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October 31, 2009

Union Hospital, AP&S partnership creates health care giant in Valley

By Arthur Foulkes

TERRE HAUTE — There’s a new 800-pound health care gorilla in town.

A new partnership — starting today — between Union Hospital and AP&S; Clinic creates a 2,700-employee health care giant in the Wabash Valley with hopes of getting even larger in years to come.

“Union, with their new [500,000 square-foot] hospital, they want to be the hospital,” said Dr. Hans Andreasen, a family practice doctor and chairman of the AP&S; board. With the new hospital and new technology, “they are going to be the premier medical center in western Indiana.”

AP&S; Clinic, a formerly physician-owned health care facility with offices all around Terre Haute, employing 500 people including more than 60 doctors, and Union Hospital Inc., the largest hospital in the Wabash Valley, have been planning this new alliance for about a year, officials from both organizations said last week. Beginning today, both entities will be working under a new umbrella organization — Union Health System, a not-for-profit entity that will provide guidance for both the hospital and the clinic.

“By joining forces, Union and AP&S; can eliminate duplication of some medical tests, reduce paperwork for patients and enjoy greater buying power, officials from both organizations said. Ultimately, they say, the new alliance will provide improved patient care.

“If you look at all the things that are coming in the future of medicine, the hospital and physicians have to work together,” Andreasen said. “In the past, we’ve really kind of been in competition for outpatient services and different things … It really gives us a way to align the hospital’s goals and the physicians’ goals together.”

The Structure

Union CEO David Doerr is the new CEO and chairman of Union Health System, making him effectively the “boss” of the new joint Union-AP&S; alliance. However, while AP&S; doctors now are essentially employed with Union Hospital, Andreasen said, the relationship is really an equal partnership. The doctors will officially be employed by a new entity called Union Associated Physicians Clinic LLC. The “sole member” of UAP Clinic is Union Health System.

“It’s a paradigm shift” for people on both sides, Doerr said.

This is not the first time Union and AP&S; have entered into a business partnership. The most-recent relationship, in which Union Hospital owned the AP&S; facilities, lasted from 1995 to 2003.

“This is a markedly different structure” than the previous business partnership, said Patrick Board, CEO of AP&S; Clinic. In this situation, both sides have retained their organizational structures, he said. “That was not quite the case before.”

“Physicians do a much better job governing themselves,” Doerr added.

The new umbrella organization, Union Health System, will be governed by a 15-member board of directors. Eight of those board members will be “at large community members” selected by Doerr, Board, Andreasen and some of the other members of the AP&S; and Union Hospital boards, according to a flow chart provided by UHS officials.

Union Hospital Inc. and the new UAP Clinic each will have governing boards, according to the chart. Some Union Hospital board members will fill positions on the new UHS board, Doerr said. Some AP&S; board members will take places on the new UHS board, Board noted.

The new UHS board will need to weigh the interests of the hospital and the physicians equally, Andreasen said. “This is really an alignment. We’re on equal grounds with the hospital.”

No Big Change

The new partnership does not represent a dramatic change for AP&S; doctors, Andreasen said. Most AP&S; doctors already were doing most of their business — about 95 percent — at Union Hospital, he said. However, some AP&S; doctors retain “privileges” to practice at Terre Haute Regional Hospital, and they can retain those privileges under the new arrangement, he said.

Regional Hospital is “currently working through employment arrangements with numerous local [health care] providers,” said Brian Bauer, chief financial officer for Regional. “We will continue to be supportive of our independent community physicians and also physicians who are part of the [new Union Hospital] system,” he said.

Becoming part of a not-for-profit entity, Andreasen said, is not a tremendous change for the doctors. Being part of a not-for-profit entity “has more to do with board makeup and some of the [government] rules and regulations,” he said.

Stark Law

Probably the most important rules and regulations governing hospital-physician relations are the federal “Stark” guidelines, which are designed to — among other things — prevent doctors from profiting from referring patients to health care entities in which they have a financial stake.

