I don't want to upset the apple cart. There's a lot going on right now.
CHICKAMAUGA, Ga. — With a federal judge telling them their hospital owes $36 million, Hutcheson Medical Center board members accepted an offer from Erlanger Health System on Monday night.
The Hospital Authority of Catoosa, Dade and Walker Counties voted 3-1 to authorize its chairman to execute a settlement agreement with Erlanger. The vote comes five days after U.S. District Court Judge Harold Murphy granted Erlanger's motion for partial summary judgment, awarding the Chattanooga hospital all the money it asked for and stripping the teeth from Hutcheson's own lawsuit against Erlanger.
But what does Monday's vote actually mean? What does each side get from a settlement?
It's hard to say for sure. The decision came after the Hospital Authority met for 3 1/2 hours Monday, but almost the entire meeting was closed to the public. The board does not have to disclose what it discusses when it meets about a pending lawsuit.
The only portion of the meeting that was open came at the end when the board spent about three minutes voting on a resolution about the settlement agreement.
Since then, lawyers on every side of the deal have kept their lips shut.
Tom Weldon, the attorney for the Hospital Authority, said after the vote Monday night that he could not explain the agreement. He needed to inform Erlanger's lawyers that they had accepted the deal. Erlanger's team would then have to do the same.
"I don't want to upset the apple cart," Weldon said. "There's a lot going on right now."
He added: "It would be accurate to say parties are moving forward with settlement negotiations and are working toward a mutual resolution."
Weldon said he would provide more details to the Times Free Press on Monday night after calling Erlanger. He did not. He also did not return multiple calls or respond to an open records request asking for a copy of the settlement agreement Tuesday.facebook
Lawyers for Erlanger did not return multiple calls or an email, either.
But actions suggest the agreement will not be friendly to Walker County officials. John Culpepper, the one Hospital Authority member who voted against the deal Monday, is a former Chickamauga city manager and an ally to Walker County Commissioner Bebe Heiskell and County Attorney Don Oliver. Culpepper declined to comment as he left Monday's meeting.
Last month, lawyers representing Walker County also sent a pair of messages saying they would not like an agreement between the Hospital Authority and Erlanger.
First, there was an email from Oliver to the board members on April 6. He wrote that a deal between the Hospital Authority and Erlanger could harm Walker County's own negotiations with Erlanger.
"That will likely prove totally ineffective so long as (Erlanger) keeps getting signals that the HA might be willing to throw WC under the bus," Oliver wrote. "Any such action would do almost nothing to relieve the HA board from any (highly unlikely) liability, and could even increase the liability of the Board members."
Oliver did not return multiple calls seeking comment Tuesday. Neither did Heiskell.
On April 26, Stuart James sent a press release discouraging a potential settlement between the Hospital Authority and Erlanger. James, a lawyer whom Walker County hired to represent it in its own lawsuit against Erlanger, said in the release that an Erlanger attorney had emailed Weldon earlier in the month.
James said the lawyer threatened to sue Hospital Authority members if they did not sign a settlement. A lawyer from Erlanger and Weldon have both since confirmed this message, though they added that it was supposed to be confidential.
"It's very unfortunate that this issue has been clouded by yet another volley from Erlanger," James wrote in the release. "Both Commissioner Heiskell and I are confident that the law will be followed in this entire matter and look forward to doing what is in the best interests for the health and well-being of the citizenry of North Georgia."
The roots of these lawsuits date back to 2011. In April of that year, Hutcheson and Erlanger entered into a management agreement. Erlanger agreed to loan Hutcheson $20 million.
In a separate contract at the same time, commissioners in Catoosa and Walker counties agreed to "guarantee" this loan, meaning they would pay Erlanger back if Hutcheson could not. The counties signed this agreement with Hutcheson, not with Erlanger.
In the fall of 2013, the Hospital Authority voted to end the agreement with Erlanger. When it did not receive money back, Erlanger filed a lawsuit against the Hospital Authority in U.S. District Court in February 2014. The Hospital Authority, in turn, filed a counter lawsuit four months later, its lawyers claiming that Erlanger damaged Hutcheson through mismanagement.
Last week, Murphy issued an order granting Erlanger partial summary judgment. Murphy awarded $36 million to Erlanger: the $20 million loan, as well as $16 million for "late fees" and interest on that loan.
Erlanger's administrators are now trying to get paid, though the hospital won't be able to give them much. Hutcheson filed for bankruptcy in November 2014. And in December 2015, ApolloMD offered to buy the hospital for $4.2 million. Though the hospital is technically still Hutcheson right now, ApolloMD's purchase is expected to be complete this month.
Potentially, the most reliable source for money for Erlanger will be the counties.
Walker County lawsuit
On Tuesday, Walker County amended its court filing in its own lawsuit with Erlanger. The county argued earlier this year that the hospital cannot demand money from it because a local government in Georgia is generally protected by sovereign immunity.
In other words, Erlanger does not have the right to sue Walker County unless the Georgia General Assembly gives it the right. That has not happened.
Walker County has also argued that the contract from April 2011 is not valid. Even though Walker County promised to pay Erlanger up to $10 million at the time, Erlanger was not actually a party to that agreement. (Erlanger was in a contract with Hutcheson, which was in a contract with Walker and Catoosa counties.)
Now, Walker County has added another argument. If a judge believes that the contract is, in fact, valid, Walker County isn't the one that should be getting sued. Erlanger is. That's because, according to the Walker County lawsuit, Erlanger violated the terms of their contract.
Which terms? The ones that say Erlanger will provide health care to Northwest Georgia. Erlanger managed Hutcheson from April 2011-September 2013. Two years later, in December, Hutcheson closed for two weeks.
Walker County's argument, essentially, is that Erlanger's mismanagement of Hutcheson from 2011 to 2013 was so severe that Hutcheson could never recover. The hospital's closing in 2015 was a result of irreparable harm two years earlier.
Erlanger first filed this lawsuit against Walker County in December. Though Catoosa County also signed the same contract as Walker County in 2011, the hospital has not sued Catoosa County, as government officials and Erlanger administrators are negotiating a settlement.
No Regions sale yet
On April 13, Regions Bank advertised that on Tuesday it would sell some property that formally belonged to Hutcheson. Tuesday came and went, and the sale did not happen.
The bank can still sell that property. But it will have to publish another ad in Catoosa and Walker counties' local newspapers.
Because Hutcheson could not pay Regions back the $26 million the hospital borrowed from the bank several years ago, Regions received two strips of Hutcheson property. Most notably, the bank received Hutcheson's ambulatory surgery and cancer centers, located on Battlefield Parkway.
Contact staff writer Tyler Jett at email@example.com or at 423-757-6476.