Catoosa pays $6.25 million to Erlanger

Catoosa County’s legal wrangling with Erlanger hospital over repayment of a $10 million loan guarantee is now over. Tuesday night (June 21), during their regularly scheduled meeting, the five-member Board of Commissioners agreed to pay the Chattanooga-based hospital $6.25 million to settle the matter out of court.

Catoosa and Walker counties in 2011 had each committed $10 million to back Hutcheson hospital in its unsuccessful attempts to remain open and solvent. Erlanger had signed a management agreement that April to oversee operations of Hutcheson, an agreement that included Erlanger’s providing a $20 million line of credit. The deal soured and Hutcheson’s board terminated the management agreement in the fall of 2013. At that point, Erlanger filed suit and demanded repayment of its loan.

Hutcheson filed for Chapter 11 protection in November 2013, but closed on Dec. 4, 2015.

Within days of closing, the Fort Oglethorpe hospital was sold to Apollo MD of Atlanta and reopened. Renamed Cornerstone Medical Center by its new owners, the hospital held a ribbon-cutting ceremony on Thursday, June 23, slightly more than six months after purchasing the facility for $4.2 million in cash.

Some proceeds from Hutcheson’s sale in bankruptcy court trimmed the amounts owed Erlanger by each county to $8.5 million. While Walker County contests Erlanger’s being owed anything and has countersued them for about $120 million, Catoosa’s leaders elected to end the matter as quickly and cost effectively as possible.

Catoosa County Attorney Chad Young told commissioners that through negotiations the amount owed by Catoosa had been reduced to $6.25 million, an amount the county can pay out of its reserve funds. Payment is expected to take place before June 30, the end of Erlanger’s fiscal year.

The only stipulation to the deal is that, if within a year of Catoosa’s settlement Walker County settles with Erlanger for a lesser amount, Erlanger will rebate the difference to Catoosa.

By agreeing to settle, Catoosa County is no longer involved with ongoing legal actions between the Hospital Authority of Walker, Dade and Catoosa Counties even though Catoosa has appointed representatives on that Authority’s board of trustees.