Hutcheson feels 'wolf at the door'

Hutcheson feels 'wolf at the door'

January 28th, 2011 by Emily Bregel in Healthlocal

Despite Hutcheson Medical Center's deepening losses, the Fort Oglethorpe hospital's president and CEO has taken home a compensation package that's grown year after year.

In fiscal year 2009 Charles Stewart pocketed a $69,750 bonus, bringing his total compensation to more than $425,000 with additional benefits -- the same year the hospital lost about $7.3 million, according to Hutcheson's 990 tax form and unaudited financial statements.

Dade County Executive Ted Rumley said the compensation is "totally ridiculous. I couldn't even hold my head up to the people involved in the hospital with them knowing that I was making that much money," he said. "You got the hospital going down, down, down. I just don't see how the board let that happen."

"Wolves at the door"

The North Georgia hospital's financial stresses show no signs of letting up. Losing more than $1 million a month in this fiscal year, Hutcheson Medical Center has just 15 days of liquid cash on hand, its chief financial officer estimated Thursday.

"So the wolf is at the door," said Bill Cohen, member of the Hospital Authority of Walker, Dade and Catoosa Counties' board of trustees, during the board's quarterly meeting Thursday.

"Yes, sir," answered Gerald Faircloth, Hutcheson's chief financial officer.

The struggling hospital still has patients and revenue coming through the door to keep it afloat, but Hutcheson leaders are hoping a partnership with Erlanger Health System in Chattanooga will help shore up its bottom line and cash reserves.

"The relationship with Erlanger is going to allow us to set a new course," Stewart said after the meeting.

Compensation

Hutcheson Medical Center executive compensation:

2007 -- $286,997

2008 -- $395,289

2009 -- $331,752

Ceo pay

Charles Stewart's base salary plus bonuses, tax-free benefits and expense accounts:

2007 -- $337,081

2008 -- $418,419

2009 -- $425,745

Source: Hutcheson's IRS 990 tax form

Hutcheson's net income:

Fiscal year 2006 -- Loss of $1.4 million

Fiscal year 2007 -- Profit of $766,766

Fiscal year 2008 -- Loss of $467,517

Fiscal year 2009 (unaudited) -- $7.3 million loss

Fiscal year 2010 (unaudited) -- About $7 million loss

Source: Hutcheson Medical Center financial statements and officials

In late October, Hutcheson and Erlanger entered into a 60-day due diligence process to consider a strategic partnership. Erlanger recently has submitted a preliminary proposal to HMC leaders, who will respond soon, Martha Attaway, Hutcheson Medical Center board chairwoman, in an e-mail Thursday.

Trustees of the hospital authority gained a greater foothold in negotiations with Erlanger on Thursday, voting to appoint members to a "transition team" that will have a stake in the partnership discussions.

There's a "growing spirit of cooperation" among the three major boards that govern Hutcheson, Cohen said. "We're going to work together to make this happen."

But during the Thursday night meeting, tension was simmering between members of the county-appointed hospital authority board, which owns the hospital building, and leaders of Hutcheson Medical Center Inc., the private nonprofit that leases and operates the hospital. Trustees pushed for more transparency during board meetings, particularly regarding finances, which usually are discussed in closed sessions.

"Probably half the people in three counties know we're broke," Cohen said. "We're not giving up any secret information."

Hutcheson lost more than $7 million in fiscal years 2009 and 2010, according to unaudited financial statements.

The hospital's fiscal year 2010 loss would have been greater if it hadn't been for the $3.5 million sale of Hutcheson Home Health that year, Faircloth said at the meeting.

Hutcheson, a publicly owned community hospital, is governed by the boards of five entities, including the hospital authority board. The authority owns the hospital building and oversees Hutcheson's 40-year lease to Hutcheson Medical Center Inc., or HMC.

At the meeting Cohen said he was "burning" at what seemed to be misleading information about the hospital's cash on hand.

Faircloth initially said 80 days, but that estimate included $10 million in capital funds that are now frozen under a complex financing arrangement used for Hutcheson's bond issue years ago. Even if the funds were liquid, they can be only used for capital projects, not operations. Excluding those funds, Faircloth estimated 12 or 15 days cash on hand.

Also including the frozen $10 million, the hospital has a 55 percent cash-to-debt ratio, Faircloth said. Hutcheson must have a 60 percent cash-to-debt ratio to maintain its bond covenants, which is a requirement of its lease agreement with the counties.

Trustees discussed the status of the HMC lease agreement in a closed session, after a close vote on whether to keep the meeting open to media.

CEO COMPENSATION

Stewart declined on Thursday to comment on his compensation.

But Hutcheson Medical Center board chairwoman Martha Attaway said Stewart's bonus in fiscal year 2009 was actually based on the profit he helped bring about in fiscal year 2008, after many years of losses.

"Last year Mr. Stewart recommended that no increase be given to him since pay increases could not be given to other employees," she said in an e-mail.

Stewart's base compensation was $331,752 that year, compared to the $550,000 base salary for Jim Brexler, president and CEO of Erlanger Health System in Chattanooga.

Brexler's bonus pay in fiscal year 2009, which for Erlanger ended June 30, 2009, was $198,000.