Erlanger's proposal to lease Hutcheson dies quietly; no word on why negotiations failed

Erlanger's proposal to lease Hutcheson dies quietly; no word on why negotiations failed

August 11th, 2013 by Tim Omarzu in Local Regional News

A plan by Hutcheson Medical Center officials to lease the hospital to Erlanger Health System has fallen through. Now officials say the North Georgia hospital will invite partnerships with other hospital systems.

Photo by Doug Strickland/Times Free Press.

There was a round of applause June 27 when Chattanooga-based Erlanger Health System trustees announced their intention to lease Hutcheson Medical Center in Fort Oglethorpe for 10 years, with two 10-year extensions.

The proposed lease died quietly Friday night -- the deadline for the deal to be signed.

At 5 p.m., a handful of Hutcheson officials met for about an hour behind closed doors at the Fort Oglethorpe hospital.

Just after midnight Saturday, Waterhouse Public Relations, which was hired by Hutcheson, issued a three-sentence news release stating that Hutcheson will seek bids from others entities to run the hospital, which is owned by Catoosa, Walker and Dade counties.

Waterhouse spokeswoman Nathalie Strickland wouldn't say Saturday afternoon exactly what killed the deal.

"They weren't able to formalize the lease agreement," Strickland said. "The negotiations of a strategic plan and the deal points are confidential."

The hospital has $56 million in debt. It had been losing money for years until it was taken over in 2011 by a management team from Erlanger led by Hutcheson CEO and President Roger Forgey.

Forgey said his team turned finances around through such improvements as increasing the patient count and bringing back doctors who had left.

But Forgey said the only way Erlanger could make the hospital work long-term was by getting Catoosa, Walker and Dade counties to issue low-interest, 30-year bonds to reduce the hospital's debt payments to a manageable $3.2 million a year.

County officials were willing to issue bonds on one condition: That Erlanger guaranteed to secure the debt and make the payments no matter what, so taxpayers wouldn't be on the hook if the hospital fails.

Those were the sides' public stances. All lease negotiations have been behind closed doors.

Erlanger still running hospital

Walker and Catoosa counties approved giving Hutcheson a $3.5 million line of credit in late June after approving a $2.5 million line of credit in May. The total $6 million line of credit allowed the hospital to make payroll and keep running during negotiations.

"I believe that they'll make it through the end of the year without needing any more help," Walker County Sole Commissioner Bebe Heiskell said Saturday.

While lease negotiations were ongoing, Hutcheson had the Decosimo accounting firm working on a request for proposals to run the hospital in case the Aug. 9 signing deadline for Erlanger wasn't met. Strickland didn't know if the RFP is ready now.

"It is in the best interest of Hutcheson that we seek a long-term partner so that North Georgia residents are served by a strong, viable community hospital," Hutcheson Chairman Corky Jewell stated in the news release.

Erlanger will keep running Hutcheson in the meantime.

"Erlanger is supportive of the RFP process and will continue to support Hutcheson Medical Center while they evaluate offers with other potential partners," Erlanger President and CEO Kevin M. Spiegel stated in the release.

At her commissioner's meeting on Thursday Heiskell said, "I expect another proposal from Erlanger."

Staff writer Rachel Sauls contributed to this report.

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