Provider Systems Thrive in Robust Economy

Originally published as Community Report No. 1 by the Center for Studying Health System Change (HSC), Fall 2000. Authors: Aaron Katz, Robert E. Hurley, Leslie A. Jackson, Timothy K. Lake, Ashley C. Short, J. Lee Hargraves. HSC was a nonpartisan policy research organization funded principally by the Robert Wood Johnson Foundation.

Community Report: Indianapolis, Indiana -- Health System Changes in the Third Round

In June 2000, HSC researchers visited Indianapolis to conduct the third round of the Community Tracking Study, interviewing more than 85 health care market leaders. Indianapolis was one of 12 communities tracked by HSC every two years through site visits and surveys. Earlier visits in 1996 and 1998 established baseline information against which market changes were measured. The Indianapolis market encompassed a nine-county region.

A Market Defined by Stability and Consolidation

The Indianapolis health care market demonstrated remarkable stability compared with other communities HSC tracked. The same major players -- four hospital systems, a dominant Blue Cross plan, and several large physician groups -- had shaped the market for years. Hospital consolidation continued, with the four systems (Clarian Health Partners, St. Vincent Health, Community Health Network, and St. Francis Hospital) accounting for the vast majority of inpatient admissions. Unlike many other markets, Indianapolis had not experienced the dramatic entries and exits of national health plans or the wholesale restructuring of hospital ownership seen elsewhere.

Anthem Blue Cross Blue Shield held a commanding market position, controlling the largest share of the commercial insurance market. Anthem's dominance gave it substantial leverage in negotiations with hospitals and physician groups, helping to moderate the pace of price increases in the market. Other national plans, including UnitedHealthcare and Aetna, maintained smaller market shares. The market's relatively competitive structure, with multiple hospital systems vying for patients and a dominant insurer holding down prices, kept premium growth in Indianapolis below national averages.

Physician Market Dynamics

The physician market in Indianapolis was evolving in significant ways. Large single-specialty groups, particularly in cardiology and orthopedics, had grown in size and influence. These groups practiced across multiple hospital systems, giving them bargaining leverage and the freedom to direct patients to whichever facility offered the best arrangements. Some specialists were beginning to explore physician-owned facilities as a way to capture a share of facility revenues and gain greater control over their practice environment -- a trend that would later produce the heart hospital building boom documented in HSC's subsequent research.

Primary care physicians were increasingly employed by hospital systems or aligned with them through management services organizations. The independent solo or small-group practice model, while still present, was under growing financial pressure from flat or declining reimbursement rates and rising overhead costs. Hospital systems saw physician employment as a way to secure referral streams and build integrated delivery networks, though the financial returns on these physician acquisition strategies remained uncertain.

Insurance Coverage and Access Challenges

Despite the market's relative stability, access challenges persisted for vulnerable populations. The number of uninsured residents continued to grow, driven by a combination of rising premium costs, the shift toward less generous employer benefits, and gaps in public coverage programs. Safety-net providers, including Wishard Memorial Hospital (the county's public hospital) and a network of community health centers, faced rising demand at the same time that their funding sources came under pressure. Medicaid managed care had been implemented in the market, but enrollment growth was not keeping pace with the growing number of low-income residents who lacked coverage.

Quality Improvement and Information Technology

Indianapolis stood out among HSC's tracked communities for its early investment in health information technology and quality measurement. The Indiana Health Information Exchange (IHIE) was developing a community-wide clinical data repository that allowed providers to share patient information across organizational boundaries. The Regenstrief Institute, affiliated with Indiana University, contributed research expertise and technology development that positioned Indianapolis as a national leader in health information exchange. These investments laid groundwork for quality improvement initiatives that would gain importance in subsequent years as pay-for-performance and value-based purchasing programs expanded.

Sources and Further Reading

This Community Report was based on site visits to Indianapolis conducted in June 2000 as part of HSC's Community Tracking Study, with interviews of more than 85 health care market leaders. Earlier reports from the 1996 and 1998 site visits provided baseline context. The research was conducted by Aaron Katz, Robert E. Hurley, Leslie A. Jackson, Timothy K. Lake, Ashley C. Short, and J. Lee Hargraves. The Community Tracking Study was funded by the Robert Wood Johnson Foundation.