Erlanger's contract negotiations with trustees predated state Sen. Gardenhire's conflict-of-interest bill

Erlanger Health System is located at 979 E. 3rd Street.

Erlanger Health System executive management engaged in contract negotiations with trustees in the months before a bill that would make those actions illegal was introduced to the Tennessee General Assembly, records show.

On Jan. 24, state Sen. Todd Gardenhire, R-Chattanooga, introduced a bill that would prohibit hospital authorities such as Erlanger from signing employment or service deals with trustees until at least 12 months after their tenure ends.

Hospital records obtained by the Times Free Press show that Erlanger last year held contract discussions with former trustee Jack Studer, who at the time was board chairman, and trustee Dr. Blaise Baxter.

The Chattanooga-Hamilton County Hospital Authority, commonly called Erlanger, is governed by an 11-member board of trustees. The Hamilton County mayor appoints six trustees with the county commission's approval, and the General Assembly appoints four trustees by a majority vote. Erlanger's medical chief of staff also serves as a trustee. Trustees serve four-year terms without compensation and may serve for no more than eight consecutive years.

While the board's bylaws contain a conflict-of-interest clause, the section pertaining to employment contracts between the hospital and trustees is unclear.

Gardenhire said he wrote the bill - which is co-sponsored by state Rep. Robin Smith, R-Hixson - because trustees of a public hospital should be held to the same standard as lawmakers, who aren't allowed to work for the government until a year after they leave office.

"If somebody's on a public hospital authority approving salary increases or benefits for executives of a hospital, you shouldn't be able to go work for that hospital for at least a year," Gardenhire said in February, shortly after the bill was introduced. "It's an obvious conflict of interest."

Erlanger officials did not respond to questions as to whether they considered the contract discussions conflicts of interest, but shared the following statement in an email:

"Erlanger's eleven trustees are committed, dedicated and passionate about governing this organization, as well as engaging with leadership and the physician community to build and sustain a strong Erlanger Health System for years to come."

Talks with trustees

Studer told the Times Free Press he and Erlanger CEO Kevin Spiegel had conversations last year related to bringing an innovation center to Erlanger.

"There were conversations last year, in the fall, between myself and Kevin about potentially trying to build an Erlanger innovation arm, which is what I do for a living, and what I've done for CO.LAB [The Company Lab] and for Lamp Post [Group] and for other companies on a consulting basis," Studer said.

Studer said the rest of the board was informed throughout the process and OK'd the talks.

photo Erlanger Health System is located at 979 E. 3rd Street in Chattanooga.

"As soon as we got to the point of even passing a draft - nothing signed - but passing a draft of a contract with boilerplate language back and forth, we brought it back up," he said. "I can't even say what happened, because I stepped out of the room, which is the appropriate thing to do when it's something potentially about you."

Shortly after, Studer said, the board's executive committee weighed in.

"They were like, 'You know, this doesn't really make sense. This doesn't pass the test of enough arm's length or enough distance,'" he said. "And we killed it, so nothing ever came of it."

Studer said he agrees with the board's call to end negotiations, and the decision serves as an example of successful oversight by the board.

Studer left the board in January, which he said was always his intention.

Records show that Erlanger and Studer considered a $425-per-hour payment rate for his services.

The discussions around Baxter related to stroke services at the Erlanger East campus and innovation center administrative duties.

"Discussions are no longer active, and it is our understanding that Dr. Baxter is relocating out of state," according to records from Erlanger.

Current board chairman Mike Griffin confirmed the negotiations with Studer and Baxter and said in an email that "such negotiations with Trustees will not happen in the future."

Unintended consequences

Nearly a month after the bill was introduced, Hamilton County Mayor Jim Coppinger appointed veteran surgeon Dr. R. Phillip Burns, of University Surgical Associates, to fill the vacant seat left by Studer on Erlanger's board. Coppinger said he chose Burns because "he has a love for Erlanger," he understands the hospital's importance and is well respected among physicians.

Although Burns isn't employed by Erlanger, he's contracted to provide clinical services at the hospital through the University of Tennessee College of Medicine and University Surgical Associates.

Gardenhire said his decision to file the bill was unrelated to Burns, but it would affect the current physicians on the board, since they have financial ties to the hospital. In addition to Drs. Baxter and Burns, Dr. James Bolton, who is Erlanger's medical staff chief and a hospital employee, serves on the board.

"One of the unintended consequences of the bill that I drafted ... was that it would completely void the current medical professionals off the board - the chief of staff, the doctors that Jim Coppinger appointed," Gardenhire said.

For those reasons, Gardenhire told the Times Free Press that "the bill is currently on hold to give the board time to address the problem of conflict of interest."

On Friday, board members and other community leaders received an emailed letter from Gardenhire about the bill's status.

The letter notes that the bill passed the Senate with a unanimous vote and passed various House committees, but it is being held from a full House vote next week.

"This was done to confirm that no unintentional harm is done to the very important function of Erlanger's Board to govern with patient care as the priority," the letter states. "Over the next few months, I will be speaking to members of your board and to other leaders to make sure our community hospital is focused on its mission while operating with transparency and integrity that serves the interests of patients and the public."

Board chairman Griffin said in an email Friday he's confident that the current board of trustees has acted in the best interest of the hospital and Hamilton County.

"We are a volunteer board who are appointed by either the Hamilton County Mayor and County Commission or the State Legislature," Griffin said. "We take our appointments very seriously and serve with compassion and dedication to the mission the doctors, nurses, administration and employees carry out every day."

Contact staff writer Elizabeth Fite at or 423-757-6673.