Potential IU Health-Eskenazi partnership clouded by personalities, politics

With Indiana University Health trying to save money by merging its downtown hospitals, one obvious solution is plainly visible on the horizon: the shiny, $754 million Eskenazi Hospital, opened just more than a year ago.

Leaders of the IU Health hospital system have discussed recently, according to multiple sources, whether a closer partnership with Eskenazi might be just what the doctor ordered. It would allow IU Health to consolidate its downtown operations at its Methodist Hospital and yet still have an inpatient facility used by the faculty at the IU School of Medicine.

Officially, both sides say there’s nothing happening on this front. And local health care sources say nothing will until both organizations have different leaders at the top.

But the possibility is still there because it would be a silver bullet for IU Health, helping the 19-hopsital system achieve $1 billion per year in budget savings it needs while also appeasing the IU med school doctors, who haven’t been happy since IU Health added their brand name to its corporate moniker four years ago.

Just how unhappy are they?

An internal physician satisfaction survey conducted in December 2011 categorized only one out of every five physicians working at University Hospital as a “Dedicated Partner,” meaning they were both satisfied with the functioning of the hospital and engaged it keeping it that way.

Three out of every five physicians’ survey responses earned them the “Distanced Patron” label. IU Health hasn’t conducted a similar survey since, but more than one IU physician said the results today would be no better and possibly worse.

“The least desired situation is to have a majority of your physicians in the Distanced quadrant,” stated the survey report, which was conducted by South Bend-based Press Ganey Associates. “These physicians use the hospital but are dissatisfied with both the hospital’s services and leadership. They typically do not participate in quality initiatives and may be highly critical of hospital efforts.”

Why does that matter? Because, according to other materials from Press Ganey describing physicians in the “Distanced Patron” category, “They may either spend their careers in the mode of disengaged critic or be at high risk of moving their patients or practices elsewhere.”

Translation: the hospital system could lose significant revenue. And that’s something IU Health can ill afford.

The IU medical school doctors already do the treating of patients at Eskenazi, and use the facility for research projects.

But that informal partnership was not enough to prevent Eskenazi’s parent organization, the Health & Hospital Corp. of Marion County, from agreeing to form a joint-operating agreement two years ago with Community Health Network—one of IU Health’s key competitors in the Indianapolis area.

That deal blindsided the IU Health leadership, according to multiple sources with knowledge of the deal and the reaction to it within IU Health. And while the Eskenazi-Community partnership ultimately fell apart, due to legal snags, ill feelings between IU Health CEO Dan Evans and Health & Hospital CEO Matt Gutwein haven’t gone away.

Even so, both Gutwein and an IU Health executive still said they were open to talking.

“Understandably and appropriately, Eskenazi Health has had no involvement in IU Health's facilities planning or strategic planning. Nor have there been discussions among IU Health's leadership and Eskenazi Health or HHC's leadership regarding Eskenazi Health's becoming a second destination for IU Health patients,” Gutwein wrote in an email. “Eskenazi Health and IU Health have a long tradition of collaborating on a broad range of issues and we are always interested in exploring new ways that  Eskenazi Health and IU Health might work together to improve the health of our patients and the community.”

Jonathan Curtirght, the chief operating officer of IU Health’s Methodist and University hospitals, said IU Health leaders have discussed among themselves a closer partnership with Eskenazi. But those discussions have been aimed more at working with Eskenazi's 11 primary care locations around Marion County.

“They would certainly be a group that we’d like to better partner with,” Curtright said, also mentioning HealthNet Inc., a group of community health centers with which IU Health already works.

As for the downtown hospital situation, Curtright said IU Health would rather have all its downtown physicians working in one inpatient facility, rather than split between Methodist and Eskenazi.

Any IU Health-Eskenazi partnership would, it seems, run up against similar challenges as faced in the Community-Eskenazi marriage.

Some of those revolved around the difficulty of combining a public entity, which Eskenazi is, with a private one–although IU Health is exactly that, being formed in 1997 as a joint venture of Indiana University and the Methodist Church.

Another big hurdle was that the rules for the special bonds Eskenazi sold to finance its $754 million hospital require that the recipient of proceeds be separate from any private organizations. The bonds were part of the Build America section of President Obama’s 2009 stimulus package, and offered lower interest rates for publicly funded projects.

The leaders of Community and Eskenazi explored whether they could refinance the Build America bonds to get out from that program’s rules. But to be refinanced, Eskenazi would have been forced to repay all remaining interest—about 25 years’ worth—at once, a big financial hit.

Eskenazi even looked at whether it could offset that financial penalty with efficiencies gained by combining functions with Community, but concluded the penalty would still far outweigh the savings.

However, if IU Health concludes that its only other option is spending more than $1 billion (some estimate it would be more than $3 billion) on a new downtown hospital, then the cost of removing those hurdles might look like an affordable price to pay.

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