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Staff Photo by Robin Rudd / Erlanger Medical Center, on East Third Street, is seen on June 24, 2021.

NASHVILLE — The Tennessee House on Wednesday approved an amended private act allowing Hamilton County government to pursue converting the governance model of the Chattanooga-Hamilton County Hospital Authority, better known as Erlanger Health system, to IRS-certified nonprofit status.

Final passage continued to remain uncertain in the Senate later in the day.

"I got the amendment late and wasn't able to put it on," Sen. Todd Gardenhire, R-Chattanooga, told the Times Free Press during an early Wednesday afternoon interview in his legislative office. "So I don't know if I'll be able to do it or not.

"But," Gardenhire added, "there's no rush because they're in good financial shape — they announced it last night how they had a great year. And there doesn't seem to be a rush to do it.

"And I think some of us gave our assurances that if it didn't get done this time and we see the proper protections put in place, we'll be glad to bring the bill back in January for approval through the process — and make it first on our agenda to get it done," Gardenhire said.

The senator, who has publicly voiced concerns and forcefully argued Erlanger employees' pension system needs to be shored up and protected as part of the change, said members of the Hamilton County legislative delegation were recently told by hospital officials that it would take a year or two to "go through all the hoops" and win IRS approval to establish a 501(c)(3) nonprofit entity to take over responsibility of the system from the hospital authority.

Erlanger officials argue the move is needed in order for Erlanger, the Chattanooga region's safety net medical provider, to remain viable for decades to come. Officials have repeatedly said the transparency required by their government status is a disadvantage in competing with private businesses.

Other bill provisions would allow for the sale of Erlanger or various assets, although some delegation members say they believe that authority already exists.

Gardenhire's hesitation in moving forward right now came as a surprise to Rep. Patsy Hazlewood, R-Signal Mountain, chairwoman of the seven-member Hamilton County legislative delegation.

Earlier Wednesday, Hazlewood's House Bill 2915 passed on an 88-0 vote. It gives officials the legal authority to pursue and transition to nonprofit status.

State law established the hospital authority governing structure in 1976 to inject new life into the hospital which was founded in the late 19th century with the aid of a French nobleman's $5,000 gift.

 

'Needs to be done'

"Well, I think the House delegation feels very strongly that this is something that a) needs to be done, it needs to be done now. And b) we all had lots of questions in the beginning, but we've had lots of conversations," Hazlewood told the Times Free Press as she prepared to enter the House chamber.

Hazlewood said there's been a "lot of back and forth" with state attorneys as well as attorneys for the Erlanger Board of Trustees and Hamilton County government's attorneys.

"And we feel comfortable we're in a good place to do this, just like I said on the floor when I presented it today," Hazlewood said. "We are making sure, to the best of anybody's ability to do so, that the mission of Erlanger will remain unchanged. They're going to provide, they're going to be there."

Erlanger's role, which includes providing care to low-income and uninsured patients, is important for Hamilton County and surrounding areas as well, Hazlewood said.

"We're going to make sure that Erlanger is still a teaching hospital. That's critical not only to our community but to the state," Hazlewood said, noting that's also important because statistics show people doing a residency program in a community are more likely to stay. "And we need those kinds of positions in our community."

She said state Treasurer David Lillard and state attorneys have also crafted bill language aimed at protecting pension benefits for employees.

"This is allowing, it's not saying they must, it's simply allowing Erlanger to look into the possibility of moving to a 501(c)(3), which has been very successfully done in Knoxville, UT Medical Center, and Grady Hospital in Atlanta.

Erlanger leadership announced in February they were exploring moving the public hospital system to a nonprofit model in an effort to level the playing field with private competitors and continue serving as the Chattanooga region's safety-net medical provider into the future.

The system operates five adult hospitals and one pediatric hospital with 797 adult beds and 133 pediatric beds in Chattanooga and other parts of Southeast Tennessee, according to the system's website. It also operates three community health centers in Chattanooga.

Rep. Yusuf Hakeem, D-Chattanooga, was taken aback by Gardenhire's comments.

"I think we're looking at the same materials and getting the same information, but it seems we have a different perspective of the urgency of the situation," Hakeem said as he prepared to take an elevator to the Capitol's second floor where the House and Senate chambers are located.

"I think in the House we're, summing it up, that this is something that needs to be done — now," Hakeem added.

At Gardenhire's urging, the delegation included language in the bill intended to ensure Erlanger's pension fund is put on more sound footing.

Sen. Bo Watson, R-Hixson, said delegation members have been working on the issue for several months.

"There are a couple of issues around the pension that we're wanting to button up a little bit," Watson said in a brief interview on his way to the Senate chamber. "I don't know what he [Gardenhire] has put together yet."

He said Gardenhire has been continuing to work on the "last few details" of the pension issue.

Watson told the Times Free Press earlier this month that a bill section could potentially allow the sale of Erlanger or assets.

"And that's a part we're looking at as well. And that's been a concern the delegation has expressed from the very beginning. Even in the current situation, they can sell it. That's our understanding. We're looking to make it, if that were to be a possibility, to make it really difficult to do that," he said.

Watson, a physical therapist and market director for therapy services at Parkridge Medical Center, said people realize he works for a competing system.

"The facility I work for recognizes the important value that Erlanger adds to our community and the important role that they play in our community," Watson said.

Contact Andy Sher at asher@timesfreepress.com or 615-255-0550. Follow him on Twitter @AndySher1.

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