Erlanger transition to private nonprofit corporation clears another hurdle

Staff Photo by Robin Rudd / The rising sun illuminates the Erlanger Baroness campus and Hospital on Aug. 23, 2022, with Elder Mountain serving as a backdrop. The Baroness Hospital is one of six in the Erlanger Health System, which took another step Aug. 29 toward becoming a private, nonprofit corporation.
Staff Photo by Robin Rudd / The rising sun illuminates the Erlanger Baroness campus and Hospital on Aug. 23, 2022, with Elder Mountain serving as a backdrop. The Baroness Hospital is one of six in the Erlanger Health System, which took another step Aug. 29 toward becoming a private, nonprofit corporation.

After an OK from the Hamilton County Commission earlier this month, Erlanger Health System took another step Monday in its transition from a government entity to a private, nonprofit corporation.

During a special meeting on Monday afternoon, the Erlanger Health System Board of Trustees adopted a mission agreement that includes binding covenants and ongoing protections for Erlanger Health System, its associates and physicians and the community, according to a statement from the board.

County commissioners unanimously approved the agreement during their meeting on Aug. 17.

According to the board, the transition to an independent nonprofit organization under Internal Revenue Code 501(c)(3) is part of an effort to "ensure the best possible future for Erlanger as well as health care in Hamilton County and the broader region."

Leaders from Hamilton County government and Erlanger celebrated the adoption of the mission agreement with a signing ceremony after Monday's meeting.

Erlanger Board of Trustees Chairwoman Sheila Boyington said the event marked a milestone for the system.

"Erlanger is at a critical juncture in making sure that we can continue to be financially and medically and community stable for many, many years to come," she told attendees. "We began this process some time ago, and it's been talked about for many, many years quite frankly, but this past year or two, besides going through a pandemic that none of us would have ever expected, has also allowed us as a board to have the very best leadership ... that took this challenge on."

(READ MORE: Hamilton County Commission to vote next week for Erlanger's transition to private corporation)

The agreement contains 13 covenants that the new nonprofit organization, Erlanger Health, will have to follow once it becomes private and no longer subject to sunshine laws that provide a window into its finances and operations.

Those covenants include maintaining Erlanger's historic mission as a teaching hospital, regional referral center and safety-net provider. Among other commitments, it will also continue to provide emergency services and use "reasonable efforts" to maintain its status as a Level I trauma center.

A three-member oversight panel, which will be separate from Erlanger and its board, will work on behalf of the community to ensure the covenants and commitments are met, according to the health system. It will exist for 15 years before the county assumes that role.

Current employee pay levels and benefits will transition to the new structure, the system has said, and accrued pension benefits will be unchanged.

(READ MORE: Erlanger and CEO Will Jackson part ways)


The 1976 private act of the state legislature that created the Chattanooga-Hamilton County Hospital Authority was amended during the most recent legislative session, allowing Erlanger to explore a new governance structure, and board members have since then been working alongside Hamilton County government and legal counsel on the transition.

Hamilton County Mayor Jim Coppinger said Monday that officials wanted to be sure employee pensions and job security would be protected under the new structure and that Erlanger would continue to operate as a safety-net hospital.

"It really plays a critical role not only in Hamilton County but throughout this region," he said by phone.

Overall, Coppinger said, the covenants will ensure the system continues to deliver services it's already providing.

(READ MORE: Erlanger transformation underway with next key votes expected in August)

"Most of us have been around Erlanger Hospital for decades, and we knew the kinds of things we wanted to do that the citizens have come to expect out of it," he said. "We just wanted to make sure we got all this in writing in an agreement, and I think it's something that the taxpayers will be really proud of."

The vote Monday finalizes the framework for the transfer of operations, assets and liabilities to the new independent 501(c)(3) organization, Erlanger spokeswoman Blaine Kelley said in an email. That process can now move forward, and it will likely be well into 2023 before it's finalized. The system is targeting a closing date in May. After the transition, meetings of the board will no longer be public.

The board does not anticipate its actions Monday will have an immediate impact on the applicability of the state's sunshine laws.

Erlanger brings in more than $1 billion in net revenue annually and is the county's largest employer. Boyington told the Times Free Press said the transition will result in a more stable Erlanger that will be able to bring future medical opportunities to Chattanooga.

(READ MORE: Hamilton County Commission approves Erlanger's transition to private corporation)

"The idea of a public safety net hospital in the way we started was really developed in the 197os and health care has changed today," she said. "We're not in 2022. It's not the same as it was in the 70s, so that structure is no longer really as relevant as what we are doing today as a private nonprofit."

The change will allow the system to be more flexible with how it makes decisions, she said, and will enable officials to partner with other health care organizations and affiliates throughout the region and nation, which hasn't always been possible under the existing structure. It could also enhance the system's ability to raise funds through donations.

"I want to be clear that it also means that there will be absolutely no changes (for those who) are still coming to Erlanger," she said. "We will still take everyone. Our mission will never change, so it doesn't matter on your ability pay or your background or what you have. You can still come to Erlanger and get that same wonderful care that you have always gotten."

Reporter Elizabeth Fite contributed to this story.

Contact David Floyd at dfloyd@timesfreepress.com or at 423-757-6249. Follow him on Twitter @flavid_doyd.