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Methodist Hospital Gary Stock Art

Methodist Hospital Northlake Campus in Gary. Hospital officials say they are continuing to explore alliances with other health systems.

After a merger attempt with Franciscan Alliance failed earlier this year, Methodist Hospitals says it is continuing to consider alliances with other health care systems.

Methodist President and CEO Ray Grady said the hospital group, with campuses in Gary and Merrillville, is exploring a variety of partnerships beyond just full-on mergers.

"We looked at the suspension of our discussion with Franciscan really as an opportunity for us to reassess our business strategy," he said. "We also know and feel quite strongly that in the long run we'd best serve our community to join forces with a larger system to give us the resources we need to meet the challenges of the new health care environment."

Nationwide, hospitals are increasingly consolidating to deal with lower profit margins from patients spending less time in hospitals, insurers increasingly paying for quality over quantity of care, and decreased bargaining leverage with insurance companies, which are themselves getting bigger.

Grady said partnering with a larger entity would give Methodist better access to capital, improved physician recruitment and a more favorable negotiating position with doctor groups.

The other arrangements the hospital group is examining include "comanagement agreements" with physician groups and so-called clinical joint ventures with other health care systems.

For instance, Methodist is finalizing an agreement with the University of Chicago to bring its cardiac surgeons to Northwest Indiana.

The hospital system also is working with an outside vendor to provide telepsychiatry services because of the lack of psychiatrists in the Region.

Additionally, Methodist is partnering with its pharmacy vendor to offer pharmacy services to patients at the Northlake Campus in Gary who aren't admitted to the hospital, and allying with a company to recommission Methodist's Gamma Knife, a radiosurgery tool used to treat complex brain conditions.

Since Methodist is remaining independent for the time being, Grady said the hospital system is implementing a $9 million "cost-improvement program" — adjusting staffing, consolidating services, restructuring management, renegotiating contracts, processing patient claims more effectively, making better purchasing and care decisions.

"If we're not going to merge, we're going to have to focus on these kinds of these things," he said. Still, he added, "I think we can do well as an independent for several more years."

When it put out a search for a partner in 2016, Methodist had dozens of suitors, many from Indiana or Chicago. Grady said Methodist would like any potential ally to be local, based in Indiana or the Chicagoland area.

Franciscan Alliance had proposed building a new $300 million hospital along Interstate 80/94 near Indiana University Northwest in Gary. But Grady said a new hospital wouldn't be a necessary condition of a merger. What would be is an ongoing commitment to the city of Gary.

"Continued support of our mission in Gary is a prerequisite, and we want to make sure that whatever we arrive at no patient gets left behind in the Gary community," he said.

Grady said Methodist is itself an attractive partner because it has a "very strong" balance sheet, little debt and a talented staff; it just has to work on improving its bottom line.

He didn't rule out the possibility of discussions with Franciscan being revisited.

"I think anything's possible with anybody," he said.

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Health Reporter

Giles is the health reporter for The Times, covering the business of health care as well as consumer and public health. He previously wrote about health for the Lawrence (Kansas) Journal-World. He is a graduate of Northern Illinois University.