Hutcheson Medical Center filing for Chapter 11 protection
A new chapter was added to the saga of Hutcheson hospital on Nov. 19. Chapter 11, that is. After meeting for more than two hours in executive session Wednesday evening, Nov. 19, the board of trustees for Hutcheson Medical Center unanimously voted to file for Chapter 11 reorganization in U.S. Bankruptcy Court, Northern District of Georgia.
Hutcheson officials said this move will allow the hospital to restructure its debt for longterm viability and could help protect it from Erlanger Health System’s efforts to recoup about $20 million it loaned Hutcheson as part of a management agreement.
“The biggest mover for us taking this action is the potential foreclosure,” Hutcheson president and CEO Farrell Hayes said following the board’s decision. “It will benefit our creditors and give us breathing room. I hope we come out as a strong county hospital.”
Chattanooga-based Erlanger has filed suit in federal court demanding the sale of Hutcheson’s buildings and grounds — jointly owned by Catoosa, Dade and Walker counties — on Jan. 6, 2015. Foreclosure would involve only the sale of the physical properties.
Hayes said Hutcheson Medical Center’s lease of those buildings has been extended through 2034. That means that even if sold, the hospital will continue operations, even though that might involve a new owner.
“The whole idea is to emerge much stronger,” Hayes said. “This gives us a chance to recover — we’ll still be open for business.”
In a prepared statement, Hayes said Hutcheson’s primary mission is to serve the health-care needs of more than 160,000 north Georgia residents. He said that during three court-ordered public hearings concerning the potential foreclosure, citizens made clear that they understood the devastation, both medically and financially, that Hutcheson’s closure could cause.
Board chairman Corky Jewell said the filing for Chapter 11 offers the hospital’s current board of trustees and administration an opportunity to restructure debt inherited from previous
boards, debts that were compounded by the mismanagement that is the subject of Hutcheson’s counterclaim against Erlanger.
“This will allow Hutcheson to reorganize for the future,” he said.
Jewell said the hospital has made tremendous strides this past year. The clinical side of operations is solid, he said. The Chapter 11 filing should allow the hospital to overcome its burden of debt and continue its mission for years to come.
“From a patient’s perspective, nothing will change with the reorganization,” Hayes said. “The physicians and staff our community knows and trusts will be providing the same level of quality care we’ve always delivered. Actually, patient care should be better than ever, as we can concentrate on doing our job instead of constantly fighting with Erlanger.”
When asked if the hospital’s major creditor, Regions Bank, had foreknowledge of the impending bankruptcy filing, Hayes said “yes.”
When asked if Erlanger knew Hutcheson’s board intended to begin Chapter 11 proceedings, Hayes replied, “I don’t think this will surprise them. They’re smart people over there.”