EDITOR’S NOTE: Hutcheson Medical Center has had a rough time of it. Last week, officials at the publicly owned Fort Oglethorpe hospital suspended labor and delivery services — once the hospital’s pride — and got a one-year extension to repay $6 million borrowed with backing from Catoosa and Walker counties. In 1995, Hutcheson had $30 million in reserves — compared to today’s more than $60 million in debt. Here’s one take on what went wrong.
Hutcheson hospital was created under the state law allowing one or more local governments to create a hospital authority as a separate legal entity, to supply medical care for the public. Catoosa, Dade and Walker counties combined to create such an authority which established Hutcheson hospital in 1951. Its nine board members are nominated by the county governments. The Authority board ran the hospital until 1995.
In 1995, in an effort to expand hospital operations beyond services that the Hospital Authority was authorized by law to do (such as the local clinics), Hutcheson Health Enterprises, Inc. (HHE) was created as a separate private non-profit corporation, which in turn created private non-profit HMC to lease all the hospital operations, and created a for profit corporation HMD to own and operate new clinics.
The first board of HHE was appointed by the Authority Board. All HHE, HMC, and HMD board appointments thereafter were made by the HHE board. The boards running the hospital became self-perpetuating, which was a terrible decision as the following years would prove. Oversight was among friends, so no one wanted to ask the hard questions. Poor decisions were made, then became the foundation for worse decisions. A downward spiral was the inevitable result.
While the Authority technically “owned” the assets of those new corporations, all Hutcheson operations were leased to HHE/HMC on a 40-year lease, and HMD ran the clinics under the supervision of HHE. So from 1996 until 2011, the Authority board was powerless.
In 2003, Walker County Commissioner Bebe Heiskell called for changes to be made to the board structure to return public input through county appointments. Her efforts were rebuffed. There was nothing the Authority could do because of the 40 year lease. Over the next few years, the HHE/HMC boards steadfastly refused to make any changes.
When the HHE/HMC lease was put in place in 1996, the Authority handed over the hospital to them with about $30 million in reserves, little bonded debt, and highly profitable operations. By 2010, the reserves had been exhausted, HMC had $25 million in bonded debt, and was accumulating monthly losses of $1 million. HMC and its administration had run up a debt of over $12 million to Medicare at 11 percent interest. They had accumulated over $10 million in vendor debt.
The Hutcheson administration and HHE/HMC boards came to the three counties asking for help. Dade County refused, but Walker and Catoosa agreed to help. However, Walker conditioned its help on the HHE/HMC boards being reorganized to require all appointees to be recommended by the counties. The HHE/HMC boards fought the change, but in the end had to agree. Unfortunately, and over the strenuous objections of Commissioner Heiskell, the old HHE/HMC board signed a management agreement with Erlanger as a last act. That deal included a $20 million line of credit which Erlanger would loan to HMC, now being managed by Erlanger. Over the next 30 months Erlanger‘s management team was fully in charge and doubled Hutcheson’s debt by drawing down the entire $20 million debt to Erlanger, borrowing an additional $6.5 million, while repaying almost none of the old debt.
The lease with Erlanger, which could not be terminated for the first two years, was recently terminated. For the first time since 1995, a Board accountable to the citizens is back in control of Hutcheson. It has instituted many changes which have returned Hutcheson to its former ability to supply quality health care services to the citizens of the three north Georgia counties. Those changes are already showing positive results. The doctors are back and the care being provided is superb. Over $5 million of the Medicare debt has been repaid.
Now that Board is leading a financial recovery that will overcome many years of bad management and which will match the excellent level of care being provided. Hutcheson is owned by and is finally once again accountable to the Counties’ citizens.
It can and will accomplish that feat of financial recovery, if the citizens will be patient and willing to continue to allow their county governments to provide the credit backing necessary to complete Hutcheson’s recovery.
David Ashburn is a former Hutcheson board member.