Hutcheson Medical Center will spend hundreds of thousands searching for a suitor.
A U.S. Bankruptcy Court judge approved a plan Friday to let the hospital hire New York investment bankers to try to sell Hutcheson and negotiate with potential buyers. Hutcheson will pay $150,000 to Guggenheim Securities for six months' work, a court filing shows.
If Hutcheson is on the market after that, Guggenheim will be paid $50,000 per month to keep looking. If a purchaser is found, Hutcheson will pay Guggenheim an additional $750,000, plus 4 percent of the sales price.
Hutcheson CEO Farrell Hayes did not return a call or an email seeking comment last week. But in a court filing, the hospital's attorney said he believes Guggenheim can find Hutcheson a buyer in four to six months.
With $30 million in assets and $80 million of debt, Hutcheson filed for Chapter 11 bankruptcy in November.
Though finding a buyer for a hospital in such financial straits could be a challenge, Guggenheim could borrow the strategy of some consultants who pitched an idea to Catoosa and Walker county government officials two months ago.
Healthcare Management Partners, a Philadelphia company, suggested Hutcheson try to find a buyer who would turn the hospital into a retirement home and build a new, 120-bed hospital. They believed the project would cost $400 million to $450 million.
"The size and age of the hospital make it functionally obsolete," the Healthcare Management Partners presentation stated. "However, the facility is attractive and would have potential to be used for sub-acute care, assisted living or other related services."
Walker County Attorney Don Oliver and Commissioner Bebe Heiskell did not return calls or emails last week, but in April Heiskell said she would turn the concept to reality immediately after the presentation, if she were allowed to.
Hutcheson Medical Center is located in Fort Oglethorpe."The plan was a great plan," she said.
Officials in Catoosa County, where the hospital is located, aren't so sure. To lure a potential buyer, members of Healthcare Management Partners suggested offering about $30 million up front to the suitor, to be repaid in the form of property taxes.
But Catoosa County Attorney Chad Young said this plan isn't legal. He believes the county is not allowed to loan a private company money.
What's more, he said, the plan doesn't make any sense for the county. If the hospital is worth $400 million, and if the property is taxed at 0.2 percent a year, the county wouldn't get all of its money back until 2053.
"The 'tax incentive' as required by Healthcare Management Partners would not work," Young wrote in an email. "And it is not permissible under Georgia law."
Catoosa and Walker counties are interested in Hutcheson's sale because they could each be on the hook for $10 million in payments. In 2011, when the North Georgia hospital was losing $1 million a month, it entered into a management agreement with Erlanger Health System.
Erlanger officials began to operate Hutcheson and gave the hospital a $20 million line of credit. Catoosa and Walker counties guaranteed they would repay Erlanger $10 million each if Hutcheson was not good for it.
In 2013, Hutcheson and Erlanger's agreement ended. Erlanger sued in U.S. District Court, demanding the money. Hutcheson sued back, saying Erlanger managed the hospital stupidly so it couldn't function anymore.
Both lawsuits are pending.
Healthcare Management Partners, the company that pitched the suggestion to Catoosa and Walker counties, hasn't been paid yet. But a bankruptcy court filing shows, their consultants did not come cheap.
The management directors make about $550 an hour. The lowest-paid employee listed on the filing -- a numbers cruncher -- makes $175 an hour. They expect to be paid by somebody, eventually.
Contact staff writer Tyler Jett at tjett@timesfreepress.com or at 423-757-6476.