OrthoIndy looks to loopholes for growth

OrthoIndy, the physician practice that owns the Indiana Orthopaedic Hospital, was able to open a new outpatient facility this spring by working around growth restrictions in the 2010 health care reform law. But its choices for further growth are much starker—which is why it's lobbying to repeal that provision of the law.

The hospital continues to pay Krieg DeVault LLP attorneys Deborah Daniels and Tom New to lobby Congress to pass repeal legislation. The hospital spent $90,000 in 2009 and 2010 trying to prevent the provision from taking effect, according to data made available by the Center for Responsive Politics.

In the meantime, the Indiana Orthopaedic Hospital is also developing contingency plans for how to grow in spite of the restrictions. To do so, the hospital would have to qualify for one of various exemptions under what is known as the Stark law.

“Not being able to expand certainly has us concerned,” said hospital CEO Jane Keller, adding, “In order to be a viable business, we need to have the ability to expand going forward.”

One exemption is for a publicly traded company, which Indiana Orthopaedic Hospital could become. But that’s an expensive proposition and might even require Indiana Orthopaedic Hospital to merge with other physician hospitals in order to reach the $75 million asset threshold required by the Stark law.

Another possible exemption would be to qualify as an academic center by operating several resident training programs. But that too is an expensive undertaking.

The Indiana Orthopaedic Hospital could transfer itself to an employee stock ownership plan. Or it could restrict its facility for use only by OrthoIndy physicians and then claim that all its procedures are part of its physicians' consultations with patients.

Dr. John Dietz, chairman of the Indiana Orthopaedic Hospital, said each option would require many more lawyers and many more dollars to put into effect, compared with its current structure. He said the hospital doesn't have a favored option right now, but as the economy recovers and patient demand grows, a decision must be made within a few years.

"They're all about equally flawed as far as I can tell," Dietz said. "It's a choose your poison kind of a deal."

And a last resort would be to sell the operations, which Keller said the hospital and its physician owners do not want to do. OrthoIndy already sold a minority stake in the Indiana Orthopaedic Hospital to St. Vincent Health in 2009.

OrthoIndy is the largest orthopaedics practice in central Indiana, with more than 70 specialists.

The 38-bed Indiana Orthopaedic Hospital currently operates at about 50-percent capacity, on average, but is at full capacity in the middle of each week, when most of its physicians schedule surgeries.

And with aging baby boomers needing more joint replacements, Keller is confident the hospital will run out of room in the not-too-distant future.

The hospital also operates two outpatient centers, one in Avon and one in Greenwood. The second center opened in March, even after the growth restrictions took effect, because the Indiana Orthopaedic Hospital was able to get rid of four beds at its facility in exchange for opening four operating rooms in the Greenwood facility.

But Keller said the hospital cannot afford to give up any more beds in the future.

“Orthopaedics is going to be in very high demand as the baby boomers continue to need our services,” she said. “We’re just hoping that we continue to meet their needs.”