Hutcheson-Erlanger contract nearing completion

Hutcheson-Erlanger contract nearing completion

March 12th, 2011 by Emily Bregel in News

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

Hutcheson hospital leaders are meeting today to review the latest - and likely final - draft of a partnership agreement with Erlanger Health System, and could cast their votes on the contract as early as next week, hospital leaders said.

"We stand ready to get this partnership contract signed and implemented immediately," said Martha Attaway, chairwoman of the Hutcheson Medical Center board, which oversees the hospital's operations.

A 12-member "transition team," including representatives from Hutcheson's four decision-making boards, will go over final details of the partnership agreement, which hospital leaders are counting on to keeping the hospital afloat in the face of deep financial losses.

Those final details include the exact amount Erlanger will commit to keeping Hutcheson open until it can become profitable again and pay back the investment, Attaway said.

Erlanger has agreed to commit the money only if Dade, Catoosa and Walker counties - which own the Hutcheson buildings - guarantee its investment. County leaders said they likely will do so by offering the hospital property as collateral.

The property was appraised in the early 1990s at $38 million, said Dade County Executive Ted Rumley. An updated appraisal has held up the finalization of the contract, Attaway said.

HUTCHESON STRUGGLING

Hutcheson Medical Center in Fort Oglethorpe is losing $1 million a month and has lost more than $7 million in each of the past two fiscal years. It is in default on its $35 million bond and its President and CEO Charles Stewart and interim Chief Financial Officer Gerald Faircloth recently resigned. Hospital leaders have been negotiating a strategic partnership with Erlanger Health System in Chattanooga in an effort to bring back doctors, and their patient referrals, to the community hospital.

Erlanger is willing to front at least $20 million to help Hutcheson get back on its feet, at which point Hutcheson would pay the money back, so long as Dade, Catoosa and Walker counties guarantee Erlanger's loan, county leaders said.

Attaway said she has put board members on alert that they could receive 24 hours notice of an emergency-called meeting of all of the boards to vote on the contract in the coming week.

But Erlanger officials say final approval from Erlanger's side may not come that quickly.

"We're making great progress" in contract negotiations, Erlanger President and CEO Jim Brexler said Friday. "But the fact of the matter is, there's no agreement until we take it back to our board and have it approved."

Erlanger board members have not seen a copy of the proposed contract yet, said board Chairman Dan Quarles. Likely they will need time to ask follow-up questions once they do get a copy, he said.

There is no called meeting planned for next week, he said.

"It's not going to be one of those things where we get it one day and we do something with it the next day," he said. "We will have to do our due diligence to be assured we're not giving something away or getting in a situation where our assets are not protected."

Details of the partnership agreement have not been released, but Hutcheson is counting on millions in funding from Erlanger to help keep it operational during a time of dwindling patient volumes.

Erlanger also is expected to recruit 15 physicians to Hutcheson, which has experienced an exodus of loyal physicians in the past few years, commissioners from the three counties said this week.

Rumley said Erlanger likely will contribute about $20 million, but on Friday, Brexler would not comment on what he termed as purely "speculative" guesses of the amount Erlanger might commit to Hutcheson, nor where the Chattanooga hospital would come up with the money.

Through January of the current fiscal year, Erlanger has a year-to-date profit of about $356,000, including a loss of nearly $1 million in January alone, according to financial statements released in February.