• Health reform
• EMRs
• Medicare
• Liability
• AMA House
• » More

• Contract Language
• Ethics Forum
• In the Courts
• Practice Management
• Technically Speaking
• » More

• Issue dates
• Regions
• Health plans
• Sections
• News briefs
• Columns
• Editorials
• Letters
• Series
• Writers
• Other years

• Search tips
• Email alert
• RSS
• Mobile
• Subscribe
• Institutions
• Staff directory
• Advertising
• Permissions
• Reprints
• News media
• Site guide
• Useful links
• About
• Premium
• Contact

• AMA Wire
• CPT
• DMPHP
• JAMA
• JAMA&Archives
• news@JAMA
• Virtual Mentor
• Physician jobs

Battle of the beds: When does enough hospitals become too many?

Indianapolis is a perfect example of the rise of specialty hospitals -- and the debate that follows regarding how they affect health care costs and the quality of patient care.

By Mike Norbut, amednews staff. May 5, 2003.

• PRINT|
• E-MAIL|
• RESPOND|
• REPRINTS|
• SHARE
•  

Indianapolis is encircled by a highway but surrounded by hospitals vying to care for ailing hearts.

Two shiny new facilities, The Heart Center of Indiana and The Indiana Heart Hospital, have opened north of the downtown area within the past six months. They both boast $60 million price tags, partial physician ownership and the most advanced digital technology money can buy.

Also, there's Clarian Health Partners' model on the west side of the city: a hospital within a hospital, a $30 million cardiac care facility carved out of renovated space and new construction in Methodist Hospital, one of the city's largest medical centers.

And to the south, St. Francis Hospital and Health Centers is planning to build a $60 million, 112-bed cardiac care center on the sprawling campus of its new flagship facility.

Time is muscle when it comes to cardiac care, and if someone has a heart attack in downtown Indianapolis, care is waiting within minutes in nearly every direction.

"If I get sick anywhere around the [Interstate 465] beltway, I know I'm going to be all right," said H. "Buzz" Hickman, MD, a cardiologist with Indiana Heart Physicians and one of the pioneers of the cardiovascular program at St. Francis.

But all right at what cost?

A recent trend among doctors is to invest in specialty hospitals either with or without support from the community hospital. Physicians see these facilities as a chance to gain clinical and financial control over their work, and say they can achieve better results at a lower cost. More specialty hospitals in a market will provide a competitive atmosphere, which can only help keep costs down and raise the bar for general hospitals, proponents say.

But as this type of facility proliferates across the country, concerns are growing about how it will alter the health care landscape. If too many specialty hospitals saturate a market, some say, the result could be half-empty facilities that operate less efficiently, and supplier-induced demand, where more tests are ordered and procedures are conducted simply because the facilities are there.

Competition-rich cities like Indianapolis will certainly prove to be test cases for market principles and opponents' theories in the coming years.

"The key test would be: Can the specialty hospitals offer a higher quality of care by focusing on a specific field or group of fields under a competitive cost paradigm," said Joe Zumpano, managing partner and health practice chair for the Miami-based law firm Ferrell Schultz Carter Zumpano & Fertel. "Where specialty hospitals have to prove themselves in terms of financial viability is in a scenario where they provide care without supplier-induced demand."

The arguments

Many see the specialty hospital as the latest step in the evolution of health care. Hospitals have simply become more specialized and more bottom-line oriented over time, experts said, and the result has been improved efficiency.

"To me, the key is focus, focus, focus," said Russ Rudish, health care practice leader for Cap Gemini Ernst & Young, a management consulting company in New York. "Specialty hospitals are among the most efficient hospitals that exist," when compared with general hospitals that offer the same service, he said.

The idea resonates with physicians, who have to perform their duties more cost effectively in the face of declining reimbursement rates. Business opportunities abound as well; with more people living longer, an aging population, and a discriminating public looking for the best possible location for their procedures -- and judging facilities by clinical reputation as well as by the creature comforts provided -- it leaves the door open for specialty centers to develop.

"Hospitals for heart, orthopedics, cancer, neurosurgery, women's health ... these are sciences fueled by the baby boomers," said cardiologist Jacque J. Sokolov, MD, chair and senior partner of Sokolov, Sokolov, Burgess, a health care management firm.

But the fear is that a market can reach a point of critical mass, where there can be too many facilities competing for a limited number of patients. Rather than raising the quality of care in the community, the glut could cause unnecessary expenses, said Kelly Devers, a health researcher for the Center for Studying Health System Change, a Washington, D.C.-based policy research organization.

"Ideally, specialty hospitals get a high volume, but if you're duplicating capacity, patients are divided among more facilities," and costs could go up, Devers said. "Each facility can operate less efficiently, and there's potential for overutilization of services."

