Hutcheson Medical Center might have a savior, if it can clear a $60 million hurdle.
Leaders for the bankrupt Fort Oglethorpe hospital, which is scheduled to close its doors the first week of December, hope a California company can buy the property and keep it humming. Problem is, Regions Bank and Erlanger Health System are waiting for eight-figure repayments and will oppose the deal.
Representatives for Prime Healthcare Services have been negotiating with Hutcheson's leaders since last month. On Thursday evening, attorney Paul Ferdinands wrote in an email to Hutcheson that Prime Healthcare will buy the hospital's main campus and surgery center on Battlefield Parkway for $7 million.
Walker County Attorney Don Oliver - who also represents Hutcheson's governing body - told a group of lawyers that he will ask a bankruptcy judge to approve the sale, even if others oppose the deal.
"Progress must be made this morning toward the Trustee and/or Regions accepting this bid," Oliver wrote in an email Friday, "or else Walker County will proceed to file a motion for Court approval."
Five minutes later, Hutcheson CEO Farrell Hayes told other hospital administrators that Walker County is preparing to file Prime Healthcare's offer in court. Oliver did not return multiple calls seeking comment.
Because Hutcheson is bankrupt, a judge will have to approve of this sale. Oliver told the Times Free Press last month that representatives for Regions Bank have been trying to scuttle any deal with Prime Healthcare, believing the offer is not strong enough.
Because Hutcheson's leaders could not pay back a bond from 2008, the hospital owes Regions Bank about $33 million, according to a December court filing. The debt has probably increased since then because of interest on the loan.
If Hutcheson cannot pay the bank, court filings show, Regions' leaders can take the hospital's ambulatory surgery center, located on Battlefield Parkway. The bank's executives could prefer to take that land rather than take money from Prime Healthcare, believing the surgery center is worth more than the offer.
David Lemke, an attorney for Regions, released a statement last month: "Our goal throughout this process has been to work with everyone involved to find a sustainable path forward for Hutcheson. Unfortunately, the financial challenges facing the hospital are severe. Our conversations have continued, but the proper forum for those conversations is the legal system, not the press."
Representatives for Erlanger Health System, meanwhile, say Hutcheson owes the Chattanooga hospital $32 million. Erlanger loaned Hutcheson $20 million in April 2011 as part of a two-year management agreement in which Erlanger administrators helped operate the Fort Oglethorpe hospital.
In an October court filing, a lawyer for Erlanger said interest on Hutcheson's debt has swelled to $32 million. She added that the money continues to swell by $2,000 every day - plus a $400,000 late fee penalty every month. If Hutcheson cannot pay Erlanger back, according to a deed to secure the debt, Erlanger can take Hutcheson's main campus and nursing center.
But Erlanger might not necessarily get all of that property. Last month, U.S. Bankruptcy Court Judge Paul Bonapfel ruled that Hutcheson can sell its nursing home to Maybrook Healthcare for $7.2 million - despite Erlanger's objection that they should legally be allowed to seize the home.
Erlanger attorney Karen Bragman has filed an objection to the judge's ruling, writing "The proposed transfer would be made with an actual intent to hinder, delay, or defraud Erlanger."
She said Erlanger can't get the money they deserve without foreclosing on the nursing home.
Nevertheless, Maybrook is poised to buy the property during a Dec. 3 auction, assuming no other companies step in. Now, Prime Healthcare will try to buy the rest of the property, despite the money owed to Regions and Erlanger.
Ferdinands, the attorney representing Prime Healthcare, said Friday that the company owns more than 30 community hospitals across the country. Last month, a bankruptcy judge signed off on a deal for Prime Healthcare to take Southern Regional Medical Center in Clayton County, Ga., in exchange for paying off the hospital's $8.9 million loan and for infusing about $50 million worth of upgrades into the building.
When Hutcheson filed for bankruptcy, it was about $82 million in debt. As of August, that debt had increased by about $6 million.
"We're ready, willing and able to move very quickly," Ferdinands wrote. "My client is used to dealing with situations that are in need of operational restructuring."
Contact staff writer Tyler Jett at tjett@timesfreepress.com or at 423-757-6476.