Trustee asks judge to terminate Hutcheson's bankruptcy protection

Trustee asks judge to terminate Hutcheson's bankruptcy protection

Guy Gebhardt says hospital's debt puts patients at risk; CEO Farrell Hayes says 'allegations are baseless'

August 19th, 2015 by Tyler Jett in Local Regional News
“We can confidently say that these recent allegations are baseless, and we look forward to discussing our case with the court.”
Hutcheson CEO Farrell Hayes

Hutcheson Medical Center in Fort Oglethorpe, Ga., is in the news again. A bankruptcy trustee is asking for a quick hearing on whether the hospital's bankruptcy protection should be withdrawn.

Hutcheson Medical Center in Fort Oglethorpe, Ga., is...

Photo by Tim Barber /Times Free Press.

As rumors of an impending crash loom, Hutcheson Medical Center could soon lose its seat belt.

Guy Gebhardt, the U.S. trustee who oversees the hospital's case, asked a judge Monday to terminate Hutcheson's Chapter 11 bankruptcy. With about $80 million in liabilities, Hutcheson's leaders filed for bankruptcy in November to get breathing room and keep hungry creditors at bay.

Hutcheson’s debts

* Total liabilities: $82 million

* To Regions Bank: $33 million

* To Erlanger Health System: $21.7 million

Source: Hutcheson Medical Center’s Statement of Financial Affairs, filed in U.S. Bankruptcy Court, Dec. 15, 2014

Debt since filing for bankruptcy

* Professional fees: $1.8 million

* Hospital’s insurance plan: $1.8 million

* Hutcheson Medical Center Accounts Payable: $900,000

* Payroll taxes: $450,000

* Hutcheson Medical Division Accounts Payable: $50,000

Source: U.S. Trustee’s Motion to Dismiss and for an Expedited Hearing Thereon, Aug. 17, 2015

Document: Trustee's Motion

U.S. Trustee's Motion to Dismiss and for an Expedited Hearing Thereon, Aug. 17, 2015.

Document: Ombudsmen Report

Hutcheson Medical Center's Ombudsmen Report, July 2015.

But if a judge agrees with Gebhardt and Hutcheson loses bankruptcy protection, those creditors could return. That includes Regions Bank, which is waiting for about $30 million, and Erlanger Health System, which is waiting for about $22 million.

In a court filing Monday, Gebhardt wrote that Hutcheson should lose its bankruptcy protection because the hospital has incurred another $5 million of debt since November and has yet to file a reorganization plan — the ultimate goal for a company in Chapter 11 bankruptcy. The hospital's condition in the last three months, meanwhile, has created a "grave concern" for the health of its patients.

"The Debtors are administratively insolvent and in financial extremis," Gebhardt wrote. "The Debtors' current financial situation puts the Debtors' patients at risk."

Gebhardt asked for a sooner-than-usual hearing on this issue, though no court date had been set as of Tuesday night.

Hutcheson's leaders, meanwhile, are holding steady. They say the trustee's statements about the hospital's problems are untrue.

"As a community hospital," Hutcheson CEO Farrell Hayes said in a statement, "we by definition make top priority the well-being of every community member that walks through our doors. We can confidently say that these recent allegations are baseless, and we look forward to discussing our case with the court."

Gebhardt filed his motion after meeting Friday with Susan Goodman, the court-appointed ombudsman for Hutcheson's bankruptcy case. Goodman's job is to explore the hospital as an objective observer. She told Gebhardt she was concerned about "the increased strain" on Hutcheson's clinic staff.

She said the staff is too small and the hospital doesn't get "standard" supplies fast enough, forcing those in the clinic to borrow items from other buildings. She also said Hutcheson's clinic has problems with its analyzer.

Analyzers are the machines that break down the blood samples that doctors and nurses draw from a patient's arm. The machines are complicated, requiring employees to calibrate them often and keep a stock of required chemicals and solutions.

Most hospitals keep two analyzers, Goodman said. But Hutcheson has only one.

"And that machine is reading periodic error codes," Gebhardt wrote.

Goodman also expressed concerns about Hutcheson in a July 9 court filing. She wrote that employees expressed "significant leadership concerns" about the hospital.

She also wrote that the radiology department — the team trained to examine X-rays and CT scans — does not work fast enough. Sometimes, she said, the ER staff has to read the scans themselves, even though they aren't trained to pick up minute but important details.

Goodman again wrote that the hospital's clinic and lab are understaffed.

"Some staff departures were reported as connected to either general bankruptcy concerns or insurance claims concerns," she wrote.

According to financial documents that hospital administrators gave Gebhardt, Hutcheson has generated more debt since filing for bankruptcy in November. It owes about $1.8 million in health insurance bills as of July 31.

At the hospital, employees pay Hutcheson for insurance, and the hospital's administrators are supposed to turn around and pay Cigna. But Hutcheson is under investigation concerning whether it failed to make those payments. The U.S. Department of Labor announced in April that it was looking into the hospital.

In addition to health insurance payments, Gebhardt wrote, Hutcheson owes about $450,000 in payroll taxes, about $950,000 in general accounts payable and $1.8 million in "professional fees" — generally, money it owes contracted doctors who work at Hutcheson but aren't hospital employees.

Last year, Hutcheson leaders said they were filing for bankruptcy as a chance to "hit the reset button." They did so one month after U.S. District Judge Harold Murphy set a date for Erlanger to foreclose on the North Georgia hospital: Jan. 6, 2015.

The bankruptcy filing canceled Erlanger's move. Or maybe it just delayed the end.

Contact staff writer Tyler Jett at tjett@times freepress.com or at 423-757-6476.


Loading...