Hutcheson gets offer from for-profit suitor

Hutcheson gets offer from for-profit suitor

February 26th, 2011 by Emily Bregel in Healthlocal

Even as they negotiate with Erlanger hospital, Hutcheson Medical Center leaders have received a partnership offer from a for-profit hospital system based in Franklin, Tenn.

Capella Healthcare sent a letter to Hutcheson Medical Center board Chairwoman Martha Attaway last week, asking for the chance to submit a partnership proposal to the financially ailing hospital. The letter was given anonymously to the Chattanooga Times Free Press.

In October, Erlanger Health System and Memorial Health System in Chattanooga submitted partnership proposals to Hutcheson, whose leaders hoped partnering with a larger Chattanooga hospital would help them recruit doctors and bring in more patients.

Hutcheson chose Erlanger.

"Had the net been cast wider, we certainly would have been interested in making a proposal," Andrew Slusser, Capella's senior vice president of acquisitions, wrote in the letter.

Slusser said Friday he has not heard from Attaway or other Hutcheson Medical Center board members who were sent copies of the letter.

Attaway said Friday that the Erlanger negotiations are going well and that other options currently are not being considered.

"There has been a plethora of these types of overtures" from other companies inquiring about partnerships, she said.

A detailed partnership plan between Hutcheson and Erlanger was expected in mid-January. None has been presented, and some Hutcheson employees and community leaders have worried that negotiations are on the rocks.

But hospital officials have said a committee of Hutcheson board members is reviewing a proposal from Erlanger, and an agreement could come any day now.

Some board members said the recent resignations of former president and CEO Charles Stewart and interim chief financial officer Gerald Faircloth were a signal that an agreement with Erlanger is imminent.

Erlanger officials also said negotiations are on course. They wouldn't comment on specifics Friday, citing a confidentiality agreement with Hutcheson.

HUTCHESON NET INCOME

  • FY 2006: Loss of $1.4 million
  • FY 2007: Profit of $766,766
  • FY 2008: Loss of $467,517
  • FY 2009 (unaudited): Loss of $7.3 million
  • FY 2010 (unaudited): Loss of $7.1 million

Source: Hutcheson financial statements

Walker County Commissioner Bebe Heiskell said Friday she believes Hutcheson management is settled on Erlanger as its partner.

"Everything that has come forth up until this point has not changed their decision" on Erlanger, she said.

Heiskell said leaders in Dade, Catoosa and Walker counties met this week to discuss whether the counties would agree to secure any debt Erlanger might incur in bolstering the struggling hospital. Hutcheson is losing on average $1 million a month.

"Once (Hutcheson) gets back into the black, they'll pay Erlanger back," she said.

But if Hutcheson couldn't repay Erlanger, county taxes could be raised to settle the debt, she said.

CAPELLA'S OFFER

Slusser said in a phone interview that Capella - the parent company of Grandview Medical Center in Jasper, Tenn. - would like to start a conversation with Hutcheson if the Erlanger partnership doesn't work out.

Capella owns 13 hospitals in seven states, including Grandview, which Capella acquired from Nashville, Tenn.-based HCA in 2005.

Capella is open to joint-venture arrangements with 50-50 governance, Slusser said. The company has the resources to help Hutcheson cope with its financial problems, including being in default on its $35 million bond issue, he said.

"It's not unusual in today's environment that a freestanding, stand-alone hospital is experiencing financial difficulty," he said. "We bring the financial management expertise that can really help a hospital achieve its success."

The health system offers advantages over partnering with a local hospital, which might seek to bring patients referrals from Hutcheson to their own beds, he said.

Hutcheson "would be the hub of health care. We wouldn't want Hutcheson to be the spoke on somebody else's hub," he said.