Inside the fight for Erlanger: High-stakes struggle centers on money and control

Inside the fight for Erlanger: High-stakes struggle centers on money and control

January 20th, 2013 by Judy Walton in Local Regional News

Chattanooga's Erlanger Hospital is seen in this aerial file photo.

Photo by Doug Strickland /Times Free Press.


The Times Free Press spoke to more than 20 people in a variety of positions and on all sides of the Erlanger debate for this story. Many would speak only on background because of the sensitive nature of the ongoing developments at Erlanger. The newspaper requested interviews with interim CEO Charlesetta Woodard-Thompson and CFO Britt Tabor through Erlanger's communications office but did not receive a response.

Behind the flap over who should run Erlanger Health System is fear of a takeover by the University of Tennessee College of Medicine, whose doctors practice and teach there.

Some hospital partisans see sinister motives in moves by the UT College of Medicine to seek seats on the Erlanger board and to shift management of physician practices from the hospital to a joint corporation with UTCOM participation.

In their view, the fact that a UTCOM associate professor is one of three CEO finalists is a signal to worry.

Others call that paranoid nonsense, ginned up by people who have been less than successful at modernizing hospital business practices or who fear losing influence over a vital community institution.

All are waiting with varying degrees of apprehension to see what Hamilton County's state legislators will come up with as they work to revamp the health system's governance.

At stake, some believe, is the future of a community asset that takes care of rich and poor, trains the people who treat them, provides a living for thousands and makes Chattanooga the center for health care in the tri-state region.

"Two things stand out to me: Focusing on providing great health care to everyone regardless of ability to pay, and the mission of training future health care workers," said Ron Loving, chairman of the Chattanooga-Hamilton County Hospital Authority.


Few would argue that former CEO Jim Brexler didn't leave Erlanger in a shambles -- driving away doctors and the paying patients who help cover costs for the indigent -- in a time of rapid and wrenching changes to the health care industry.

The new CEO's No. 1 task will be to heal those ruptured relationships. But the new man -- the only female candidate, interim CEO Charlesetta Woodard-Thompson, didn't make the final three -- also faces a host of other problems, from business procedures to physician contracts.

A key issue is who benefits.

"It's always about money -- how it's going to be divided up and who's going to pay for what," said Peter Young, whose Florida-based HealthCare Strategic Issues analyzes hospital trends.

Hospital partisans say Erlanger supports the medical education program in a way that no other UT-affiliated hospital does.

Figures developed by Erlanger executives obtained by the Chattanooga Times Free Press show the cost of the resident training program at about $26 million a year. Of that, almost $15 million comes from federal and state grants, including close to $4 million in Medicaid funds sent to UTCOM and forwarded to the hospital.

Erlanger kicks in close to $11 million of its own revenues. Hospital figures show UT at Knoxville's program gets $611,000 from the university hospital and UT-Memphis gets nothing.

David Seaberg, dean of the UT College of Medicine in Chattanooga, said only $2 million to $3 million of Erlanger's contributed money goes to the residents program; the bulk goes to clinical service. If Erlanger had to hire doctors to provide that service, it would cost a lot more, he said.

"They're getting 170-plus residents and fellows for that two or three million, plus the loyalty of the faculty. ... It is a huge value to this hospital," Seaberg said.

He disputed that UT and Memphis don't get contributions from their hospitals.


Hospital supporters also worry that UTCOM, which operates the medical training program at the hospital, hopes to rake off revenue by shifting management of faculty physician practices from Erlanger to what's called a "faculty practice plan."

Now, Erlanger has contracts with many UTCOM faculty members and hospital-employed physicians, managing their practices and paying their salaries. Some familiar with the system say the contracts have shortcomings, including a lack of performance metrics to ensure productivity -- doctors get paid whether they see, and bill, five or 50 patients in a week.

Under the faculty practice plan, a joint hospital-UTCOM corporation would manage the practices, from setting appointments to billing. Backers say it would give physicians more of a voice in their practice. And quality and performance metrics, along with peer pressure, would increase accountability, among other benefits.

"You will have hospital administrators saying physicians can't manage themselves. It's simply not true," Seaberg said.

But partisans say the practice plan drafted a few years ago and never acted on was weighted heavily in favor of UTCOM. It would shift some $65 million a year from the hospital to the college, but require Erlanger to bear all the plan's administrative costs and liability.

Erlanger trustee Russell King said a lot of people were confused about the plan after it was brought up at a board retreat. He said Seaberg told trustees it would bring more physicians back to Erlanger, but some trustees feared it would push up costs to hire doctors.

"The numbers have been difficult to deal with," King said.

Seaberg said he was "not familiar" with the $65 million figure, but added, "I think Erlanger would make more money by having a more efficient physician practice."

A practice plan in place at Methodist University Hospital in Memphis includes scheduled payments of $14.1 million this year from the hospital to the UT physicians group there, according to October minutes from the UT board's Health Affairs Committee. The hospital also will maintain an electronic health records system for the faculty at an estimated cost of $2 million a year. If the hospital's profit margin is more than 3.5 percent, it will pay 25 percent of that to the UT Health Science Center, the Memphis-based parent of UTCOM.


The CEO of Methodist University Hospital, Kevin Spiegel, is one of three finalists for Erlanger's top job. He also is an assistant professor at the UT Tennessee Health Science Center College of Medicine.

Those wary of UT gaining control of Erlanger see Spiegel's inclusion with a Navy rear admiral and the former administrator of a not-for-profit system in Kentucky with suspicion.

Insiders said Brexler had balked at the original physician practice plan proposal. The Times Free Press asked Loving, the Erlanger board chairman, whether the finalists were quizzed about their positions on a practice plan during recent interviews.

"There has been no level of detail relative to specifically how a plan should be structured," he said. "There may have been some discussion about the importance of such."

Steve Schwab, chancellor of the UT Health Science Center, said, "You need the consent of all parties to do it [the practice plan], and you probably need a permanent CEO who would take ownership of it."

Schwab said there's an overarching vision for better coordination and sharing among all eight of UT's core teaching hospitals, which he said have a $2.3 billion annual economic impact in Tennessee.

"We think we have great education programs. The more we work together across the state, the better we get," he said.

And he, like everyone who spoke for this report, said nurturing the partnership between university and hospital is paramount.

"We are absolutely and totally committed to all our teaching hospitals, but especially Erlanger. We're committed to its thriving and being successful," Schwab said.

Added Schwab: "The goal is to bring the best-qualified person not only to run Erlanger but to grow the Erlanger-university relationship. ... We should get the best CEO we can get to lead us into the future, to grow the clinical enterprise and to have a solid relationship with the university. I'm not sure why people are afraid of that."


The next likely step will be the unveiling of amendments to the Hospital Authority Act under which Erlanger operates, which lawmakers said should be ready by the end of the month.

Lawmakers said they began discussing a new governing structure for Erlanger last year. At the time, Brexler was freshly departed and UTCOM approached the delegation about getting four seats on the hospital board. Lawmakers declined to do that, but added a single seat for the hospital's medical chief of staff.

Gerald McCormick, the Chattanooga Republican who serves as House majority leader, has said the board of trustees has struggled under the current structure, but he hasn't been specific about what changes are coming.

He and other delegation members, though, have emphasized that they want to see Erlanger continue as a community hospital under local control.

"I absolutely am opposed to UT taking over Erlanger hospital, and as long as I'm living and breathing and in the Legislature, I'll do everything in my power to make sure that does not happen," McCormick said.