CHI Memorial acquires N. Georgia properties, sets up healthcare duel
In front of local politicians and business owners, CHI Memorial CEO Larry Schumacher staked a claim to the North Georgia health care market, setting up a feud with Erlanger Health System.
Schumacher announced Friday morning that his hospital purchased Cornerstone Medical Center, the Fort Oglethorpe enterprise that has operated since 1953. Not only that, he said, but CHI Memorial also bought
Hutcheson Medical Center’s shut-down ambulatory surgery and cancer center, located on Battlefield Parkway.
CHI Memorial paid Regions Bank $4.5 million for the building on Nov. 15, property records show. A hospital spokeswoman declined to comment on the price of the purchase of the Cornerstone campus, located at 100 Gross Crescent Circle. But Schumacher said CHI Memorial is spending $18 million overall.
He said his hospital is also absorbing Cornerstone’s 207 employees.
“North Georgia, these communities and the people in these communities are very important to CHI Memorial,” Schumacher said.
The purchases are a significant step toward dominating the region’s health care market. The hospital already has doctors in the Physician’s Center, located next to the surgery and cancer center it just bought. CHI Memorial also opened primary care clinics in Chickamauga, LaFayette and Trenton in the last two years.
The purchase of Cornerstone’s campus will be final on Dec. 29, Schumacher said. He also hopes to open the surgery and cancer center in the next couple of months.
But Erlanger officials will try to stop that operation before it starts. To run a surgery center in Georgia, an organization must have a certificate of need approved by the state’s Department of Community Health. Hutcheson operated the surgery center on Battlefield Parkway from 2004-15, when the hospital shut down and was purchased by the company that opened Cornerstone Medical Center.
As part of that purchase, the company acquired Hutcheson’s certificate of need. And in purchasing Cornerstone, CHI Memorial officials hope to do the same.
But Erlanger Senior Vice President of Planning and Business Development Joe Winick said the certificate of need for the surgery center is dead. In a filing with the Department of Community Health on Monday, Winick wrote that the key document expired because nobody operated the surgery center after Hutcheson’s 2015 shutdown. In the past two years, Cornerstone has only maintained an emergency room, a lab, a pharmacy, radiology services and 19 inpatient beds.
“This time period in which no surgery has been offered well exceeds 12 months,” Winick wrote. “… Hutcheson/Cornerstone has lost [certificate of need] authorization to operate these services.”
Winick’s comments were part of Erlanger’s own certificate of need application. He said hospital officials want to build a $9.8 million surgery center off Battlefield Parkway, with three operating rooms and two procedure rooms. The center would be next to Erlanger South Family Medicine, less than half a mile down the road from where CHI Memorial plans to open its own center.
In the filing, Erlanger estimated that 22,700 North Georgia patients left the area to receive surgery. It estimated the center could perform about 3,200 surgeries a year.
“We are reviewing the application and are not prepared to respond at this time,” CHI Memorial Marketing Communications Specialist Karen Long told the Times Free Press in an email on Friday afternoon.
The surgery center would be located in a prime location for either hospital. In addition to the Physician’s Center next door, the Center for Sports Medicine and Orthopaedics is building a center across the street.
With 66,000 residents, Catoosa County has about the same amount of people as Walker County. However, the area has more affluent residents. According to U.S. Census data, about 23 percent of households in Catoosa County make $100,000 or more a year. In Walker County, that rate is only 11 percent.
On the Cornerstone campus, which will be renamed CHI Memorial Georgia, Schumacher said the hospital will bring doctors for outpatient treatments and follow-up care. He wasn’t sure Friday what specific services will come.
“We will recruit the necessary physicians, providers, staff in order to provide them at this location the same quality and clinical outcomes that we have at our other campuses,” Schumacher said.
Friday’s announcement is yet another event in what has been an unstable health care marketplace in North Georgia since the turn of the decade. In 2011, Hutcheson and Erlanger entered into a management agreement, only for Hutcheson’s board to kick Erlanger out two years later. Despite improving financials and an uptick of specialists on campus, Hutcheson leaders (and some politicians) accused Erlanger of trying to siphon North Georgia patients to the Chattanooga campus.
In 2014, Erlanger sued Hutcheson, demanding back the $20 million it loaned the North Georgia hospital. Hutcheson, in turn, filed for bankruptcy protection. In December 2015, Hutcheson closed after 62 years of operations. Days later, Valor Bridge purchased the hospital for $4.2 million. The company had a physicians group that staffed the hospital, but it had never run its own operation.
In August, Memorial and Cornerstone entered into their own management agreement, leading to a purchase. Cornerstone CEO Jessica Long said she would stay at the hospital in the coming weeks but is not sure of her long-term plans.