published Thursday, January 30th, 2014

Hutcheson officials fire back at Erlanger over debt, stole patients, few investments in Hutcheson

Hutcheson Medical Center officials on Wednesday blasted Erlanger Health System for what they called increasing the North Georgia hospital's debt, stealing patients and failing to invest in the community hospital.

In response to a lawsuit Erlanger filed to recover $550,000 it loaned the struggling Fort Oglethorpe facility, Hutcheson leaders said the hospital will "vigorously defend" itself. The damage Erlanger did when it managed Hutcheson for 16 months far exceeds the amount of any line of credit or other debt owed to Erlanger, Hutcheson officials said in a news release.

"The successes realized by Hutcheson while rebuilding the hospital in recent years are attributable to the work of the hospital staff -- rather than Erlanger's management," the release states.

Erlanger filed an initial lawsuit for $550,000 a week ago in U.S. District Court in Rome, Ga. Erlanger officials said they plan to file a separate suit in early February seeking the additional $20 million. The two sums were loaned in separate notes, with separate timelines for demands to be met, said Erlanger's attorney, Jeff Woodard.

Erlanger's top executive was puzzled by Hutcheson's accusations. Hutcheson officials had praised Erlanger's management when it was in place, and Hutcheson never sought mediation to resolve differences, CEO Kevin Spiegel said.

"If there were issues with the management ... there was a [mediation] process that was required," he said, adding, "I can tell you, we made zero dollars on the management agreement."

The management agreement is separate from the $550,000 and $20 million loans that Erlanger made to Hutcheson, Spiegel said. The loans were meant to tide over the Fort Oglethorpe hospital as it treated Medicaid patients while the federal program's payments were cut so the federal government could recoup millions overpaid because Hutcheson reported a higher-than-actual patient count.

Hutcheson's hospital authority used the hospital's assets as collateral, and Catoosa and Walker county officials agreed to guarantee $10 million each, Spiegel said. The hospital could liquidate assets or the counties could raise taxes to repay the loan, he said.

"It's like the mortgage on your house," Spiegel said. "It really is up to the hospital authority on how they want to settle the debt."

Hutcheson 'launches initiatives'

Hutcheson decided to go it alone as an independent hospital in November, after only two health care organizations responded to a request for proposals to manage Hutcheson -- one of which was from Erlanger.

"In just a few months of independent operation, Hutcheson launched initiatives to add state-of-the-art technology, including a new CT scanner and two outpatient GI suites at Hutcheson on the Parkway, grow the number of outpatient clinics and expand operating hours for better community convenience," the release states. "Meanwhile, hospital leaders are working to find solutions to the debt challenges."

According to Walker County Attorney Don Oliver, Walker County and Regions Bank are providing support of Hutcheson's ongoing financial needs.

"We are surprised and disappointed that Erlanger's leaders filed this lawsuit in an attempt to distract attention away from their own financial problems. We were working with Erlanger officials last week to discuss a mutual settlement of claims -- at a meeting Erlanger requested -- while they were covertly drafting a lawsuit," Oliver stated in the release.

Corky Jewell, chairman of the Hutcheson Medical Center board of directors, stated, "In spite of the challenges created by past administrations and Erlanger's management, we remain confident that we have the partners and resources to turn the corner and make this hospital the thriving community healthcare institution it used to be."

Including its loans from Erlanger, the Fort Oglethorpe hospital is more than $60 million in debt.

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

about Tim Omarzu...

Tim Omarzu covers Catoosa and Walker counties 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. Stories he's covered include crime in blighted parts of metro Detroit and Reno, Nev.; environmental activists tree-sitting in California's Sierra Nevada foothills; attempts by the Michigan Militia to take over a township¹s government in northern Michigan. A native of Michigan, ...

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