Medcical Specialists negotiating with Franciscan Alliance
By Mark Taylor Post-Tribune correspondent July 4, 2012 6:44PM
The Munster Medical Center building at 761 45th Street in Munster, Ind. Wednesday June 27, 2012. | Stephanie Dowell~Sun-Times Media
Updated: July 4, 2012 8:11PM
An evolving health care market and changes in the payment and delivery of medical services are driving area hospitals to purchase physician practices and align their economic interests.
Last week Northwest Indiana’s largest independent physician group practice, Medical Specialists Inc., confirmed it is negotiating a purchase agreement with the region’s biggest hospital system, the Franciscan Alliance.
Medical Specialists’ founder and president, Alexander Stemer, said his practice is in sales talks with Franciscan and the deal is far from finalized.
“There are a million details to be resolved,” said Stemer, an infectious disease specialist who founded the group in 1978.
While Stemer declined to discuss details of the prospective deal, he did address questions about his group and the motivations for the sale. He said Medical Specialists includes 50 board certified physician specialists, 19 advanced practice providers like physician assistants and nurse practitioners and 330 employees at 12 locations. Stemer said Medical Specialists delivers services to 12 area hospitals.
The Franciscan Alliance is a Mishawaka-based Catholic, not-for-profit health system operated by the Sisters of St. Francis of Perpetual Adoration. The alliance operates five hospitals in Lake, Porter and LaPorte counties and a total of 13 in Indiana and Illinois.
Even before the Obama-backed Affordable Care Act was passed in 2010, the federal Centers for Medicare and Medicaid Services (CMS) had been moving away from Medicare’s traditional method of paying health care providers more for increased health care services. But with rising health care costs, CMS has moved to give hospitals and doctors incentives to work together to coordinate care, improve outcomes and reduce costs. And when Medicare leads, commercial insurers, some of which have already been pushing similar measures, usually follow.
Stemer said Medical Specialists has decades of experience in capitation and other forms of risk contracting, terms used to describe payment methods to compensate hospitals and physicians for caring for large populations of patients.
He said Medical Specialists “feels strongly that an affiliation with a large organization would be important, particularly in an accountable care organization as the future of health care continues to evolve. We think it’s important to look at the wave coming and be on its leading edge to bring an extra dimension of care to the people of Northwest Indiana.”
Franciscan’s sister hospital, St. Francis Health in Indianapolis, was one of the pioneer accountable care organizations in a federal pilot program. The accountable care health care delivery model calls for tighter collaboration between physicians, hospitals and other providers.
While Gene Diamond, regional chief executive officer for Alliance’s northern region, could not be reached for comment, he has been quoted saying the local Franciscan hospitals also would form an accountable care organization. Last year the Franciscan Alliance purchased the Hammond Clinic, then the largest independent physicians’ group in the region, citing health care trends.
Stemer declined to confirm that the rumored purchase price discussed is between $20 million to $30 million, but said Franciscan officials have toured a Medical Specialists’ facility and sales talks have progressed for months. The prospective sale is subject to due diligence by both parties and is expected to finalize in the coming months. Terms of the sale were not disclosed.
Both Stemer, 63, and anonymous sources within the Franciscan Alliance confirmed that he would continue to lead Medical Specialists for at least five years.
A 2010 American Hospital Association study found that physician employment has grown by 32 percent in the decade that began in 2000. In 2010 hospitals employed 212,000 physicians, about 20 percent of all practicing doctors. Experts said hospital purchases of physician practices have escalated in the last two years, though figures documenting that trend are not yet available.