published Friday, January 28th, 2011

Hutcheson feels 'wolf at the door'


by Emily Bregel

Despite Hutcheson Medical Center's deepening losses, the Fort Oglethorpe hospital's president and CEO has taken home a compensation package that's grown year after year.

In fiscal year 2009 Charles Stewart pocketed a $69,750 bonus, bringing his total compensation to more than $425,000 with additional benefits -- the same year the hospital lost about $7.3 million, according to Hutcheson's 990 tax form and unaudited financial statements.

Dade County Executive Ted Rumley said the compensation is "totally ridiculous. I couldn't even hold my head up to the people involved in the hospital with them knowing that I was making that much money," he said. "You got the hospital going down, down, down. I just don't see how the board let that happen."

"Wolves at the door"

The North Georgia hospital's financial stresses show no signs of letting up. Losing more than $1 million a month in this fiscal year, Hutcheson Medical Center has just 15 days of liquid cash on hand, its chief financial officer estimated Thursday.

"So the wolf is at the door," said Bill Cohen, member of the Hospital Authority of Walker, Dade and Catoosa Counties' board of trustees, during the board's quarterly meeting Thursday.

"Yes, sir," answered Gerald Faircloth, Hutcheson's chief financial officer.

The struggling hospital still has patients and revenue coming through the door to keep it afloat, but Hutcheson leaders are hoping a partnership with Erlanger Health System in Chattanooga will help shore up its bottom line and cash reserves.

"The relationship with Erlanger is going to allow us to set a new course," Stewart said after the meeting.

Compensation

Hutcheson Medical Center executive compensation:

2007 -- $286,997

2008 -- $395,289

2009 -- $331,752

Ceo pay

Charles Stewart's base salary plus bonuses, tax-free benefits and expense accounts:

2007 -- $337,081

2008 -- $418,419

2009 -- $425,745

Source: Hutcheson's IRS 990 tax form

Hutcheson's net income:

Fiscal year 2006 -- Loss of $1.4 million

Fiscal year 2007 -- Profit of $766,766

Fiscal year 2008 -- Loss of $467,517

Fiscal year 2009 (unaudited) -- $7.3 million loss

Fiscal year 2010 (unaudited) -- About $7 million loss

Source: Hutcheson Medical Center financial statements and officials

In late October, Hutcheson and Erlanger entered into a 60-day due diligence process to consider a strategic partnership. Erlanger recently has submitted a preliminary proposal to HMC leaders, who will respond soon, Martha Attaway, Hutcheson Medical Center board chairwoman, in an e-mail Thursday.

Trustees of the hospital authority gained a greater foothold in negotiations with Erlanger on Thursday, voting to appoint members to a "transition team" that will have a stake in the partnership discussions.

There's a "growing spirit of cooperation" among the three major boards that govern Hutcheson, Cohen said. "We're going to work together to make this happen."

But during the Thursday night meeting, tension was simmering between members of the county-appointed hospital authority board, which owns the hospital building, and leaders of Hutcheson Medical Center Inc., the private nonprofit that leases and operates the hospital. Trustees pushed for more transparency during board meetings, particularly regarding finances, which usually are discussed in closed sessions.

"Probably half the people in three counties know we're broke," Cohen said. "We're not giving up any secret information."

Hutcheson lost more than $7 million in fiscal years 2009 and 2010, according to unaudited financial statements.

The hospital's fiscal year 2010 loss would have been greater if it hadn't been for the $3.5 million sale of Hutcheson Home Health that year, Faircloth said at the meeting.

Hutcheson, a publicly owned community hospital, is governed by the boards of five entities, including the hospital authority board. The authority owns the hospital building and oversees Hutcheson's 40-year lease to Hutcheson Medical Center Inc., or HMC.

At the meeting Cohen said he was "burning" at what seemed to be misleading information about the hospital's cash on hand.

Faircloth initially said 80 days, but that estimate included $10 million in capital funds that are now frozen under a complex financing arrangement used for Hutcheson's bond issue years ago. Even if the funds were liquid, they can be only used for capital projects, not operations. Excluding those funds, Faircloth estimated 12 or 15 days cash on hand.

Also including the frozen $10 million, the hospital has a 55 percent cash-to-debt ratio, Faircloth said. Hutcheson must have a 60 percent cash-to-debt ratio to maintain its bond covenants, which is a requirement of its lease agreement with the counties.

Trustees discussed the status of the HMC lease agreement in a closed session, after a close vote on whether to keep the meeting open to media.

CEO COMPENSATION

Stewart declined on Thursday to comment on his compensation.

But Hutcheson Medical Center board chairwoman Martha Attaway said Stewart's bonus in fiscal year 2009 was actually based on the profit he helped bring about in fiscal year 2008, after many years of losses.

"Last year Mr. Stewart recommended that no increase be given to him since pay increases could not be given to other employees," she said in an e-mail.

Stewart's base compensation was $331,752 that year, compared to the $550,000 base salary for Jim Brexler, president and CEO of Erlanger Health System in Chattanooga.

Brexler's bonus pay in fiscal year 2009, which for Erlanger ended June 30, 2009, was $198,000.

about Emily Bregel...

Health care reporter Emily Bregel has worked at the Chattanooga Times Free Press since July 2006. She previously covered banking and wrote for the Life section. Emily, a native of Baltimore, Md., earned a bachelor’s degree in American Studies from Columbia University. She received a first-place award for feature writing from the East Tennessee Society of Professional Journalists’ Golden Press Card Contest for a 2009 article about a boy with a congenital heart defect. She ...

