Hutcheson, Erlanger closer to partnership

Hutcheson, Erlanger closer to partnership

April 4th, 2011 by Kate Belz in News

Document: Statement to HMC Board of Directors

A partnership between Hutcheson Medical Center in Fort Oglethorpe and Erlanger Health System in Chattanooga is one step closer to being sealed after three of the hospital's four oversight boards voted unanimously on Sunday to accept a finalized contract.

But first, board members heard a strongly worded statement from Gregg Gentry, Erlanger's senior vice president for human resources, denouncing a presentation they heard Friday from a for-profit hospital corporation making its own partnership pitch.

Gentry said Erlanger would "not be used as a pawn in a game to get the best deal from an outside entity."

Hutcheson and Erlanger have been negotiating for months on a plan that would pump money into the struggling hospital and help it rebuild its physician and patient base. Hutcheson has been losing $1 million a month, and it has defaulted on a $35 million bond.

Though three separate boards voted for the contract Sunday, it can't go through unless trustees of the Hospital Authority of Walker, Dade, and Catoosa Counties agree.

Authority trustees were scheduled to meet Sunday at the same time and place as the other three boards - Hutcheson Medical Center Inc., Hutcheson Health Enterprises Inc. and Hutcheson Medical Division Inc.

But that meeting was canceled Saturday and rescheduled for Wednesday, though county commissioners from Dade, Walker and Catoosa counties were present Sunday.

Bebe Heiskell, Walker County sole commissioner, said she has been questioning the agreement because she doesn't want the county to suffer the financial burden of a failed partnership.

"Erlanger is still plan A, but we don't have a plan B, and we need one," she said.

"Our request wasn't a request for a proposal, it was a request for information. We can't just agree with everything [Erlanger] tells us; we need to ask more questions, get an outside look."

The agreement hinges on Walker County's willingness to guarantee $10 million worth of loans from Erlanger if the hospital can't repay the money. Catoosa County also has agreed to put up $10 million, and Dade is not required to post collateral.

"If [the Hospital Authority] approves the deal and if Walker County agreed to take on the responsibility for $10 million, then this deal will be closed, papers would be signed," said Ward Nelson, legal counsel for Hutcheson Medical Center Inc.

"Dade and Catoosa are in full support of this agreement; they are very, very frustrated by what's going on," he said.

Last week, after six months of talks with Erlanger, the Hospital Authority invited presentations from for-profit and nonprofit companies.

Gentry said Erlanger perceived Hutcheson's move as "a really bad April Fools' joke."

"For Erlanger to have spent the time and resources of negotiating to a positive conclusion, having spent thousands of dollars on 60 days of due diligence, only to find we are being used as a negotiating tool against offers from for-profit organizations, is the ultimate violation of honest and fair business practice," he said.

Pressure to approve the deal continues to mount as concessions made by Regions Bank, Hutcheson's lender, are only good if the agreement closes by April 15.

The contract, which has undergone 19 drafts, is still under a confidentiality agreement.