Tennessee Senate sends bill allowing Erlanger to go private to governor

NASHVILLE - Tennessee lawmakers gave final approval Thursday to a bill allowing government-owned Erlanger Health System to pursue plans to convert the hospital system into a nonprofit corporation that leaders argue will help enable its survival into the future by becoming more competitive.

Senators voted 29-0 for House Bill 2915, which cleared the lower chamber on Wednesday, sending the private act to Gov. Bill Lee.

"With Gov. Lee's signature, we will take an important and historic step forward for Hamilton County and the surrounding region as we work to secure the best possible outcome for Erlanger," stated Jim Coleman, chairman of the Chattanooga-Hamilton County Hospital Authority, which has had responsibility over Erlanger since the authority was created under a 1976 law.

Coleman called it critical for Erlanger to transition to an independent, IRS-certified 501(c)(3) structure. It will help ensure the continued ability to serve as the safety-net hospital for the Chattanooga region, he said. Nothing in the legislation would prevent the system from being sold to a for-profit entity.

Erlanger officials have complained for years that the public hospital is put at a disadvantage by being subject to the Tennessee Public Records Act and having to make many records and meetings public, including for competitors.

The bill was carried in the Senate by Sen. Todd Gardenhire, R-Chattanooga, a retired financial adviser who once served as chairman of the federal Pension Benefit Guaranty Corporation. Gardenhire and other delegation members worked on language that they inserted into the measure to protect pension benefits for employees, a top concern.

Legislators have explored various facets of the plan to take Erlanger private.

"It's been a long process," Gardenhire told the chamber when presenting the bill on the floor. "The hangup that some of us had, myself specifically, was what to do with the pension fund, the legacy, frozen pension fund. And to do that, we insisted on certain protections for those people that were in the fund and would require certain entities to guarantee it. It's something you just can't do very lightly and the hospital trustees were kind enough to give us the assurances we needed to guarantee participants in a frozen pension would be protected."

For example, the new nonprofit corporation will have to agree to assume full responsibility for the hospital authority's defined-benefit pension plan, he said.

Gardenhire also credited help from Senate Finance Committee Chairman Bo Watson, a Hixson Republican who is a physical therapist and market director for therapy services at Parkridge Medical Center, calling him a "real champion" for bringing Erlanger into a new era.

"Sen. Watson needs a big round of applause," Gardenhire told senators.

House Finance Committee Chairwoman Patsy Hazlewood, R-Signal Mountain, handled the bill in the lower chamber as it passed earlier this week. She told the Times Free Press Wednesday that state Treasurer David Lillard and state attorneys had also crafted bill language aimed at protecting pension benefits for employees.

"This is allowing, it's not saying they must, it's simply allowing Erlanger to look into the possibility of moving to a 501(c)(3), which has been very successfully done in Knoxville, UT Medical Center and Grady Hospital in Atlanta," Hazlewood said.

Coleman cited the work of Erlanger's board of trustees and singled out the work by Co-Chairwoman Vicky Gregg in reaching what he called "this milestone."

The board in coming weeks will engage with patients, physicians and the "broader community about the health system's exciting future," he said in his statement.

Contact Andy Sher at asher@timesfreepress.com or 615-255-0550. Follow him on Twitter @AndySher1.