published Friday, April 8th, 2011

Taxpayer funds called safe in hospital deal


by Chris Carroll

WHAT’S NEXT

Erlanger’s board of trustees will discuss its proposed management agreement with Hutcheson Medical Center Wednesday at 6 p.m. inside the Chattanooga hospital’s Professional Office Building dining room.

A partnership between two area hospitals poses no threat to taxpayers even if it loses money, according to sources close to the nearly completed deal, but millions in public funds must hang in the balance until certain issues are resolved.

The Hospital Authority of Walker, Dade and Catoosa Counties unanimously voted Wednesday to accept Erlanger Health System’s $20 million line of credit to Hutcheson Medical Center in Fort Oglethorpe. Erlanger President and CEO Jim Brexler said he expects his hospital’s board of trustees to approve the agreement on Wednesday.

Hutcheson is losing $1 million a month and recently defaulted on a $35 million bond issue. In case Hutcheson fails despite Erlanger’s $20 million infusion, Catoosa and Walker have pledged $10 million each toward the lifeline, but only as a stopgap because Hutcheson’s property, buildings and equipment likely will exceed $20 million in collateral.

The North Georgia hospital’s exact value will be known after an appraisal of its material assets is submitted to the Hospital Authority.

“The counties are not putting out one dime,” said Don Oliver, Walker County attorney and legal counsel for the Hospital Authority. “They won’t need to. They’re just pledging.”

Meanwhile, Wednesday’s agreement cleared out another thicket for Hutcheson—its byzantine corporate structure.

Hospital Authority trustees on Wednesday passed a resolution that streamlines the company’s four decision-making boards into two boards that will be dominated by those same trustees — nine political appointees from Walker, Catoosa and Dade counties.

“It was the right thing to do, and I’ll tell you why,” Walker County Sole Commissioner Bebe Heiskell said, “[The hospital] is owned by the people of Walker, Catoosa and Dade counties.”

Each of the three counties will get several additional political appointees to the two boards with only one physician representing the hospital’s medical personnel.

“Doctors are underrepresented and politicians are overrepresented,” said Ward Nelson, legal counsel for Hutcheson. “Not the way I would have done it.”

It’s one of many kinks in the deal. For six months, officials from both hospitals have been debating a compulsively revised contract — now in its 19th version and still under a confidentiality agreement. Their efforts culminated this week with 75 Hutcheson layoffs and Wednesday’s agreement.

“It was the hardest thing I’ve ever done,” said Heiskell, noting that her 11-year term included a national controversy involving 300 improperly handled bodies at Tri-State Crematorium in Noble, Ga., in 2002.

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