published Sunday, December 15th, 2013

Hutcheson cutbacks expected this week; critics want board to quit as supporters blame restructuring

The Hutcheson Medical Center building in Fort Oglethorpe, Ga.
The Hutcheson Medical Center building in Fort Oglethorpe, Ga.
Photo by Doug Strickland.
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CORPORATE STRUCTURE

Hutcheson Medical Center, a publicly owned community hospital, is governed by the boards of five entities, three of which since April 2011 have had mostly the same members in order to work as an “efficient and single board,” according to a resolution that restructured the hospital’s governance then.

• Hospital Authority of Walker, Dade and Catoosa Counties: Owns the hospital building and oversees the lease. Its nine-person board is appointed by county commissioners, four by Walker County, three by Catoosa County and two by Dade County.

• Hutcheson Health Enterprises: Nonprofit parent company of Hutcheson Medical Center and Hutcheson Medical Division. Its 13 members consist of the nine-member hospital authority board plus the hospital’s physician chief of staff, plus one member from each county.

• Hutcheson Medical Center Inc.: A private, nonprofit company that leases the building and operates the hospital. Its 13 members consist of the nine-member hospital authority board plus four members appointed by the HHE board.

• Hutcheson Medical Division: For-profit sister company to Hutcheson Medical Center operates medical offices and practices. Its board oversees Hutcheson’s clinics.

• Hutcheson Health Foundation: Nonprofit fundraising foundation for the hospital.

Cutbacks loom at Hutcheson Medical Center.

At their meeting Wednesday night, board members of the deep-in-debt Fort Oglethorpe hospital are expected to adopt what have been described as “austerity measures” outlined in a strategic plan crafted in a series of closed-door, executive-session meetings.

The anticipated cuts haven’t been made public. Hutcheson’s Atlanta-based attorney, Michele Person Madison, declined last week to release the strategic plan in response to a Georgia Open Records Act request filed by the Times Free Press. She wrote Hutcheson’s strategic proposals and plans aren’t public until after the board approves them.

So the publicly owned hospital’s more than 800 employees will have to wait and see what the board announces.

Meanwhile, Roger Nelson, a vocal Catoosa County, Ga., businessman, thinks that one thing the board needs to reorganize is itself — by resigning.

“Hospital board members are like football coaches — have a string of losses, and it is time to change the whole staff,” reads one of the emails Nelson sent to residents of Dade, Walker and Catoosa counties, which created the hospital authority in 1947.

“This hospital board brings to mind similarities to a baby’s diaper — the evidence may be hidden but you know something doesn’t smell right; and both need changing for the same reason!” Nelson wrote.

It’s true that a majority of the nine-member Hospital Authority of Walker, Dade and Catoosa Counties has held office for a decade or more. Five board members have been there since 2003 or before.

Decisions made during the past decade — that in hindsight were seen as mistakes — include the 2005 hiring of Charles L. Stewart as Hutcheson’s president and CEO.

He resigned under fire on Feb. 14, 2011. Stewart’s administration is blamed for things such as driving away doctors, allowing the hospital’s patient census to fall precipitously and taking some $12 million in overpayments from Medicaid and Medicare that Hutcheson is still working to repay. It’s a portion of the hospital’s more than $60 million in debt, the bulk of which is $25 million loaned by Regions Bank, $20.5 million loaned by Erlanger Health System, and a $6 million line of credit from Regions Bank.

Still, not everyone pins the hospital’s financial tailspin on the nine-member hospital authority board.

Starting with a reorganization in 1995 meant to make Hutcheson competitive with other area hospitals, the authority board was left out of most decision-making and met only four times a year to oversee the hospital’s lease.

