St. Francis buys big cardiology practice

July 27, 2009

As concern grows among medical providers that health care reform augurs lower payments, St. Francis Hospital & Health Centers has agreed to absorb a large group of cardiologists that bring lucrative heart patients to its facilities.

Indiana Heart Physicians Inc. will merge with St. Francis on Aug. 1, making its 23 physicians and 150 staff members employees of the hospital system.

The move adds to a trend heating up locally and nationally as lawmakers in Washington debate major health care reform.

“The way health care reform works, no one thinks they’re going to push more money at any piece” of the industry, said Greg Pemberton, a health care mergers attorney at Ice Miller LLP in Indianapolis.

So Indiana’s doctors and hospitals are looking to link up to save money. “There’s lots of discussions,” he said.

Indianapolis-based Clarian Health is offering to buy up the practices of physicians who work at its numerous hospitals and fold them in as employees under the new Indiana Clinic, a joint venture of Clarian and the Indiana University School of Medicine, which will employ 1,500 physicians.

Also, Indianapolis-based Community Health Network hired 31 heart doctors in January—most of the staff at its Indiana Heart Hospital.

And St. Francis, which is part of Sisters of St. Francis Health Services Inc., based in Mishawaka, Ind., is in merger talks with physician groups in other specialties.



Keith Jewell, St. Francis' chief operating officer

Earlier this month, the hospital industry struck a deal with President Barack Obama, accepting payment cuts of $155 billion in the next decade if a health care reform bill extends insurance coverage to nearly all Americans—which would boost hospitals’ income.

But those cuts are only the beginning, said Keith Jewell, St. Francis’ chief operating officer, and Dr. Jeff Christie, managing partner of Indiana Heart Physicians.

They have their eyes on a new fee schedule proposed by the federal Medicare and Medicaid programs that would slash payments to specialist physicians in 2010.

Congress typically has blocked such cuts in the past. But because of Obama’s desire to slow down galloping health care inflation, doctors are less hopeful they will be spared this year, said David Charles, a physician accountant at Katz Sapper & Miller in Indianapolis.

Also, new rules from Medicare and Medicaid will make it much harder for doctors to bill the government under the higher fees given to hospitals—unless the doctors and hospitals are truly merged into one entity.

“It certainly looks like at the end of this year, the private-practice guys are going over a cliff,” Christie said.

Obama also wants to change incentives for doctors and hospitals so their income hinges less on how many procedures they perform and on more on the efficiency and effectiveness of their procedures.

For example, Medicare is expanding efforts to make one “bundled” payment for a complex procedure, such as a heart bypass surgery. In that instance, the heart surgeons, anesthesiologist and hospital would decide how to divvy up the payment.

St. Francis and Indiana Heart Physicians think their merger will help achieve process improvements on par with what the hospital system achieved in 2007 when it dramatically sped up response times for heart attack patients. The process, called EHART, helped St. Francis save $10,000 per patient and achieve a lower heart attack death rate than all but 18 of the 4,600 U.S. hospitals.

“We’re going to have to be more closely integrated than ever to achieve the national goal of improved quality at lower cost,” Jewell said.

Jewell and Christie acknowledged anxieties about their merger on both sides, but said they think the two organizations’ cultures align nicely. Indiana Heart Physicians, founded in 1978 by Dr. Buzz Hickman, has had a tight relationship with St. Francis ever since.

“It’s a little bit like two people living together for 20 years who just decided to go ahead and make it official,” Christie said.•



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