Center for Studying Health System Change

previous study examined the changes underway in the Indianapolis health system as of July 1995.¹³ Comparison of findings from that last site visit and this one shows that changes in the health system generally are continuing in the same direction, but not at a rapid pace. The first report identified the dominance of hospital-based health care systems as an important market feature and focused on the developing merger activity involving these systems. However, one of the mergers anticipated at that time did not take place (a merger between St. Vincent’s and Community Hospitals). The first report also identified several other market characteristics that remain today:

• the preference for POS and PPO products in the managed care market;

• the lack of a strong, coordinated purchaser influence;

• the limited role of public policy in shaping market changes;

• the key position of Wishard Memorial Hospital and affiliated clinics as providers of services to Medicaid and uninsured populations; and

• the relatively limited impact to date of clinical management efforts on the delivery of care.

Most change at the health system level appears to be taking place in the organizational arrangements of hospitals, while changes in other aspects of the system remain modest.

Most respondents expressed satisfaction with health care delivery in Indianapolis, and viewed health care costs as relatively stable and acceptable in comparison with those of other major metropolitan areas. They did not report reduced access to care for the general population or for the indigent population. Respondents said they believe health care provided in Indianapolis is of high quality, although there is little concrete information available concerning quality of care.

The dominance of the hospital-based health care systems, particularly in specific geographic service areas within Indianapolis, suggests that the Indianapolis market may evolve in a more orderly manner than many other large metropolitan markets. These systems appear to be focused on maintaining market share and control over local health care dollars. Some market participants expected St. Vincent’s to merge with St. Francis at some point, possibly as the culmination of a variety of organizational linkages and affiliations over time. The timing of such a merger is difficult to predict; it depends in part on strategies adopted by the parent systems.

For-profit national health systems have had difficulty developing strong market positions in Indianapolis, as have large national HMOs. Medicare reimbursement rates for risk contracts are low, offering little incentive for these national companies to enter the market. It is possible, however, that a for-profit company will try to acquire Community Hospitals. In addition, if Anthem, the area’s largest insurer, turns its attention from national expansion to the local market, respondents predicted it could have a major impact. Its HMO enrollment has been declining, while its PPO product remains strong. Anthem’s activities are closely monitored by others in the market.

The public policy front in Indianapolis is relatively quiet. Consumer-oriented managed care protection legislation may be submitted, but is unlikely to be highly restrictive. Nor does there appear to be any momentum to fund new programs for the uninsured. Mandatory Medicaid managed care enrollment would be a significant policy initiative. But even though such a move likely would stimulate new alliances between health systems and health plans to serve Medicaid recipients, it probably would not affect the fundamental market structure for either plans or providers.

One issue that bears watching is the impact on clinical practice of health systems’ efforts to control the premium dollar by sponsoring health plans and using PHOs to negotiate global capitation contracts. This strategy creates incentives for the health systems to more closely integrate health care delivery and financing. The relative importance of this incentive and its impact on the health system ultimately depends on the number of patients served under global capitation contracts.