Hospital Authority of Walker, Dade and Catoosa Counties

Walker County

D. Ashley “Corky” Jewell V, appointed 2002

Steve Ellis, appointed 2003

William Chapin, appointed 2002

William Cooke, appointed 2013

Catoosa County

William Cohen, appointed 1997

T. Darrell Weldon, appointed 1991

Ken Rhudy, appointed 2010

Dade County

Alex Case, appointed 2010

Evan Stone, appointed 2011

“We were being encroached upon by Chattanooga in the north and Dalton and Rome in the south,” the hospital’s Dr. Robert Jones was quoted as saying in 1997 as the reason for restructuring Hutcheson to have “semi-private” boards. “They were coming into our territory. It was a survival-type maneuver.”

After that, decisions involving day-to-day operations — including Stewart’s hiring — were made by the board overseeing Hutcheson Medical Center Inc., a private, nonprofit company. With a few exceptions, its members were different from the hospital authority board.

Hutcheson’s governance changed in an April 2011 reorganization, when the hospital authority took the reins to try to reverse the decline.

“The failure of the board structure has led to … the hospital declining from one of the most financially successful in the region in 1995 to the point of bankruptcy today,” reads the resolution the hospital authority approved in April 2011 that aimed to streamline the board into one “efficient and single board.”

The nine-member authority board now meets monthly, at the same time and in the same board room as Hutcheson Medical Center Inc., and Hutcheson Health Enterprises Inc., another nonprofit private company. The latter two nonprofits now share the same 13-member board of directors — which consists of the nine authority board members plus the doctor who’s chief of staff plus one member appointed from each county to serve four-year staggered terms.

With the authority board calling the shots, and everyone in the same room at the same time — though smaller committees still meet separately — Hutcheson is better run, some say.

“They’ve been trying to figure out solutions and trying to make the hospital work,” Catoosa County Commission Chairman Keith Greene said of the hospital authority board at a Dec. 3 meeting. “They’ve put a lot of effort into it, so I don’t think we should be asking for them to resign.”

He blamed current problems on the structure of the old board.

“The wheels were set in motion many, many years ago,” Greene said. “When that lease agreement was signed [in 1995], it turned over control to the people operating the hospital. The hospital authority at that time became mostly supervisory.”

Catoosa Commissioner Jeff Long also backed Catoosa’s three board members, two of whom have served since the 1990s.

“I think our current board that’s representing, they’ve had a tough battle on this,” he said. “It’s not as much what they did as what was done on previous boards. I think this board that’s on there is trying to do what’s best with what they’ve got.”

Meanwhile, Dade County decided to change things up. Its two hospital authority board members are relatively new. Alex Case was appointed in 2010, and Evan Stone got the post in 2011.

“We put new board members on there because we felt … it was time for a change,” Dade County Executive Ted Rumley said. “When things aren’t working, you’ve got to make things right. That’s the difference in the counties. I felt that there should be a lot of new blood brought in.”

Behind closed doors

Arguments that board members are doing a good job may have to be taken on faith, because Hutcheson board members go behind closed doors for critical discussions. The joint Hutcheson board has gone into executive session at every single meeting in 2013, according to meeting minutes.

Also hidden from public view are key documents — and not just the strategic plan.

For example, when Hutcheson in August ended the management agreement it entered in April 2011 with Chattanooga-based Erlanger Health System, officials didn’t — except in the vaguest terms — explain why.

Hutcheson and Erlanger had been poised in June to have Erlanger lease the Fort Oglethorpe facility for 10 years, with two 10-year extensions. The pending deal was announced with fanfare and applause at an Erlanger board meeting as North Georgia county leaders watched from the front row.

The agreement fell through for unspecified reasons, and key information — such as the amount Erlanger was willing to pay to lease Hutcheson — has never been released.

Likewise, in September, when Hutcheson sought requests for proposals for another health care organization to manage it, officials initially wouldn’t say how many proposals the hospital got, or from whom.

Under Georgia law, Hutcheson had to release that information after deciding on Nov. 25 to go it alone and operate as an independent hospital.

