St. Francis buys big cardiology practice

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.•