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The Community Snapshots Project

Capturing Health System Change

Indianapolis, Ind.


he Indianapolis health care market is characterized by an array of players trying to take full advantage of the city’s location well away from the health care markets on the two coasts and south of the managed care domination in Minneapolis. The market is conservative, cautious, and increasingly competitive, with much action in the past 18 months but little change to date in managed care penetration and other measures of market change. A strong sense of "Hoosierness" has inspired major moves that are consistent with national trends but are couched in homegrown ("keeping outsiders out") terms.

The market encompasses Marion County and the seven surrounding counties. For some institutions, such as the Indiana University Medical Center and Methodist Hospital of Indiana, the market is the entire state, and many market strategies include alliances with hospitals in counties outside the eight-county region. The more broadly the market is defined to the north and south, the more Indianapolis-based providers run into market overlap with Chicago, Louisville, and Cincinnati.

Local observers describing the market report that two major systems have emerged and a third could be on the horizon. In reality, one system, an alliance between Community Hospitals Indianapolis and St. Vincent Hospitals & Health Center, is in place formally, and another, a proposed merger of Methodist Hospital and the two hospitals in the Indiana University Medical Center (IU), is being appraised. Local observers suggest that a third system could develop out of local health plan and hospital activity, or it could be initiated by external actors that enter the market, such as Columbia/HCA or another national for-profit interest.

Market changes in the past 18 months have been hospital driven, the role of physicians in the alliances and mergers is negligible. Instead of instigating the structural changes, physicians have gone along out of a sense of self-preservation. As networks and alliances have taken hold in Indianapolis and the state’s Medicaid budget has been slashed, the role of the physician has changed. Primary care physicians are being courted by hospitals and health plans. Specialists, concerned about their role in the system, have begun to form their own provider organizations and to purchase primary care practices themselves, to assure referral sources.

All market observers feel that the city’s public hospital, Wishard Memorial, is critical to the future of the Indianapolis system because it provides care to the greater part of the area’s indigent population. But Wishard, which has been managed and staffed by IU since 1974 and has an affiliation with IU dating back to 1969, has been left out of the Methodist/IU merger talks by IU. Aggressive and savvy political leaders, however, have kept the hospital solvent, even growing, and it is a continuing factor in market discussions.

Insurers are following the hospitals’ lead in restructuring the Indianapolis market. Most insurers and health plans define their market as the state, and the changes they are making in their products are not necessarily geared toward any one regional market. Managed care products enjoyed a 30 percent increase in enrollment statewide between mid-1993 and mid-1994, but enrollment has been flat since then. These products are predominantly point-of-service (POS) plans and preferred provider organizations (PPOs). Blue Cross and Blue Shield is the largest insurer in the state, and in the Indianapolis market, doing most of its business in indemnity care; it has not been a leader among the insurers, however, in product development or direction.

The public sector is not perceived as a major force in local market discussions. The state legislature is seen as neither an advocate for nor an impediment to market changes, although it passed three health care related pieces of legislation in 1995. The state’s recent move to Medicaid managed care inspired affected hospitals to collaborate to retain their market share, but there is no evidence that it is having broad market effects.

The church, Protestant and Catholic, is influential in the Indianapolis market. The Methodist church has become increasingly involved in Methodist Hospital’s various market strategies, and its bishop recently convened a meeting to discuss the direction in which the institution is moving. The Catholic church intervened in collaboration discussions between St. Francis Hospital and Methodist Hospital, suggesting that St. Francis work with the local Catholic institution, St. Vincent’s Hospital, instead.


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The Center for Studying Health System Change Ceased operation on Dec. 31, 2013.