published Thursday, February 27th, 2014

Erlanger fires back after Hutcheson demands funds

Aerial view of Erlanger hospital in Chattanooga, which could get a new nonprofit board in a bill working its way through the Tennessee General Assembly.
Aerial view of Erlanger hospital in Chattanooga, which could get a new nonprofit board in a bill working its way through the Tennessee General Assembly.
Photo by Doug Strickland.
Response to Erlanger's response to Barnes Letter
Response to Erlanger's response to Barnes Letter
Erlanger response to Hutcheson
Erlanger response to Hutcheson

Erlanger officials used the words "silly, ludicrous, and absurd" to describe a letter from Hutcheson Medical Center attorney and former Georgia Gov. Roy Barnes seeking $75 million from the Chattanooga hospital.

Barnes is defending Hutcheson against a lawsuit filed by Erlanger in January.

Erlanger -- which oversaw Hutcheson operations during a two-year management agreement -- has sued the North Georgia hospital for $550,000, and has threatened to sue for $20 million more that it lent the hospital when the agreement began.

But in a January letter, Barnes sought to turn the tables, saying Erlanger was the one owing Hutcheson $75 million compensation for a litany of "damages" Barnes described, including the allegation that Hutcheson served as a "transfer facility" for Erlanger.

Erlanger has shot back a response to the letter, saying that Erlanger's management helped Hutcheson avoid closing its doors, improve d key clinical programs and moved Hutcheson to a profitable organization -- "saving hundreds of jobs in the North Georgia community."

Erlanger asserted that at the time it entered into a management agreement with Hutcheson, the Fort Oglethorpe hospital was deeply in debt, cut off from Medicare payments and seeing monthly losses in excess of $1.5 million.

"The $20 million loan to Hutcheson from Erlanger was largely to fund the operations since Hutcheson was no longer receiving payments from Medicare," the statement from Erlanger said.

The statement said that Hutcheson's Board declined to approve many of Erlanger's recommendations during the agreement, Erlanger's improvements to the hospital "were repeatedly and publicly recognized by Hutcheson's board of directors, officials of Catoosa, Walker and Dade Counties."

"Despite Mr. Barnes absurd 'tally of 23 itemized failures, injuries and damages that Erlanger inflicted on Hutcheson under the Management Agreement,' Hutcheson's boards never once followed the management agreement's process to address any of those now alleged "failures, injuries and damages," the statement reads.

In a response letter of their own, Hutcheson said they disagreed that Erlanger's efforts to manage Hutcheson were successful, claiming that the $20 million line of credit was used "because Erlanger's management failed to stem the negative cash flow" and that the Chattanooga hospital did not appoint a CEO at Hutcheson until nearly a year after the agreement.

"At the point that Mr. (Roger) Forgey was appointed, $11 million had been drawn on the line of credit, none of which was related to a Medicare repayment," a response from Hutcheson read.

The Fort Oglethorpe hospital also stated that they were "not aware of any recommendations that were not implemented."

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