Erlanger sues Walker County over $9 million debt

Erlanger sues Walker County over $9 million debt

October 26th, 2017 by Tyler Jett in Local Regional News

Erlanger Health System President and CEO Kevin Spiegel speaks during a press conference about the Chattanooga Heroes Run at the Hubert Fry Center on Mon., June 5, 2017, at the Tennessee Riverpark in Chattanooga, Tenn. For the second year in a row, a July 16 run/walk event will be held to commemorate the anniversary of the fatal shootings of five servicemen in Chattanooga.

Photo by Erin O. Smith

UPDATE: Update: In response to Shannon Whitfield's TV appearance Wednesday night, Erlanger Spokeswoman Pat Charles told the Times Free Press: "Erlanger stands by its pleading in the litigation against Walker County, which speaks for itself, and has no intention of trying this matter publicly."

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Erlanger Health System filed a lawsuit Monday in U.S. District Court demanding Walker County Commissioner Shannon Whitfield pay it $9 million as soon as possible.

If he doesn't have the money, they're giving him two options: find someone willing to loan it to you, or tax property owners even more.

Whitfield addressed the lawsuit on an hour-long segment on UCTV, a cable-access television station, Wednesday night. He said he had been in communication with Erlanger CEO Kevin Spiegel, and told Spiegel he hoped the two parties could come to a settlement without any further litigation.

"Despite repeated demands for payment communicated to Walker County and its counsel over the course of several months, Walker County has not paid all or any portion of the amounts outstanding under the Judgment, which it is lawfully obligated to pay, and has offered no plausible excuse or justification for failing to do so," Atlanta attorney Karen Bragman wrote in the complaint filed Monday.

Whitfield said this is the second lawsuit the hospital has filed against Walker County since he took office at the beginning of the year. Also in the last couple of months, he said, the hospital filed a lawsuit for a jury trial for $180,000 in attorney fees it says it is entitled to.

The debt goes back to 2011, when Erlanger's administrators agreed to manage Hutcheson Medical Center. As part of the deal, Erlanger loaned Hutcheson $20 million, saying the Fort Oglethorpe hospital needed the cash to stay afloat. At the same time, Whitfield's predecessor, Bebe Heiskell, signed a contract with the board that controlled Hutcheson, promising to pay back half the loan if Hutcheson didn't have the funds.

In November 2014, Hutcheson filed for bankruptcy, and attorneys agreed to sell the hospital. Erlanger received some money in the sale, though Walker County would still owe $8.7 million. In December 2015, Erlanger sued Walker County, demanding payment on the debt.

Walker County special counsel Stuart James argued the local government didn't have to pay the debt, that Erlanger had no power to enforce the 2011 agreement because Erlanger is not located in Georgia. He said the county was protected under Georgia law by "sovereign immunity."

U.S. District Court Judge Harold Murphy did not agree. In August 2016, he ruled Walker County still owed the money. The county appealed soon after, and on July 13 the U.S. Court of Appeals upheld the decision.

Meanwhile, leadership in the county changed hands.

After taking office Jan. 1, Whitfield and Spiegel met multiple times this year to discuss the debt, Walker County spokesman Joe Legge said.

In August, Spiegel sent Whitfield a letter, offering him three different payment plans for the debt. Two of the deals would have run for six or seven years but allowed him to pay the money back in lower increments. Whitfield said those deals were illegal because he can't guarantee debt beyond the end of his term in 2020; Erlanger spokeswoman Pat Charles said the hospital's administrators disagreed.

Spiegel's other offer? Pay back $8.7 million in three years. He would then forgive the county for interest owed, which currently sits at $230,000, according to Erlanger's filing this week. On Wednesday, Whitfield said that would amount to nearly $1 million per quarter for 27 months.

"I don't have the cash flow — I don't have the money to be able to do that," Whitfield said.

Instead, Whitfield created a plan to pay Erlanger back at a rate of about $2.5 million a year through the end of his term. That would come out to $7.5 million. He said he hoped Spiegel would be open to the offer. Judging by this week's lawsuit, he was not.

To raise even that, Whitfield has boosted property taxes in the county more than Heiskell ever did in a given year. Residents are facing a 50-70 percent hike this fall, depending on what part of the county they live in. He also cut expenses by about $2.5 million, when not counting money he is setting aside for debt payments.

"Basically, they're wanting to drain our bank accounts, they're wanting us to go borrow the money, they want us to levy more taxes from you," Whitfield said. "...They're wanting their money, and they want it now."


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