published Thursday, February 20th, 2014

Hamilton County lawmakers introduce bill altering Erlanger structure

NASHVILLE — Hamilton County state legislators have introduced legislation paving the way for Erlanger' hospital's governing authority board to create a nonprofit group to run the public hospital.

Among "key" benefits of the enabling legislation, according to proponents, would allow Erlanger's board "to adopt more modernized, market-based purchasing guidelines."

The current Authority would remain but a new operating board would be created. Erlanger would continue its public hospital mission and provide comprehensive and essential medical services such as providing health care to underserved people in the Tri-State area.

The bill, sponsored by Sen. Todd Gardenhire, R-Chattanooga, and Rep. Mike Carter, R-Ooltewah, has been filed but is basically a placeholder for additional language.

According to a draft of key provisions to be inserted in the bill, the proposed legislation amends general state law governing private act hospitals, granting them additional rights.

Erlanger's authority would be permitted to create a Tennessee nonprofit corporation or operating board for the purpose of leasing and operating the hospitals and facilities it controls. The corporation would have all the rights and powers under the Tennessee Nonprofit Corporation Act.

The nonprofit corporation could choose to lease the facilities and operations to the Operating Board, which could lease out operations. The Authority would remain to oversee the lease.

The bill is an answer to problems at the public hospital, which has lost money and been embroiled in other problems in recent years. Last year, the delegation passed a bill creating a nonprofit board but Hamilton County Commission members refused to approve those changes to the private act creating Erlanger.

This legislation, however, applies to provisions in state general law and would not require approval by county commissioners, according to one person familiar with the legislation.

According to an Erlanger news release on the bill:

• The Hospital Authority is permitted to create a Tennessee Nonprofit Corporation (Operating Board). It would be a 501 (c)(3) organization.

• The Authority, if it chooses, can lease the facilities and operations of Erlanger Health Systems to the Operating Board for adequate consideration, sufficient to cover the Authority's current and future debt service. The Authority remains intact to oversee the lease. The lease will not increase the bonded indebtedness of the Authority.

• The Operating Board assumes all debt and obligations which are payable out of the assets of the Operating Board with no liability to state or local governments.

• The Operating Board shall have all the rights and powers under the Tennessee Nonprofit Corporation Act and shall serve a governmental, public purpose for purposes of leasing and operating the hospitals.

• Nothing in the act will add or reduce existing financial obligations of the county to Erlanger.

• The Operating Board is directed to adopt competitive bidding procurement rules and regulations based on best corporate business practices. It also encourages opportunities for Disadvantaged Business Enterprises as already defined by state procurement law.

• The Operating Board is subject to and covered by Tennessee's Government Tort Liability Act as well as the state's Open Records Act and Open Meetings Act. The Hospital Authority remains under these laws as well.

• Employees and contractors "leased" to the hospital by the Authority remain eligible for all benefits, retain their workers compensation status and are subject to personnel policies and procedures.

• The Operating Board will file annual financial reports to the Authority. They will include data on the provision of charity care, indigent care and other community benefits benefits the hospital provides.

• The Operating Board shall maintain Erlanger's public mission providing trauma care and serving indigent, low-income and needy within the service area.

• The Operating Board is direct to adopt conflict-of-interest rules and policies for directors, officers and medical staff as it relates to hospital operations. Both state and Internal Revenue Service regulations governing nonprofit boards include conflict of interest provisions as well.

Read more in tomorrow's Times Free Press.

about Andy Sher...

Andy Sher is a Nashville-based staff writer covering Tennessee state government and politics for the Times Free Press. A Washington correspondent from 1999-2005 for the Times Free Press, Andy previously headed up state Capitol coverage for The Chattanooga Times, worked as a state Capitol reporter for The Nashville Banner and was a contributor to The Tennessee Journal, among other publications. Andy worked for 17 years at The Chattanooga Times covering police, health care, county government, ...

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