Hospital deal still may be in jeopardy

Hospital deal still may be in jeopardy

April 12th, 2011 by Chris Carroll in News

This is the campus of Hutcheson Medical Center in Fort Oglethorpe. Staff File Photo by Angela Lewis/Chattanooga Times Free Press

Eleventh-hour power struggles may kill a partnership between two area hospitals because no one can answer a fundamental question: Who's in charge at Hutcheson Medical Center?

On April 3, three of Hutcheson's four decision-making boards approved a management agreement with Erlanger Health System, Chattanooga's largest health care facility.

The lone holdouts - trustees from the Hospital Authority of Walker, Dade and Catoosa Counties - joined three days later, but a major "caveat" may nullify the deal, in which Erlanger would inject a $20 million line of credit into the ailing Hutcheson in Fort Oglethorpe.

A contingent resolution passed at the same time as the Hospital Authority's pro-Erlanger vote would replace two long-existing Hutcheson boards - Hutcheson Medical Center Inc. and Hutcheson Health Enterprises Inc. - with the Hospital Authority's nine trustees and their own appointees. The kicker is that the two boards must vote to relinquish their own power.

EXISTING BOARD STRUCTURE

  • Hospital Authority of Walker, Dade and Catoosa Counties: Owns the hospital building and oversees the lease. Its nine trustees are appointed by county commissioners.
  • Hutcheson Medical Center Inc.: Private, nonprofit company that leases the facility and operates the hospital.
  • Hutcheson Health Enterprises: Nonprofit parent company of Hutcheson Medical Center and Hutcheson Medical Division.
  • Hutcheson Medical Division: For-profit sister company to Hutcheson Medical Center. Operates medical offices and practices. Its board oversees Hutcheson's clinics.

The reorganization proposal states the two boards "have not fulfilled [their] legal and moral obligations."

In the past year, Hutcheson has defaulted on a $35 million bond, lost $1 million a month and laid off 75 people.

"This bunch has bankrupted the hospital," said Don Oliver, Walker County attorney and legal counsel for the Hospital Authority. "There's no way we are putting taxpayers at risk with them running things."

Last week's authority vote "is not effective" if its demands are not met, he said.

Hutcheson Medical Center Inc. and Hutcheson Health Enterprises Inc. announced a joint meeting scheduled for today. It is open to the public.

Paul Chambers, vice chairman of Hutcheson Medical Center, Inc., said he is "not interested in power or control," but he declined to comment on whether his board would go along with the authority's demands.

Sources on both sides said reorganizing Hutcheson's boards played into the proposed management agreement between Erlanger and Hutcheson. The details are under a confidentiality agreement.

But Ward Nelson, legal counsel for Hutcheson Medical Center, Inc., said the restructuring was supposed to happen after Erlanger takes ownership, "not last minute like this."

"We don't need to restructure quickly and risk making ourselves illegal," said Hutcheson Health Enterprises, Inc. Chairman Jim Forster. "As far as relinquishing my position, I have zero problem with that."

Erlanger President and CEO Jim Brexler, thinking Hutcheson officials were working with each other, scheduled a meeting Wednesday night in which Erlanger's board of trustees was expected to finalize the management agreement.

During negotiations, Erlanger board members stressed that all of Hutcheson's boards - however they're structured - should agree before any agreement is reached.

"We feel confident the various boards and their respective attorneys will work through the minor details left to complete the agreement," Brexler said in a written statement.

But if board members from Hutcheson Medical Center and Hutcheson Health Enterprises refuse to step down this evening, "Erlanger won't have anything to vote on," according to Oliver.

Contact Chris Carroll at ccarroll@timesfreepress.com or 423-757-6610.