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Marathon5454 said...

A Grand Jury should investigate Hutcheson thoroughly--I've said this several times before--At the very least, management at Hutcheson is guilty of gross mismanagement and malfeasance--And it could be worse than that

January 28, 2011 at 6:21 a.m.
PMac said...

this has been going on for years and nothing done. You would think the board would be more concern. But they may be part of the problem!

January 28, 2011 at 8:14 a.m.
mrcommonsense said...

Pmac & Marathon5454...not sure if you two pea-brains realize this but the BOD consists of only volunteers who out of good grace and kindness spend their time to keep a not-for-profit hospital operational for the local county residents that built and funded the place. THE BOD RECEIVES NO COMPENSATION - ZERO, NOTHING, ZIP...........hence no potential conflict of interest linked to monetary gain or enrichment.

SO I guess you would rather see private ownership with a private BOD? Would that better the transparency in your eyes (when disclosure requirements are much less than what they are at the current time? Would private ownership & its private BOD (& stipends for members)help the financial situation in your eyes?

I urge you and Marathon5454 to help yourself to a basic legal reference explaining the difference between "private" and "not for profit" organizational classifications. Your statement clearly shows you have zero understanding of the important differences between the two.

January 28, 2011 at 1:42 p.m.
aryfrosty said...

I worked for HMC for over 7 years in the 1980s and was vested with retirement benefits. I am now retired and on Social Security Disability benefits and cannot seem to make phone contact with anyone with HMC who admits to knowing anything about my pension benefits. I would probably get $15.00 a month after 7 years...but it's easier for them to play "I Dunno" when asked about how I can file for it so they can continue to pay outrageous sums to their admin folks who are letting them drive the hospital out of business. I live in New Hampshire and can't drive over there to ask in person. Colonel Gleason, Catherine Morrison, Doc Stevens and the other members of the founding board of Directors/Trustees for Tri-County Hospital and John L Hutcheson, are probably spinning in their graves over this chicanery. Thanks, HMC. I won't starve without what you owe me but it would have helped.

January 28, 2011 at 3:57 p.m.
mrcommonsense said...

If you look at from a systemic standpoint - cuts in federal medicaid and medicare spending (a national trend), the ever increasing cost of private health insurance, employers having few options but to push more costs onto employees thus socializing the costs, growing ranks of the unisured thus growing rates of indigent care, you would have the circumspect to understand the microcosm Hutchenson is to that of the broader US health care problems....

You might also consider companies like HCA (Bain & Co owned - private equity and hedge fund), KKR (private equity and hedge fund) are making record profits from the buying out of these hospital for a fraction of what they are worth, then squeezing everything out of it they can.....

Pray, tell......think deeply for a moment...who would love to see the merger with Erlanger not go through and for what private interest is such a deal being targeted and torpedoed.....why not think about the broader picture for a moment,hmmmm?

I agree, the deal with Erlanger is the best plan if you have the care of patients at heart and not the private interests of very few parties at the forefront.

I live in the NE US, im from Chattanooga and I wrote my graduate thesis on the systematic privatization of US health care and the consequences on patient care and access to preventative medicine - a thirty year timeline.

This is part of a larger trend - privatization of public infrastructure for private investors and profit. I also encourage those of you interested to think about what will happen to Catoosa and Dade county residents in the event of a private take over.....the obvious end game for those trying to torpedo the Erlanger/HMC merger when Vanguard or HCA or Tenant Health services takes over and must earn a rate of return for their investors.

Georgia has one of the highest rates of uninsured citizens in the country - close to 30% in FY 2007-2008. Catoosa and Dade a far from the "richest counties in the state. Think long and hard about what happens to these people should the worst case scenario unfold. In lack of health insurance, GA ranks 44 out of 50 states...but im sure you all knew that right?

http://www.americashealthrankings.org/yearcompare/2009/2010/GA.aspx

January 28, 2011 at 5:39 p.m.
rarnold281 said...

@mrcommonsense: What is this gibberish you speak? I don't know who you are trying to impress with your "graduate thesis". I couldn't care less about some paper you wrote. It is obvious that you don't have a clue about what is going on at Hutcheson. It is a lack of management ability that starts with the CEO. Why don't you ask the CEO why numerous doctors have left the facility and are admitting their patients to other hospitals in the area? Incompetent CEO+no doctors+no patients=no revenue. Simple as that.

January 29, 2011 at 1:36 a.m.
bilbobaggins said...

Lots of hate here. :)

I believe there are valid points to be had in the explanation of the economy in reference to the indigent care, health insurance, demographics and ability to repay medical bills, by mrcommonsense.

Likewise, rarnold281, I agree that there should have been some action taken by the CEO and leadership back in 2007 to mitigate the substantial losses being reported today.

But like any corporation in America, the CEO is first responsible for the actions of 'his' corporation. It is a known fact that the CEO did run off a bunch of quality doctors, those same doctors practicing at other hospitals in the Chattanooga area.

Those same doctors provided a chunk of the "willing and able to pay" patients of HMC. So now, take mrcommonsense's analyses of the market. Take out the patients that are able to pay, lost by the doctors that left when the CEO ran them off. What do you have now?

You have exactally whats on the official financial reports. Loss of income.

January 31, 2011 at 10:39 a.m.
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