published Friday, April 18th, 2014

Attorney says Erlanger lawsuit against Hutcheson Medical Center belongs in state court

Hutcheson Medical Center in Fort Oglethorpe, Ga.
Hutcheson Medical Center in Fort Oglethorpe, Ga.
Photo by Doug Strickland /Chattanooga Times Free Press.
  • photo
    Attorney and former Georgia Gov. Roy Barnes is suing Erlanger hospital over its management deal with Hutcheson Medical Center.
    Photo by Associated Press /Chattanooga Times Free Press.

If Erlanger Health System wants to get back the roughly $22 million it's owed by Hutcheson Medical Center, Erlanger needs to sue in the Georgia state court system -- not federal court, Hutcheson's lawyer says.

Meanwhile, the Fort Oglethorpe hospital's interim CEO says Hutcheson would have to close and sell off its assets if forced to repay the $60 to $70 million it owes to various creditors.

The attempt to shift courts comes in a motion filed in U.S. District Court in Rome, Ga., by former Georgia Gov. Roy Barnes, whose Marietta law firm represents Hutcheson, a publicly owned hospital based in Fort Oglethorpe.

Barnes argues that Hutcheson was established in 1947 by Walker, Catoosa and Dade counties to "carry out the state's duty of [caring] for its indigent sick."

"If [Hutcheson] cannot provide indigent care for the State of Georgia, the State itself would have to expend state funds to fulfill its duty to indigents," Barnes wrote.

That means Georgia is the real target of Erlanger's lawsuit. And, according to the 11th Amendment of the U.S. Constitution, states can't be sued in federal court, he argued. Erlanger, which is based in Chattanooga, still can sue Hutcheson, Barnes argues -- it just has to do so in the Georgia state courts.

On Thursday, Erlanger spokeswoman Pat Charles declined to comment specifically about Barnes' motion, which was filed April 7.

"What I can tell you is this: Erlanger will be filing a response," she said.

Erlanger sued Hutcheson in January to recoup a $20.5 million loan it made while managing the Fort Oglethorpe hospital for 16 months. The management agreement ended last year, and the loans, which total about $22 million including interest, were to be repaid Dec. 1. Erlanger also has filed the suit against the hospital's governing body, the Hospital Authority of Walker, Dade and Catoosa counties.

Hutcheson is the primary provider of indigent health care in Walker, Dade and Catoosa counties, Hutcheson's interim Chief Executive Officer Farrell Hayes testified in an affidavit attached to Barnes' motion, and 36 percent of its services are for uncompensated care or Medicaid.

"Hutcheson is in dire financial straits," Hayes said in the affidavit. "It is struggling to pay its current obligations, and cannot pay any debt service. If Hutcheson were required to pay the debt allegedly owed to [Erlanger], Hutcheson would have to cease operations and to liquidate its assets. There are insufficient assets to pay all the debts owed by Hutcheson."

Barnes has sought to turn the tables on Erlanger, claiming that it is Erlanger that owes the North Georgia hospital at least $73 million in damages sustained during the management agreement. Erlanger has called the letter "silly, ludicrous and absurd," stating that its management kept the Hutcheson in business and even helped the hospital recover financially.

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

about Tim Omarzu...

Tim Omarzu covers education for the Times Free Press. Omarzu is a longtime journalist who has worked as a reporter and editor at daily and weekly newspapers in Michigan, Nevada and California.

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