Health System Change in Indianapolis, Indiana

Round One Site Visit

Case Study
September 1997
Jon B. Christianson, Robert E. Mechanic, Christina A. Andrews, Joy M. Grossman

ompared with other major U.S. cities, the health care market in Indianapolis is relatively stable, although it has the potential for significant changes in the coming years. Change in Indianapolis will hinge substantially on the activities of its hospital-based health care systems, which dominate the local market. Other industry players -- including employers and state and local policy makers -- are doing little currently to initiate major changes in health care organization and delivery.

As of January 1997, four major health care systems accounted for 78 percent of all hospital admissions in Marion County,1 which shares boundaries with Indianapolis. These systems, which cover different though somewhat overlapping geographic service areas, exert considerable influence. For example, managed care plans that want to offer community-wide provider networks must contract with most of the four systems because of how the systems are configured geographically. In addition, most primary care physicians are closely aligned with these systems, either through direct employment or contractual relationships. In a relatively new strategy, some health systems are seeking to leverage their dominance in geographic sub-markets and their primary care physician networks to secure full-risk, global capitation contracts with HMOs.

These hospital-based systems have entered the insurance business by creating their own health plans, including HMOs and PPOs, either independently or in collaboration with other systems. To secure their referral bases, the systems have pursued statewide affiliations with other providers in response to employers’ demands for plans with large provider networks and extensive geographic coverage.

HMOs have found it difficult to enter this market or increase their enrollment. Respondents report that 15 to 20 percent of the commercial market is enrolled in HMOs, mostly in plans owned by the local health systems. However, the bulk of the commercial market is enrolled in PPOs or indemnity plans. Again, the strongest PPOs are those owned by the health systems, with the exception of Anthem, Inc., a regional Blue Cross and Blue Shield plan.

Purchasers in Indianapolis have not demonstrated strong support for tightly managed HMO products, although they are turning increasingly to PPO products because of their competitive premiums and the access they offer to a broad range of providers. Except for the state and local governments and the health care systems themselves, few employers in Indianapolis are large enough to force health care change through their purchasing activities. In addition, employer coalitions formed to date have not engaged in any joint purchasing activities.

For now, state and local policy initiatives appear secondary to the actions of the provider systems in shaping health care delivery in Indianapolis. Care for the indigent is not perceived as a major issue, and the consensus is that the Marion County public hospital and local clinics are financially stable and accessible.

In general, respondents said they believe that the quality of health care provided in Indianapolis is good, and that costs are relatively stable and acceptable, compared with those in other major metropolitan areas.