Indianapolis Hospital Systems Compete for Well-Insured, Suburban Patients

Originally published as Community Report No. 12 by the Center for Studying Health System Change (HSC). Authors: Aaron Katz, Grace Anglin, Emily Carrier, Marisa K. Dowling, Lucy B. Stark, Tracy Yee. HSC was a nonpartisan policy research organization funded principally by the Robert Wood Johnson Foundation.

Indianapolis Hospital Systems Compete for Well-Insured, Suburban Patients

Unlike many other communities tracked by HSC, the Indianapolis metropolitan area emerged from the Great Recession in relatively good shape. The region experienced above-average economic recovery, with unemployment falling faster than the national average and major employers in health care, education, and insurance maintaining stable workforces. However, the health care market itself was undergoing significant changes as hospital systems competed aggressively for commercially insured patients in affluent suburban areas, raising concerns about the impact on health care costs and access for underserved populations.

Hospital Expansion into Suburban Markets

Indianapolis's major hospital systems -- including Indiana University Health (formerly Clarian), St. Vincent Health, Community Health Network, and Franciscan St. Francis Health -- were investing heavily in new suburban facilities designed to attract commercially insured patients. These expansions typically involved building outpatient centers, ambulatory surgery facilities, and small hospitals in growing suburban corridors where residents had employer-sponsored insurance and higher incomes. The strategy reflected a broader national trend of hospitals following commercially insured populations to suburban locations while inner-city facilities serving Medicaid and uninsured patients faced growing financial pressure.

Cost Implications of Competitive Expansion

The competitive hospital expansion raised questions about the impact on health care costs. Building new facilities required substantial capital investment, and the additional capacity in suburban markets threatened to increase total spending without necessarily improving quality or access. Health plan executives expressed concern that the proliferation of suburban facilities would drive up utilization as hospitals sought to fill new capacity, while also shifting the competitive dynamic in ways that could increase provider leverage in price negotiations. Anthem Blue Cross Blue Shield, which maintained a dominant market share, continued to serve as a restraining force on hospital pricing, but even Anthem's leverage was being tested by the growing number of hospital-owned physician practices and the systems' expanding geographic footprints.

Safety Net and Underserved Populations

While hospital systems pursued suburban growth, access challenges persisted for lower-income and uninsured residents concentrated in urban areas. Eskenazi Health (formerly Wishard Health Services), the county's safety-net hospital, had opened a new state-of-the-art replacement facility, but demand for its services continued to grow. Community health centers expanded their capacity, and Indiana's Healthy Indiana Plan provided coverage to some low-income adults, but significant coverage gaps remained. The contrast between the investment flowing into suburban facilities for commercially insured patients and the persistent resource constraints facing safety-net providers illustrated a core tension in the market.

Sources and Further Reading

This Community Report was based on site visits to Indianapolis as part of HSC's Community Tracking Study. The research team included Aaron Katz, Grace Anglin, Emily Carrier, Marisa K. Dowling, Lucy B. Stark, and Tracy Yee. The Community Tracking Study was funded by the Robert Wood Johnson Foundation.