Tennessee lawmakers to seek AG opinion on Erlanger bonuses

Tennessee lawmakers to seek AG opinion on Erlanger bonuses

January 7th, 2015 by Kate Belz in Local Regional News

The backlash over Erlanger's Health System awarding bonuses to its top managers appears to be ramping up as local lawmakers ready for the state legislative session.

Hamilton County delegation members said Tuesday they plan to ask the state attorney general whether the public hospital's trustees violated the open meetings law when they discussed paying out $2.7 million in performance-related bonuses during two closed meetings before they publicly voted on Dec. 4.

And the repercussions could extend beyond the Chattanooga hospital, lawmakers said during a roundtable discussion with Times Free Press reporters and editors.

Delegation members said Erlanger's decision has now "clouded" their view of Gov. Bill Haslam's plan to expand Medicaid and also spurred a bill that could remove public hospitals' special strategic exemption to open meetings law.

Referring to potential political fallout, state Sen. Todd Gardenhire, R-Chattanooga, said the Erlanger payouts "could be the most expensive bonuses anybody has ever gotten."

Erlanger officials could not be reached for comment by press time on Tuesday. Trustees said earlier the bonuses were earned according to benchmarks set in early 2014. Those benchmarks were not made public until December.

The vote to give bonuses to 99 managers came after a financially turbulent year. The hospital froze vacation time, tightened benefits and phased out pensions and retiree insurance. Then in the spring, the hospital received a $19 million infusion of federal funding after lobbying local, state and federal officials for access to the pool, and ended the year with a profit.

While lawmakers initially celebrated Erlanger's rebound, they said the incentive payouts left them disillusioned.

"We all have worked diligently these last 18 months to help Erlanger," said Rep. JoAnne Favors, D-Chattanooga. "We spent a lot of time writing letters, making telephone calls."

Favors said she was not opposed to "bonuses at the appropriate time," but said she was chiefly concerned the hospital had awarded them so soon after the federal funding arrived, "before they had made a real profit."

Rep. Mike Carter, far left, talks about Erlanger making money alongside JoAnne Favors and Todd Gardenhire during the Times Free Press sponsored Legislative Roundtable Tuesday at the newspaper. (Staff Photo by Tim Barber)

Rep. Mike Carter, far left, talks about Erlanger...

Photo by Tim Barber /Times Free Press.

Senate President Pro Tempore Bo Watson, R-Hixson, said the action "has certainly clouded one's view of Medicaid expansion and what those dollars would be used for" at a public or nonprofit hospital like Erlanger.

"Are they going to use it for great patient care? Are they going to use it to pay those who are providing the care for those patients? Or are they going to do it to pay administrative people higher salaries so they can 'attract the best people?'" said Watson, who prefaced his comments by acknowledging he is a physical therapist with Parkridge Health System, an Erlanger competitor.

Gardenhire has repeated that the chief concern is not the bonuses but the process by which they were decided upon. The vote was a last-minute addition to the agenda and the only discussion took place behind closed doors.

A 2008 law allows public hospitals to discuss strategic plans privately to keep competitors from having an unfair advantage. Erlanger often closes meetings under that law. But lawmakers and a public records experts have said the discussion about the bonuses do not qualify as strategic planning under the law.

After the vote, when lawmakers questioned the legality of the closed-door discussion, board Chairman Donnie Hutcherson called for the payouts to be suspended for a legal review of the process. But after attorneys at the firm of Spears, Moore, Rebman and Williams vetted the process, the board announced the payouts would proceed in two waves.

The "firm informed the Board members that the approval process was appropriate and the action taken by the Board was also appropriate," Hutcherson said at the time in a news release.

In response, Gardenhire and Rep. Mike Carter, R-Ooltewah, say now they plan to introduce a bill that could remove public meeting exemptions for Erlanger or require a court reporter to keep a verbatim transcript. They say the specifics of such a law will depend on what the attorney general's opinion says about the bonus vote.

Carter said he has been contacted by other lawmakers concerned about high bonus payouts at government-funded hospitals in their own districts.

"This is not an Erlanger issue," Carter said. "It's starting to run rampant."

Meanwhile, delegation members said any hopes Erlanger had of resurrecting a bill to grant the hospital 501(c)(3) nonprofit status -- a bill that was introduced, then dropped last session -- are dead.

"I've learned my lesson," Carter said. "If you catch me carrying [such a bill], I need to be in a hospital -- but not Erlanger."

The 109th General Assembly will convene Jan. 15.

Contact staff writer Kate Belz at kbelz@timesfreepress.com or 423-757-6673.


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