Community News Walker County, Erlanger agree to settle $8.7 million debt

Community News Walker County, Erlanger agree to settle $8.7 million debt

January 10th, 2018 by Tyler Jett in Community North Georgia

The former Hutcheson Medical Center in Fort Oglethorpe.

Photo by Doug Strickland /Times Free Press.

Ending a dispute that has lasted almost seven years, Walker County Commissioner Shannon Whitfield agreed to pay off an $8.7 million debt to Erlanger Health System.

Whitfield signed an agreement with the hospital during a special called meeting last Thursday, promising to pay the debt by the end of his term in 2020. The county will give the hospital $2.6 million in 2018 and again in 2019, followed by $3.5 million in the third year.

In exchange, Erlanger will let the county skirt on interest on the debt, which sat at about $240,000 as of the agreement date. Whitfield said the interest would have grown to about $400,000 by the end of 2020.

The agreement also allows Walker County to avoid paying $180,000 in attorney's fees.

"It is a turning point for Walker County," Whitfield said. "We're bringing closure."

The debt is a holdover from Hutcheson Medical Center's final years. In April 2011, Erlanger loaned Hutcheson $20 million as part of a management agreement, and former Walker County Commissioner Bebe Heiskell guaranteed the loan.

Even though Hutcheson shut down in December 2015, Heiskell refused to pay the bill. She said she wanted to fight Erlanger in court and accused its officials of covertly trying to steal Hutcheson's patients during the management agreement. Some members of Erlanger's team, working at Hutcheson, told the Times Free Press that Walker County Attorney Don Oliver killed any chance of the partnership working.

Whitfield inherited the debt when he took office in January 2017 and began negotiating with Erlanger CEO Kevin Spiegel a month later. In August, Spiegel made an offer similar to the one Whitfield signed. He promised to forgive the attorney's fees and interest on the debt if Walker County paid the money back by 2020. Whitfield said no.

He was hoping to pay the hospital $7.5 million over three years.

Whitfield said he called Spiegel four weeks ago with a new offer. Compared to what Spiegel floated in August, that now-signed deal gives Walker County slightly more time to make the full payment.

Spiegel's deal asked for $1 million every three months. Whitfield's deal allows Walker County to pay $650,000 every three months, with one last payment of $900,000 in December 2020.

The county will pay most of the money from a special property tax Whitfield implemented this year. On top of the usual taxes, residents pay 0.14 percent of their property value just to the Erlanger debt. Whitfield projects this will bring in about $2.5 million a year.

Whitfield said he thinks Spiegel also wanted to move on from this fight. In December 2015, the hospital sued Walker County, demanding payment. A federal judge ruled eight months later that the county did, in fact, have to pay. Walker County appealed, and a higher court upheld the order to pay in July.

For Erlanger's finances, the payment will be a small bump. Spiegel said in September that the hospital's net operating revenue was $886.4 million in the most recent fiscal year.

"We remain committed to caring for patients from Northwest Georgia and will continue to look for opportunities to partner with Commissioner Whitfield and the good citizens of Walker County," Spiegel said in a statement.

Chattanooga-Hamilton County Hospital Authority Board Chairman Jack Studer said the hospital's administrators badly wanted to avoid any more court appearances in the case. The North Georgia market is an important part of Erlanger's business. In addition to the patients who flow up to Chattanooga, the hospital is trying to open a surgery center in Ringgold.

Studer said he always rooted for a deal between the two sides and saw Whitfield's defeat of Heiskell in November 2016 as a promising sign. Heiskell never budgeted to pay back any of the debt.

"I don't think that's justice," she said in September 2016.

Even with multiple federal judges ruling in favor of Erlanger, Studer told the Times Free Press he was concerned about the hospital's image in continuing to fight a cash-strapped county. Taking the matter to court again would only look worse.

"People choose [to go to] Erlanger," he said. "We think they're smart to choose Erlanger, and they're doing it more and more. We didn't want to drag [the court case] out more than we had to. We were excited when Shannon got on board. Frankly, for the first time we were dealing with a reasonable counterpart."

Email Tyler Jett at tjett@timesfreepress.com.