an ambulatory surgery center near Community North.

The surgeons wanted operating rooms that would not be thrown off schedule by emergencies, which can happen with hospitals. And Community wanted to maintain a relationship with its doctors.

As a result, the first Indiana Surgery Center opened in 1991 near the north campus. Community then entered joint ventures with doctors to build centers at Community Hospital East and in Greenwood, Noblesville and Kokomo.

VEI grew beyond state lines after a contact in Michigan asked hospital officials to consider doing business in that state. VEI opened three centers in Michigan last year and now has one on the drawing board for Illinois.

All this, Corley said, has happened without seeking the business. Now VEI is trying to figure out whether it should make a push for more growth.

"A lot of these opportunities have just come to us," Corley said. "It's not one of these things that we had this grand plan to do this in other states, because we didn't."
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