published Tuesday, August 13th, 2013

Erlanger CEO says Hutcheson deal is still a possibility

Erlanger tile
Erlanger tile

The "will they-won't they" suspense continues to build in the latest episode in the ongoing drama of Hutcheson Medical Center and Erlanger Health System's relationship.

Hutcheson has decided to see what other fish are in the sea, as North Georgia officials let a leasing agreement between the two hospitals die quietly after a closed-door meeting late Friday night.

Meanwhile, CEO Kevin Spiegel says Erlanger is still "committed" to working out some kind of partnership, as long as it's "sustainable."

"We're absolutely not out," Spiegel said Monday. "We really want to be there. We really want to serve that community. But we need it to make sense. We just need to make the deal so it doesn't drain financial resources for Erlanger."

Erlanger still has first right of refusal for a potential agreement after Hutcheson, which is owned by Catoosa, Walker and Dade counties, casts a wider net for bids. In June, Erlanger and Hutcheson leadership had agreed to a letter of intent that both parties hoped would lead to Erlanger leasing the North Georgia hospital for two 10-year spans.

But in case things didn't work out, Hutcheson also prepared a wider Request for Proposal from other interested hospital companies, said a spokeswoman with Waterhouse Public Relations, which was hired by Hutcheson to handle communications.

"Since the hospitals were unable to come to terms on a lease agreement, an RFP is expected to be issued to other potential partners this week," said spokeswoman Nathalie Strickland.

The process of soliciting proposals from possible long-term leasing partners should take 30 to 45 days, she said.

Strickland has not stated why Hutcheson officials decided against the Erlanger deal. For Erlanger, the key to make Hutcheson viable for the long term was by getting Catoosa, Walker and Dade counties to issue low-interest, 30-year bonds to reduce the hospital's debt payments to a manageable $3.2 million a year.

County officials were willing to issue those bonds on the condition that Erlanger guaranteed to secure the debt and make the payments no matter what, so taxpayers would not be on the hook for the hospital's fate.

But Spiegel said that a recent fair market value analysis of Hutcheson -- agreed to by both parties -- changed the terms of Erlanger's proposal.

"To meet the highest level of value meant we would have to grow the business overall by 10 percent in a very short turnaround," Speigel said. "We didn't know if that was realistic."

The price Erlanger was willing to pay was the price needed to generate a profit -- but the proposal did not satisfy all of Hutcheson's debt, he said.

But, on a surface level at least, leaders from both sides aren't showing hard feelings.

"We agreed that going out to the market would flush out who all may be interested and what they could offer," Spiegel said. "I think [going with Erlanger] would have been in the best interest of Hutcheson, but I think the hospital and the counties want to make sure they're getting the very best for that community." He says that despite Hutcheson's financial difficulties, he still sees it having future success and being a potential financial asset "if the business arrangement was good."

In the meantime, Erlanger is still managing the hospital and will continue to while the RFP goes out.

Contact staff writer Kate Harrison at kharrison@timesfreepress.com or 423-757-6673.

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