Erlanger Health System officials on Friday said compensation packages for Hutcheson Medical Center's top three executives are flexible and will not amount to a combined $1 million per year.
"There was never a plan to pay three executives more than the former CEO, CFO and CNO of Hutcheson Medical Center," Erlanger President and CEO Jim Brexler said.
Brexler was responding to a Chattanooga Times Free Press story revealing that a summary of the newly approved management agreement between the two hospitals states Erlanger will select Hutcheson's chief executive officer, chief financial officer and chief nursing officer and pay them a total of "approximately $1 million per year."
Base salaries for the positions previously added up to $630,626, according to Hutcheson's tax records.
The Fort Oglethorpe hospital's governing board approved the management agreement with Erlanger a day before Hutcheson announced 75 layoffs.
The 48-page management agreement makes no reference to specific salaries for Hutcheson's to-be-named executives. But trustees from the Hutcheson boards that approved the agreement said Erlanger executives referenced the $1 million figure during negotiations.
"It sounded harsh to us," said Corky Jewell, a trustee from the Hospital Authority of Walker, Dade and Catoosa Counties. "But we were told it may end up costing that much to hire top-notch hospital administrators."
William Craig, a former Hutcheson Medical Center Inc. board member, said he remembers the $1 million figure as being concrete.
Erlanger officials declined to comment Friday on the Hutcheson board members' remarks.
Hutcheson officials provided the Chattanooga Times Free Press a copy of the management agreement Friday under Georgia's Open Records Act. Erlanger refused to give the newspaper a copy on Wednesday after the Chattanooga hospital's board of trustees unanimously approved it.
Work force review
Members of the Hutcheson boards relied on the summary document when approving the management agreement during a called meeting on a Sunday afternoon. Less than 24 hours later, the hospital announced 75 layoffs as part of what officials called "a plan to reduce expenses and improve efficiencies within the hospital system."
Hutcheson is losing $1 million a month as well as much of its physician and patient base.
The agreement also includes language about a top-to-bottom work force and service review at Hutcheson as part of a strategic plan. The document states that Hutcheson and Erlanger will "transition those employees for which there is no foreseeable need at the hospital," a possible prelude to more layoffs.
Erlanger "shall have no responsibility for severance pay" for Hutcheson employees, the agreement states. Hutcheson will be charged with providing severance packages to their own employees in the event of layoffs.
Through December 2012, Erlanger will keep a list of terminated employees and try to hire those who fit in job openings, according to the agreement.
"Nothing herein, however, is intended to or otherwise shall require Erlanger to hire any such person(s) or to give any rights to such person(s) to be offered employment with Erlanger," the agreement states.
Erlanger may modify "one or more of the core services" at Hutcheson, including its long-term care facility, its hospice program and outpatient services known as Hutcheson on the Parkway, according to the agreement.
Erlanger will extend a $20 million line of credit to Hutcheson to keep the hospital afloat. But without stipulating an exact figure, the management agreement indicates more financial investment than that.
Under the agreement, physicians will be directed toward Hutcheson "at Erlanger's expense, including bearing all costs of practice-related expenses, staff expenses and systems costs," according to the agreement.
The summary document used by Hutcheson boards to approve the agreement estimates physician recruitment costs at $15 million.