published Friday, July 4th, 2014

Erlanger files foreclosure proceedings against Catoosa County's Hutcheson Medical Center

Hutcheson Medical Center will be auctioned in August to the highest bidder if Erlanger Health System has its way.

In the latest battle between the two publicly owned hospitals over some $22 million, Chattanooga-based Erlanger announced Thursday that it has initiated formal foreclosure proceedings against Fort Oglethorpe-based Hutcheson.

Erlanger lent the $22 million to Hutcheson, with the hospital property as collateral, as part of a two-year management agreement that began with fanfare in April 2011 and ended in August of last year in what was described as an amiable parting. Walker and Catoosa counties further secured the loan with guarantees of up to $10 million per county.

The acrimony surfaced later, when Erlanger sued early this year in federal court to get the money back. Hutcheson, represented by the law office of former Georgia Gov. Roy Barnes, responded that it didn't owe Erlanger anything -- and, in fact, was due millions in damages because of Erlanger's alleged mismanagement.

"We have acted in good faith with regards to Hutcheson, but the time has come to expect repayment," Erlanger board Chairman Donnie Hutcherson said in a news release Thursday.

Erlanger President and CEO Kevin M. Spiegel said in the statement: "Our employees and their families, our medical staff, the community we serve and our bondholders would expect nothing less."

Hutcheson board members were notified of Erlanger's intentions and given a copy of the public notice of sale submitted to Catoosa and Walker legal publications, the release said. The sale is scheduled for the first Tuesday in August on the steps of the Catoosa County Courthouse in Ringgold, Ga., it said.

Foreclosure does not necessarily mean that Hutcheson will cease operations as the community's hospital, the release said. The purchaser at the foreclosure sale would decide whether the facility continues as Hutcheson Medical Center.

Hutcheson fired back with its own statement.

"It is shameful that Erlanger, which just posted a huge profit this week, would refuse that offer and instead seek to close a small community hospital," said Farrell Hayes, president and CEO of Hutcheson Medical Center, referring to a windfall of $20 million in federal funds that should put Erlanger in the black for the first time since 2010.

"In negotiating a settlement over the management contract, Hutcheson made an offer that would have allowed for full repayment of the $20 million loan to Erlanger," Hayes said.

Contact staff writer Tim Omarzu at tomarzu@timesfreepress.com or twitter.com/TimOmarzu 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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