“We’re pretty conservative on all those [Stark-related] things,” Andreasen said. “We err on the side of conservatism.”

Doerr and Board said the new partnership was not formed in response to recent tightening of the Stark regulations, which took effect Oct. 1. However, across the country, many hospital-physician relationships have been changed recently, at least partly due to new Stark rules, health care legal experts say.

Changes in the Stark laws that took effect Oct. 1 have caused a number of hospital-physician relationships to end, according to Karen Smith, a health care lawyer and partner with Bricker and Eckler, a Columbus, Ohio, law firm that recently published an article on new Stark regulations.

The new Stark regulations have “required hospitals and physicians to restructure [their previous arrangements] so the old [arrangements] no longer exist,” Smith said. In some cases, whole new entities are being formed. In other cases, hospitals are now employing physicians, she said.

Although UHS officials say the new Union-AP&S; partnership is not related to changes in Stark regulations, they note that several previously existing relationships between Union Hospital and area physician groups did change in response to the new rules. Arrangements between the hospital and clinics such as the Hope Center, Providence Medical Group and AP&S;, have been “re-negotiated to comply with changes to Stark regulations,” according to a joint statement from Board and Doerr issued Friday. Details of those changes “are confidential,” the statement said.

No More Hope

One local health care clinic that had been involved in a business relationship with Union Hospital — originally known as an “under arrangement” — was the Hope Center, a cancer and blood disease clinic in Terre Haute. Hope’s relationship with Union Hospital ended Oct. 1, said Dr. Chandra Reddy, founder of the Hope Center.

“We are independent,” Reddy said. Due to what he called a lack of transparency and a lack of clarity with the new Stark regulations, “we have withdrawn from any ‘under arrangements,’” Reddy said. “We are not part of the Union Hospital anymore as of Oct. 1.”

During a highly public dispute with Anthem Blue Cross Blue Shield insurance earlier this year, officials at Union Hospital, AP&S; Clinic and the Hope Center stated that the hospital and area cancer doctors had entered into these “under arrangements,” — later called “management services agreements” — in order to ensure that cancer doctors received higher “hospital” reimbursements for outpatient services. Without the higher reimbursement, area cancer doctors likely would go out of business, Union, AP&S; and other health care officials all said at the time.

But, despite terminating its “under arrangement” with Union Hospital, the Hope Center will continue to serve patients well into the future, Reddy said Friday. To deal with its new circumstances, the Hope Center will reduce its overhead costs — including imposing some “sacrifices” on its doctors, he said.

Ending the Union partnership “did not change anything in the delivery of services to our patients,” Reddy said. “We are continuing to practice in the Wabash Valley as we have done the past 16 years.”

Facing the Future

Given the current political push for widespread changes in America’s health care system, the future of health care is clearly uncertain. One certainty, however, is Union and AP&S; Clinic officials believe their new partnership will position both entities to better face whatever comes next.

“We believe this structure will allow us to meet any changes that might come up” in the future, Board said Tuesday.

Having “at large” community members in majority positions on the UHS and UAP Clinic boards will ensure that the new organization is “a little bit more community-driven,” Andreasen said. Having a single entity over both the hospital and the clinic also will ensure that the interests of both sides are weighed in the balance, he said.

Once the system is fully up and running, it will improve the quality of health care patients receive, UHS officials said. But getting the computer systems and other coordination in place still may take a couple of months, they added.

In January, patients will begin to see physical changes at AP&S; and Union Hospital, UHS officials said. Signs will change along with the names on hospital statements and promotional items. Patients should notice no change, however, in their AP&S; physician relationships or in insurance coverage, Board said.

“It’s a work in progress,” Doerr said. The goal is to encourage other doctors to join and grow the organization even larger than it is right now, he added. “That’s what we’re trying to accomplish.”

Arthur Foulkes can be reached at (812) 231-4232 or arthur.foulkes@tribstar.com.

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