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The former Hutcheson Medical Center in Fort Oglethorpe is seen in December 2015.

The U.S. Department of Labor has launched a criminal investigation against former Hutcheson Medical Center administrators, according to multiple ex-employees.

Former Director of Radiology Linda Case and registered nurse Patricia Kelley said they met with a DOL investigator within the last three weeks about whether administrators defrauded employees of their benefits. Case and Kelley both said they were asked if the company failed to provide health insurance to them, as well as what kind of interactions they had with former Hutcheson CEO Farrell Hayes.

The investigator, Michael Morrow, is not in his office this week, and he did not return an email seeking comment. Asked whether the DOL has launched a criminal investigation against former Hutcheson administrators, a department spokesman said, "I cannot confirm or deny."

Before it was sold to a private company earlier this year, Hutcheson had a self-insured plan. Employees paid the company every two weeks, and their health care claims were submitted to a third party. The third party would then bill Hutcheson.

But at some point before the hospital's board filed for Chapter 11 bankruptcy protection in November 2014, Hutcheson's administrators fell behind on health insurance claims, Trustee Ronald Glass wrote in a court filing last month. After the hospital was bankrupt, the claims only piled up even more. Glass' best guess for total outstanding payments now stands at $2.8 million.

When Hutcheson's administrators stopped paying health care claims, some companies gave the outstanding bills to debt collectors. The employees were told they were on the hook: Make thousands of dollars' worth of payments, or absorb a hit to your credit rating.

The DOL is now wondering why employees weren't covered for their claims despite consistently paying their bosses, Case and Kelley independently told the Times Free Press. Hayes, the CEO, said he had not heard about the investigation until a reporter contacted him Thursday.

News of the investigation comes the same week that Hutcheson's bankruptcy attorneys received approval from a judge to try to satisfy the hospital's outstanding debts to other health care providers because of the insurance problem. Hutcheson has about $650,000 to settle the claims, and its attorneys are offering deals to all creditors to accept payment at a rate of 23.2 cents on the dollar.

Attorney Hayden Kepner said health care providers can hold out and try to fight for whatever money is left at the end of the bankruptcy case, though he thinks that would leave them with a payment of about 10 cents on the dollar.

"Frankly," he said, "every provider we've spoken to has been very thrilled to know they are going to get something."

A court filing shows that the largest claims are for Chattanooga's three hospitals: $489,000 to CHI Memorial Hospital, $286,000 to Parkridge Medical Center and $247,000 to Erlanger Health System. A spokesperson for Parkridge said the hospital has not seen the offer yet, and a spokesperson for CHI Memorial did not respond to a question on the topic.

But Erlanger spokeswoman Pat Charles said the deal sounded good.

"As the only health care system in the region which provided more than $91 million in uncompensated care last year," she wrote in an email, "Erlanger is happy to accept payment for the outstanding services our institution provided."

Kelley, who worked at Hutcheson from 2005-15, said she has about $30,000 in outstanding bills owed to Erlanger, Hamilton Physician's Group and Lab Corp, among other providers. She said her husband is in remission for a severe illness, though she did not want to elaborate.

She said Medicare provides secondary insurance for her husband. But before the government can step up, Hutcheson would have to decline to make payment. Instead, Kelley said, the hospital administrators declined to commit one way or the other on the bills, leaving her on the hook. She said the human resources department did not return her calls regarding the bills.

"I hope somebody goes to jail for this," she said.

Mike Brady, the hospital's former director of physician relations, said he had to pay about $2,000 for his wife's medical treatment. He decided to pay the charges rather than let his credit rating slip. Curiously, one of the bills he received from a debt collector was for a procedure his wife received at Hutcheson, Brady's own hospital.

He wondered why Hutcheson couldn't step up to pay Hutcheson, or who from Hutcheson gave his bill to a debt collector.

"If they do settle and pay the bills," he said of the latest developments in bankruptcy court, "it doesn't do me a lick of good. Do you know how hard it is to get a rebate from a hospital or a medical provider? Good luck."

Last month, the Catoosa County Commission also voted to ask the district attorney to request a Georgia Bureau of Investigation inquiry into Hutcheson. But Special Agent in Charge Greg Ramey said his department is not going to open a case. The county's request was open ended, not indicating any specific wrongdoing that they thought the GBI should investigate.

Some county commissioners mentioned something about millions of dollars going down the drain. But they didn't have any specific accusations of fraud.

"The GBI can't investigate whether there's been any kind of criminal wrongdoing without some kind of audit or something," Ramey said. "That would be like saying, 'Can you go across the state of Georgia and see if there's been any murders?'"

Staff writer Steve Johnson contributed to this report.

Contact Staff Writer Tyler Jett at 423-757-6476 or tjett@timesfreepress.com. Follow him on Twitter @LetsJett.

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