Hutcheson Medical Center keeps its bankruptcy protection

Hutcheson Hospital is seen in this, Aug. 18, 2015, file photo.
Hutcheson Hospital is seen in this, Aug. 18, 2015, file photo.

ATLANTA - Hutcheson Medical Center will not lose bankruptcy protection.

A U.S. trustee monitoring the case dropped his motion to end Hutcheson's Chapter 11 bankruptcy during a hearing Friday in Atlanta. The trustee filed the motion Aug. 17, citing its leaders' financial decisions.

The Fort Oglethorpe hospital has incurred an extra $6.3 million in debt since filing for bankruptcy in November. Its administrators also have not created a reorganization plan explaining how the hospital can continue to operate without losing money.

But the trustee dropped his motion after Hutcheson CEO Farrell Hayes testified Wednesday that he expects an unnamed group to offer to buy the hospital within a week. Hayes said the new purchaser can save Hutcheson, which was $80 million in debt as of December.

Bankruptcy Court Judge Paul Bonapfel also appointed a second trustee to the case. While the first trustee, Guy Gebhardt, oversees the whole case, the second trustee will just oversee Hutcheson's financial decisions.

In addition, Bonapfel approved Hutcheson's sale of its Trenton clinic to Dade County government. Hospital leaders planned to close the clinic to save money, but the Dade County Commission offered $350,000 for the building.

Hayes said in a statement that he is pleased the hospital will remain in bankruptcy. Without such protection, creditors like Erlanger Health System could move to foreclose. Hutcheson owes Erlanger $20 million from a 2011 loan.

"I'm really thankful and very much looking forward to working for and with the trustee," Hayes said. "The trustee will be very helpful in moving this process forward."

Gebhardt opposed Hutcheson's sale of the Trenton clinic because he did not think the hospital tried hard enough to drive the sales price up. Hospital officials did not announce that the clinic was for sale or try to solicit more offers.

Catoosa County leaders also opposed the sale. Earlier this year, Catoosa paid off $3.5 million of Hutcheson's debt because elected officials had previously guaranteed a loan for the hospital. County leaders hope Hutcheson will repay that money eventually.

So, the logic goes, if Hutcheson sells its Trenton Clinic for less than the maximum it can get, the hospital costs itself money. That reduces the chance it will pay what is owed to Catoosa County.

But Catoosa County Attorney Clifton "Skip" Patty said he dropped opposition to the sale after a conversation Friday morning with Dade County Executive Ted Rumley.

Some in Catoosa County opposed the sale because the property value of the land is about $550,000 - $200,000 greater than what Dade County paid for the land plus the clinic. But Rumley said the official figure is inaccurate.

Because the county wasn't collecting taxes on the hospital's land, the appraiser stopped evaluating the property in 2006.

Since then, Rumley said the land's value decreased because of the 2011 tornadoes that swept through Trenton. Rumley said another appraiser valued the clinic and land at $375,000.

Rumley said Memorial Hospital will begin running the clinic in about two weeks. Memorial will pay the county to operate there, though Rumley said the two sides are still negotiating a final price. He said 8,000 residents use the clinic each year.

"We're just glad that it went this way," he said of Bonapfel's ruling Friday.

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

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