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Hospital market shares shift

October 13, 2014

Local hospital market shares, which in the past changed slowly and in small increments, saw fairly significant movement last year.

Community Health Network claimed 23.1 percent of the central Indiana inpatient market last year, up from 21.5 percent the year before.

Meanwhile, Indiana University Health saw its share of the inpatient market decline from 28.8 percent in 2012 to 27.8 percent last year.

Those figures come from a report prepared by IU Health as part of a $70 million bond sale it intends to stage between now and Dec. 1, to refinance older debt. The report is based on data collected by the Indiana Hospital Association.

Not all central Indiana hospitals have publicly disclosed their 2013 results for inpatient discharges, so the IU Health report provides an earlier glimpse of how the tumultuous year altered the landscape among local hospitals.

In 2013, three of the four major hospital systems—IU Health, Franciscan St. Francis Health and St. Vincent Health—all saw overall patient visits fall, prompting each hospital system to lay off roughly 900 workers.

Community, however, was the only one of the four major health systems to see a rise in patient traffic.

From 2012 to 2013, St. Vincent Health added 0.6 percentage points to its market share, reaching 20.4 percent, according to the IU Health report. Franciscan St. Francis Health lost 0.5 percent points of its market share during that time period, falling to 9.8 percent.

The two major hospital systems with declining market shares—IU Health and Franciscan—are the ones that have embraced the Medicare accountable care programs, which were launched by Obamacare. Meanwhile, Community and St. Vincent have not participated in those programs, which offer bonuses to health systems that slow the rate of growth in spending for a specific group of patients.

Brian Williamson, a bond analyst at Standard & Poor’s, highlighted different factors for IU Health’s declining inpatient business.

“IU Health's admissions have declined because of the impact of the changing health care environment. IU Health has seen both a rise in observation cases, up 11 percent in fiscal 2013, and an impact of delayed health care decisions with the growth of high-deductible health plans,” Williamson wrote in an August report. He added, “Management also notes that the rise in retail health clinics is having an impact on utilization, and notes a rise in other business models such as Walgreens' entry into the infusion business.”

And independent hospitals—the county-owned hospitals surrounding Indianapolis and the Indiana Orthopaedic Hospital—saw their market share fall by 0.6 percent points to 19.1 percent, collectively.

Nearly all hospitals will find ways to quibble with the way IU Health calculated market shares—including IU Health itself.

The data do not count observation stays, in which patients have acute medical needs but are not actually admitted to the hospital. If observation at all central Indiana hospitals were counted, IU Health’s 2013 market share would have been 29 percent.

The numbers also do not include psychiatric, rehabilitation or normal newborn hospital stays.

Also, IU Health included hospitals in Tipton and Kokomo, but excluded those in Anderson, where Community and St. Vincent each operate a hospital.

If 2013 results from those hospitals are included in the 2013 figures, St. Vincent’s market share would have been 22.2 percent and Community’s would have been 24.8 percent.

The figures have also been affected by the various hospital systems opening, c losing or acquiring hospitals.

In December 2011, IU Health opened its Saxony hospital in Fishers.

In 2012, Franciscan closed its hospital in Beech Grove after it expanded its hospital on the southern edge of Indianapolis. The Beech Grove hospital sat just six miles away from Community Hospital East, which reported a significant rise in patients that would have previously gone to the Beech Grove hospital.

Also in 2012, Community acquired Howard Regional hospital in Kokomo. The year before, it acquired Westview Hospital in Indianapolis.

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