It turned out that Erlanger had offered to pay $2.5 million annually to lease everything except a few of Hutcheson’s facilities, such as the Parkside Nursing Home and the hospice, for 10 years, with the option to extend the lease for 10 years.

That was almost $2 million shy of what county officials hoped to get. They wanted an estimated $4.4 million annually to cover payments on long-term, low-interest bonds the counties were willing to sell to refinance the hospital’s debt.

Would residents in the three counties have supported a property tax millage increase or some other tax to make up the difference and support Hutcheson, one of the region’s largest employers?

The public wasn’t asked. And if board members talked about it, their discussion was behind closed doors, and the meeting minutes are sealed.

Board members also avoid talking to the media. Hutcheson issues statements through Chattanooga-based Waterhouse Public Relations, which it hired in 2011.

“Since we are going to be reporting on activities of three counties and two hospitals and for Hutcheson at least three boards we felt routing all communication through … Waterhouse was the appropriate thing to do,” then-Hutcheson President and CEO Roger Forgey said in a June email. “Individually all these entities didn’t have PR departments. We want the information and the messaging to be consistent.”

Hutcheson’s finances have improved since the restructuring that took place as Erlanger was brought in to manage the hospital. Erlanger’s most recent management team, led by Forgey, was credited by Hutcheson officials for luring back doctors who had left, bringing in new doctors and increasing patient counts.

Hutcheson has had a “successful operational turnaround of $10.2 million over the last two years,” hospital spokeswoman Stacey Kaufmann said in an email this month.

But Hutcheson also has racked up debt since the restructuring: $20.5 million loaned from Erlanger and a $6 million line of credit through Regions Bank. Both loans are backed by Catoosa and Walker counties.

Phoning it in

One member of Hutcheson’s board has been phoning it in — literally.

Ken Rhudy, who was appointed to the hospital authority board in April 2010 by Catoosa County, never stepped foot in Hutcheson for a board meeting this year. He attended nine board meetings in 2013 by speakerphone and missed two meetings, according to meeting minutes.

That’s because Rhudy works about 340 miles away as the full-time administrator of Brooks County Hospital in Quitman, Ga., near the Florida border.

Georgia law requires hospital authority board members to live in the counties that they represent.

So does Rhudy reside in Catoosa County?

He didn’t return multiple phone calls seeking comment left at his Brooks County Hospital office on Monday, Tuesday and Wednesday. Eventually the employee fielding the calls advised a Times Free Press reporter to stop trying, because Rhudy wouldn’t be calling back.

The Times Free Press looked to see where Rhudy is registered to vote.

There’s no registered voter named Kenneth Rhudy in Catoosa County, elections official Tonya Moore said. though she indicated others with that last name are registered to vote in Catoosa County, and people sometime use a different first name in everyday life than the first name they use to vote.

Meanwhile, there is a Kenneth Rhudy listed as a registered voter in Brooks County, Ga., and he voted in the most recent election there, Assistant Supervisor of Elections Charles Dave said.

“He’d have to live here to vote here,” Dave said.

Hutcheson’s attorney said in an email that “Rhudy has relocated due to a job opportunity, but his family maintains a residence in Catoosa County.”

“Mr. Rhudy previously offered his resignation,” Madison wrote. “Pursuant to the Hospital Authority governing documents, a member continues until his or her replacement is appointed and approved. Mr. Rhudy’s expertise as a hospital administrator and his consultation with the Hospital Authority Board has been very valuable to the Hospital Authority members.

There have been several attempts to identify an individual to serve as an adequate replacement for Mr. Rhudy. At this time, the replacement for Mr. Rhudy has not been finally processed.”

Staff writer Rachel Wright contributed to this story.

Contact staff writer Tim Omarzu at tomarzu@timesfreepress.com or 423-757-6651.

about Tim Omarzu...

Tim Omarzu covers education for the Times Free Press. Omarzu is a longtime journalist who has worked as a reporter and editor at daily and weekly newspapers in Michigan, Nevada and California.

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