Erlanger Health System officials insist their financial investment in a struggling North Georgia hospital will happen at no risk to Hamilton County taxpayers, despite a hazy sense of how much will be spent.
“The money never leaves,” Erlanger Chief Financial Officer Britt Tabor said last week. “It’s coming back, and it’s fully guaranteed.”
Hutcheson will pay back Erlanger’s investment, he said.
Erlanger, which gets $3 million annually in Hamilton County government funding, entered a management agreement with Hutcheson Medical Center last month, pledging a make-ends-meet line of credit of up to $20 million.
The line of credit is backed up by Hutcheson’s mortgage and two $10 million pledges by Catoosa and Walker counties.
The agreement also calls for a significant financial investment in doctors, facilities and other medical services — completely separate from the line of credit and “at Erlanger’s sole discretion and expense,” the agreement states.
A preliminary document used to brief Hutcheson board officials on the agreement estimated an investment of $15 million besides the line of credit. There is no discussion of collateral.
Tabor said he didn’t know “where $15 million came from,” and said the number could fluctuate, depending on Hutcheson’s needs.
Erlanger reported an operating profit of $8.58 million in the 2010 fiscal year, which ended June 30.
Documents show Erlanger has $78.2 million in cash reserves and long-term investments. Tabor said the line of credit and any other investments directed toward Hutcheson will come from those assets.
But not all at once.
“Some visualize Erlanger writing a $20 million check on Day One,” Tabor said. “Not true. It might be $1 million one month and zero the next, depending on operations.”
Hutcheson must pay Erlanger 2 percent of “total revenues, gains and other support,” plus investment income. The payments are due in 2014 or when Hutcheson’s operating income is positive for any calendar quarter — whichever comes first.
The Fort Oglethorpe hospital recently defaulted on a $35 million bond and has reported $1 million losses for the last several months. In April, hospital officials announced about 75 layoffs.
A late draft of the management agreement states both hospitals will phase out “employees for which there is no foreseeable need at the hospital.”
Tabor and Erlanger CEO Jim Brexler said they hope that Hutcheson jobs will be saved with the Chattanooga hospital’s investments.