General hospitals also complain that specialty hospitals pilfer the easiest and most profitable cases, leaving the more costly, challenging cases for the cash-strapped community centers. Facing declining revenues, community hospitals might react by duplicating other service lines or raising rates, industry experts said.

The debate has spilled over into government settings as well. Bills that would prohibit physicians from referring patients to a facility in which they have an ownership interest have been introduced on the federal level and in some states. Currently, however, states like Indiana, which does not have a certificate-of-need law requiring government approval for hospital construction, are relying on basic economics to decide the future of these facilities.

The Indianapolis market

Devers is co-author of a report released just a few months ago by the Center for Studying Health System Change and focusing on the Indianapolis market, which includes about 1.6 million people in the nine-county area. The report says the health market "appears on the verge of becoming a battleground among providers."

The Heart Center of Indiana, a 60-bed free-standing facility, involves a 50-50 partnership between The Care Group, a local cardiology group, and St. Vincent Health, a health care system. Physicians from Indiana Heart Associates own about 20% of The Indiana Heart Hospital, and the 88-bed facility sits on the north campus of the physicians' health system partner, Community Hospital Network.

Years before these two facilities opened, Clarian Health Partners, which includes Methodist and Indiana University hospitals as well as Riley Children's Hospital, consolidated its cardiology practices into the Krannert Institute of Cardiology. And St. Francis, which draws largely from southern Indianapolis, expects to complete its facility next year.

"About a decade ago, we thought about a heart hospital," said Eric S. Williams, MD, a Krannert cardiologist and Indiana University professor of medicine. "But rather than try to have duplicated services or segregate by risk or organ system, we thought a hospital within a hospital is more conducive to our care."

The Center for Studying Health System Change report points out a local orthopedic group has announced plans for another specialty hospital, and a second children's hospital is now open. Clarian also has plans for two more new hospitals, one an acute-care facility on the far west side, the other a possible women's and children's center on the north side. There already are nine full-service hospitals in the city of Indianapolis alone, and several more specialty hospitals.

The report concedes the new facilities could mean greater access to care for patients, higher quality and lower costs. However, it also says the market conditions, including a lack of certificate-of-need laws and employers' limited leverage with physicians and hospitals, could "alternatively, result in higher use rates and costs."

Most physicians and hospital administrators, however, feel there are enough patients to go around. Not only is the market's design such that the main players generally draw from different portions of town, but, tragically, obesity and heart disease are on the rise in Indiana, which makes more cardiac care necessary. The state ranks fourth in smoking, eighth in the number of obese and overweight residents, and 16th in deaths per 100,000 due to heart disease, according to statistics from the U.S. Centers for Disease Control and Prevention.

Physicians also point out the majority of the facilities are not duplicated, and while there may be a net gain in beds, it is only slight. Community moved its cardiac care from its other locations into The Indiana Heart Hospital, while St. Francis will move its present program from its Beech Grove campus to its new facility. Clarian, meanwhile, simply condensed services under one roof.

"Right now, we are a typical hospital," said Donald J. Kerner, MD, vice president and chief medical officer of St. Francis. "But we've done our homework, and we think the best thing for our patients is we simply have to consolidate and build a new facility."

Leaders at the other facilities, however, say The Heart Center is not a reallocation of beds. Ironically, one of the facility's main competitors will be the Indiana Heart Institute, the established cardiac program at St. Vincent Indianapolis Hospital, Heart Center CEO Gary Campbell said.

"[St. Vincent's] approach is a rising tide floats all boats," Campbell said. "St. Vincent is on diversion many days for cardiac beds, and it's only going to get worse, so I don't see this as an inappropriate expansion of capacity."

Who wins?

So who will succeed in this market? The doctors and hospital administrators feel they all will, but if demand does not meet supply, they're willing to let the market decide which hospitals flourish.

They plan to compete by marketing themselves -- motorists see plenty of billboards and hear plenty of radio ads -- and focusing on what they consider to be their biggest advantages. Clarian and St. Francis talk about their ability to treat the whole person, not just the heart, because of their connection to a general hospital. The physician-owned facilities, meanwhile, tout their technological advancements, including all-digital patient records and innovative designs.

"Why would anyone [build a new facility] if they couldn't be successful?" said Michael C. Venturini, MD, a cardiologist and chief medical officer of The Indiana Heart Hospital. "The market will only bear so much. What it comes down to is, if you take good care of your patients, you'll do all right."

Still, he said, "I would suspect it wouldn't make sense to build another heart hospital at this point."

Back to top

 ADDITIONAL INFORMATION: