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Staff Photo by Dan Henry / The Chattanooga Times Free Press- 10/21/15. Hutcheson Hospital and Medical Center in Fort Oglethorpe, Ga., on October 21, 2015.

ATLANTA — A hero promised to save a hospital in distress, but his sword might not be sharp enough to cut through pesky bureaucratic red tape.

People's Choice Hospital, an Illinois-based company, offered to buy Hutcheson Medical Center this week for $4 million. That deal, though, is up in the air because lawyers involved in Hutcheson's bankruptcy don't know whether a state agency would approve the sale.

They are running out of time.

After closing the hospital Dec. 4, Hutcheson attorneys do not know whether they can recover their hospital license from the Georgia Department of Community Health. Without the license, the deal with People's Choice is likely dead.

When Hutcheson closed, its leaders had to tell the department they were surrendering the license. They believed they had 10 days to reverse course if a company such as People's Choice offered to save the hospital. They believed the company could step in at the last minute to manage the hospital and that Hutcheson could get its license back.

That 10-day window would end Monday. But during a bankruptcy court hearing Friday, no one was sure whether the 10-day cushion exists. Attorney Rob Williamson, who represents Hutcheson, said Department of Community Health employees told a group of lawyers that they didn't know if a hospital could reverse course at the last minute — they had never dealt with this problem.

"We're really in uncharted waters," Williamson said. "Everybody is struggling to handle this situation."

U.S. Bankruptcy Court Judge Paul Bonapfel said, "There's not a lot of time to make this decision. It's at the 11th hour. It's actually the 11th hour. It's the 12th hour. It's the 13th hour."

State Rep. Tom Weldon, R-Ringgold, who represents Hutcheson's governing body, talked to Community Health Commissioner Clyde Reese on Friday afternoon. Weldon told Bonapfel that Reese also was unsure whether Hutcheson can get its license back. He said Reese would have a definitive answer Monday.

"He assured me that he would be willing to work with us on this matter," Weldon said.

Stuart James, an attorney representing Walker County, is worried about the ticking clock. He said Hutcheson's license is set to expire at 8:59 a.m. Monday. All the attorneys involved in Hutcheson's case are due back in court at 10 a.m.

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Staff Photo by Dan Henry / The Chattanooga Times Free Press- 12/4/15. Workers wrap the signage and board up the former Emergency Room entrance at Hutcheson Medical Center in Fort Oglethorpe, Ga., on Friday, December 4, 2015.

"This is the state's fault," said James, who added that groups involved in the potential deal didn't know about this problem until Friday afternoon.

If the Department of Community Health allows Hutcheson to get its license back, employees of People's Choice will take over as managers of the Fort Oglethorpe hospital. They won't technically own it, but they will run the day-to-day operations. Then, after applying for its own license with the department, People's Choice would officially buy Hutcheson.

People's Choice is offering $4 million. The company plans to run a much smaller operation — paying a group of doctors to run the emergency room and a second group to provide medical advice to patients over computer monitors, like an online chat.

That is a model that some medical experts have proposed for rural hospitals. Communicating via computer instead of in person allows a hospital company to employ doctors for several hospitals, potentially making the whole process more affordable.

But the deal won't work if Hutcheson has to close. Farrell Hayes, the hospital's CEO before it shut down, said state codes are too stringent for a building that is decades old. Hutcheson is not up to code, but it is grandfathered in under certain regulations. If the hospital shut down for good, Hayes speculated, bringing the building up to modern codes would cost millions — effectively killing a deal.

Harold Israel, an attorney representing People's Choice, said the company will not reopen Hutcheson next week unless it knows for sure it is going to be the owner of the hospital next year.

"[People's Choice] is not willing to go forward without assurance," Israel said.

There might be competition. During Friday's hearing a representative for another company cut in over the phone, telling Bonapfel his client would pay $4.2 million for Hutcheson — a $200,000 increase against the offer from People's Choice.

And while People's Choice will pay $3 million in cash, the new offer would be entirely in cash.

While attorneys who have been negotiating deals this week said they would consider the new offer, they were skeptical. Especially with time running out.

Said Williamson: "We don't know who they are, what their ability to manage the hospital is, what their game plan is."

Nursing home sale

A sale of Hutcheson's nursing home and child care center to a company in New York will be approved in court Monday. Maybrook Healthcare is buying the 109-bed nursing home for $7.2 million.

Though Erlanger hospital and Catoosa County's elected officials had previously objected to the sale, they signed off on a settlement agreement Friday. As part of the deal, according to the agreement, Erlanger will get about $1.39 million.

Erlanger is trying to recover money it loaned to Hutcheson in 2011. Erlanger officials say the $20 million loan is now worth more than $33 million because of accrued interest.

Selling the nursing home to Maybrook will allow residents to remain in place.

Contact staff writer Tyler Jett at tjett@times freepress.com or at 423-757-6476.

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