Hutcheson Medical Center's turnaround hamstrung by debt

A billboard in Rock Spring, Ga., for Erlanger at Hutcheson hospital features a giant photograph of Mays Rawlston wearing a T-shirt that reads "party at my crib."

Hutcheson Medical Center had been losing $1 million a month in 2011 before Chattanooga-based Erlanger Health System took over management that year.

Now, officials at the rebranded Erlanger at Hutcheson hospital say they've stopped the financial bleeding and are on track to be $4 million in the black this year. But the Fort Oglethorpe hospital recently had to borrow $550,000 to cover operating expenses: payroll, according to one news report; information technology, according to another.

So has the long-struggling hospital recovered and found its financial footing, or is Erlanger at Hutcheson headed for a relapse?

"We don't really have an income problem," said Don Oliver, attorney for Walker County, which jointly owns the hospital with Catoosa and Dade counties. "We have a cash-flow problem."

"What has really hurt us ... is the previous administration left us with over $12 million in Medicaid and Medicare overpayments," Oliver said.

The hospital had hoped to pay that back slowly , perhaps over 30 years. But Medicare wanted its money sooner, Oliver said.

"Dealing with Medicare is kind of like dealing with the IRS," he said. "They tell you what you're going to do."

Medicare has withheld reimbursements to the hospital to pay the debt.

"They're withholding about $300,000 per week or about $1.2 million per month," Oliver said. "We've made it six months ... without having to borrow operating cash. It's fairly miraculous that [the hospital] made it this far."

While Medicare is taking back its money, other debts are coming due, including what Oliver said is roughly $24 million that Hutcheson still owes on a $35 million Regions Bank bond issue.

Hutcheson also owes Erlanger about $20 million, Hospital Authority Board Chairman Corky Jewell said.

For the past two years, the hospital has paid Regions the interest -- but not the principal -- on the bonds, Oliver said.

"They're getting their interest," Oliver said. "They backed off on the principal payments to help us put Humpty Dumpty back together again."

"We've had two years now, so they're getting anxious," he said.

Regions Bank spokesman Mel Campbell declined to comment.

Catoosa and Walker counties' commissioners were poised to issue $25 million in tax anticipation bonds to reduce Hutcheson's interest on its debt.

But Regions' request for payment reportedly would have increased the tax anticipation bond request to $35 million.

"I don't think we're going to do that bond anticipation note for $25 million," Walker County Sole Commissioner Bebe Heiskell said in mid-April. "Some things came up after Catoosa and Walker signed the resolution."

At a community meeting in April in LaFayette, Heiskell said that issuing bonds for all of Hutcheson's debt could put the counties on the hook for $62 million. She worried that was more than the counties could recoup by selling the hospital, if it failed.

Erlanger proposed leasing Hutcheson for 10 years, which would make it responsible for the hospital's debt, Heiskell said. But, according to a LaFayette radio station's coverage of the meeting, Heiskell said the counties would have no input on the hospital's operation. She worried Erlanger might use Hutcheson as a "feeder" for its Chattanooga hospital.

Emory Healthcare in Atlanta expressed an interest in leasing or purchasing Hutcheson, she said.

The Hospital Authority of Walker, Dade and Catoosa Counties, the nine-member board appointed by county commissioners that oversees the hospital's lease, will put out requests for proposals to see what hospitals are interested in leasing Hutcheson, Oliver said.

"[Erlanger is] in now as a hired manager, but we're going to lease the hospital to an appropriate entity," he said.

Erlanger could be the health care company that takes over.

Oliver expects others to apply, too.

"Oh, yes, this is an attractive market. There'll be plenty of people interested," he said. "You've got a couple hundred thousand people down here that this hospital is the primary provider for."

'Not closing'

One thing that everyone seems to agree on is that Erlanger at Hutcheson's finances are complicated.

"It's one of the most complicated things I've ever been involved in," Heiskell said.

Walker, Catoosa and Dade officials also seem united by a strong desire to keep the facility open.

"The hospital's not going to go under," Catoosa County Commission Chairman Keith Greene said. "The doors will stay open at the hospital. None of the counties are going to allow the hospital to close. That's my opinion."

Having a hospital was so important to residents of Catoosa, Dade and Walker counties, Heiskell said, that they helped fund the facility, which first opened in 1947 as The Post Hospital, with deductions from their paychecks.

"They had a payroll deduction to support that hospital," Heiskell said. "That's how badly they wanted and needed that hospital."

"A lot of private money's also gone into it," she said.

"The people in Walker and Catoosa counties want this county hospital," Heiskell said. "I have not had one single person say, 'Just let it close.'"

Erlanger has lured back doctors who had left Hutcheson, brought in new doctors and marketed services such as its baby delivery.

Greene is impressed with how the hospital has done under Erlanger's watch.

"They're starting to get more patients," he said. "They're rebuilding and bringing ... doctors back. I've seen significant improvements over there."

Contact staff writer Tim Omarzu at tomarzu@timesfreepress.com or 423-757-6651.