published Saturday, September 14th, 2013

Fort Oglethorpe's Hutcheson for sale — if deal is right

Hutcheson Medical Center
Hutcheson Medical Center
Photo by Doug Strickland /Chattanooga Times Free Press.
Hutcheson RFP Release
Hutcheson RFP Release

Hutcheson Medical Center is for lease — or for sale.

The health care company that takes over the Fort Oglethorpe hospital will guarantee that employees keep their jobs and existing pay -- for 90 days.

Those are some of the highlights in the 16-page request for proposals issued Sept. 10 to find a new partner to run Hutcheson. It's parting ways with Chattanooga-based Erlanger Health System, which has managed the hospital since spring 2011.

The Hospital Authority of Walker, Dade and Catoosa Counties, the board that oversees the county-owned hospital, prefers to make a deal with a health care provider that guarantees to cover the payments on low-interest bonds that the counties will issue to refinance the hospital's more than $60 million in debt.

"The bonds, if issued in the amount of $61.9 million for 25 years, would have annual debt service of $4.4 million per year," the RFP states.

That's a best-case estimate, based on some of the bonds being nontaxable, according to the RFP. If the bonds are fully taxable, then the company that leases the hospital will have to foot a $4.7 million annual bond payment, based on current interest rates.

Forty years is the maximum term of any lease the hospital authority will approve.

While the hospital authority prefers to lease Hutcheson, it will consider alternative proposals, the RFP states. One example, is "the outright purchase of Hutcheson facilities for a specific amount thereby reducing or eliminating the amount of bonds issued by the [counties]."

If a health care company wants to buy Hutcheson, it can't cherry-pick and buy just the new campus on Battlefield Parkway, for example. It has to buy the hospital lock, stock and barrel.

"A proposal to only lease or purchase Hutcheson on the Parkway will be rejected," the RFP states. "Only alternatives that address all health care facilities and the continuance of a community hospital will be considered."

Some of the hospital's facilities will be excluded from the transaction, for example its 109-bed nursing home, Parkside at Hutcheson, and the "Hutcheson Houses" or "Sergeants Row" -- stately, brick duplexes across from hospital's emergency room that were built as officers' housing when Fort Oglethorpe was a military base.

The hospital authority also wants to "minimize the immediate disruption to service and employees," the RFP states. "The new operator will agree to offer employment for a 90-day probationary period to all employees providing services at the health care facilities at the same or higher level of [pay] and benefits."

Other priorities the hospital authority will base its decision on include the new partner's commitment to the following: rebuilding inpatient and outpatient services, continuing emergency services, physician recruitment, charity care, treatment of county prisoners and making capital expenditures to maintain the hospital's facilities.

Proposals are due Oct. 24. Finalists will be interviewed in November and a proposal should be selected by mid-November. It may be awhile before the partnership is finalized because a 60-day due diligence period will follow the selection of a partner and the agreement will be subject to review and approval by the state attorney general, which could take 120 days.

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

about Tim Omarzu...

Tim Omarzu covers Catoosa and Walker counties 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. Stories he's covered include crime in blighted parts of metro Detroit and Reno, Nev.; environmental activists tree-sitting in California's Sierra Nevada foothills; attempts by the Michigan Militia to take over a township¹s government in northern Michigan. A native of Michigan, ...

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