The reduction involves both job cuts and work hours reduced across the board among the hospital’s approximately 900 employees, said Haley Walters-Johnson, communications and marketing director for the Fort Oglethorpe hospital.
She said she did not have details as to whether any particular areas of Hutcheson or category of employees will be affected.
A Chattanooga TV news station was reporting Monday afternoon that as many as 160 people could be affected by reductions by the end of the week.
The hospital has been losing about $1 million each month, due primarily to a lack of patients to fill its beds. In the past year Hutcheson’s patient census has averaged less than 20 percent of its 195-bed capacity.
According to a prepared statement from the hospital, employees affected by the reduction have been offered a two-week severance package including accrued paid time off.
“We have worked diligently over the last several months to streamline daily operating expenses,” interim president and CEO Debbie Reeves said in the statement. “Yet as a result of our current financial state, we had to implement this difficult task of aligning our staffing levels to meet our patient volumes.”
In its efforts toward financial turnaround Hutcheson announced in October 2010 that it had chosen to pursue a partnership with Erlanger Health System in Chattanooga.
Negotiations on the financial details and final management agreement with Erlanger have recently hit snags as county commissioners and members of the Hospital Authority of Walker, Dade and Catoosa Counties, which owns the Hutcheson facilities and land, have questioned specific points in the proposal.
The Authority Board did not officially participate in a joint meeting of Hutcheson’s operating boards held Sunday, April 3, in which three of the four boards voted unanimously to approve the current proposal from Erlanger.
In a closed-door executive session at a special called meeting April 1 the Authority Board and its legal counsel reviewed its own counter-proposal to Erlanger and voted to make it their official position.
“The counter-proposal is also the official position of Commissioner Bebe Heiskell and Walker County,” said Don Oliver, attorney for the Authority Board. “We feel the counter proposal is very fair to Erlanger, but at the same time protects the jobs at the hospital, protects the hospital and the Authority's assets, and protects the taxpayers of the three counties. We are confident that Erlanger will find our edits more than fair, and we will have a final agreement within days.”
Lease under scrutiny
At the April 1 meeting a five-member quorum of Authority Board trustees also considered a resolution that alleges the Fort Oglethorpe hospital has breached at least 20 provisions of the 40-year lease agreement it has with the Authority.
Steve Ellis, trustee representing Walker County, read aloud the resolution, which says the Authority Board has the right to call the lease in default and terminate it immediately if the hospital breaches any of the provisions.
But as the board “recognizes its civic duty to ensure that there is continued access to affordable health care in the community,” it recommended that the hospital be given 90 days to earnestly demonstrate remedies for the alleged breaches.
The lease was agreed upon 16 years ago when the Authority Board, which owns the Hutcheson facilities and the dozens of acres of land on which they sit, created the non-profit companies of Hutcheson Medical Center Inc. and its parent company, Hutcheson Health Enterprises Inc.
HMC Inc. was assigned the task of day-to-day operations of the facility, formerly known as Tri-County Hospital, which was established in 1953.
The essence of the lease requires that, in exchange for the facilities, Hutcheson Medical Center must provide health care to the community regardless of a patient’s ability to pay.
The hospital continues to provide millions of dollars of indigent medical care annually.
Oliver said many breaches of the lease concern the financial aspects of the hospital, such as failure to comply with debt covenants and to maintain the minimum 45 days operating cash.
He said most everything in the lease provides for the 90-day “cure” period, and that approval of the resolution now is needed to expedite the matter toward completion as soon after an anticipated partnership agreement is reached.
“I am not intending in any way for this to interfere with the process with Erlanger,” he said.
Prior to Friday’s meeting Oliver issued an open letter to the trustees, giving background on the powers of the Authority Board and describing his view of the situation.
“HMC (Inc.) is nothing more than a paper entity created by this Authority to do a job,” the letter reads.
Oliver said that creation, like a terminator robot from a modern horror movie, has gone rogue. “The robot and its own servants, the administration it has hired and the attorneys it has hired, now tell the Authority what it can and cannot do; who it can hire; who it can pay; who it can do business with; how it will conduct its business.”
The Board is at a crossroads, Oliver said, and “will either facilitate and enhance this disaster which began 15 years ago, or return our hospital and the Authority to resemble the creature of the noble intentions of 60 years ago when it was created.”
Although a quorum was present and therefore could have voted to approve the resolution, four trustees were not at the meeting, including chairman Dr. Darrell Weldon and the two trustees who represent Dade County.
Authority Board vice chairman Bill Cohen, who represents Catoosa County, presided over the meeting, but as such could only vote to break a tie.
Catoosa County trustee Ken Rhudy was connected to the meeting via telephone, so he was not eligible to vote.
Rhudy said the momentum gained by the Authority Board in these recent tense months of partnership negotiations has “fallen by the wayside.”
“The bond of trust has been broken,” he said, and urged the postponement of action until a better representation of trustees could be present.
Dade County executive Ted Rumley agreed, and said that although he is not a member of the Board, he is favorable to many of the provisions in the resolution, particularly one calling for an “efficient and single board to operate the hospital.”
“But you’ve pretty much only got Walker County voting here, and in fairness I think you should have a full board,” Rumley said.
Walker County commissioner Bebe Heiskell was also in attendance. Catoosa County commission chairman Keith Green was not.
Cohen said he spoke earlier with Greene, who indicated he would appreciate the Authority Board not taking any action that would imperil the Erlanger negotiations.
In light of this, the members present voted to table the resolution until the April 6 meeting, where it will continue to consider other management proposals, matters relating to the lease, and to discuss and possibly change officers.
Attorney Oliver said that in a March 24 email board chairman Dr. Darrell Weldon requested that he produce information giving alternatives to the current lease arrangements.
Oliver said he sent out requests for information in “considering other alternative arrangements to operate the hospital.”
Oliver indicated that after sending out the requests, six health care corporations and hospitals, including Parkridge and Memorial in Chattanooga, expressed interest.
Some returned a questionnaire that Oliver had provided while others, due to the short notice, responded verbally.
Representatives from Health Management Associates (HMA), a for-profit company from Naples, Fla. attended the April 1 meeting, and senior vice president Alan Levine gave a brief presentation regarding Hutcheson’s options for a partnership.
Levine urged the Board to not “make a decision with a gun to your head.”
“You don’t have to add debt to get rid of your debt,” Levine said in apparent reference to Erlanger’s current proposal to loan millions more to HMC in its partnership and restructuring.
Regions Bank, Hutcheson’s lender on its defaulted $35 million bond issue, has made concessions to facilitate a partnership agreement, but they are only good if a deal is reached by April 15.
At the April 3 joint board meeting, a statement was read from Gregg Gentry, Erlanger’s senior vice president for human resources, who takes exception to the Authority Board’s courting of other offers.
Gentry characterized the move as “a really bad April Fools’ joke.”
“We cannot imagine a sign of worse bad faith than this action,” he said. “For Erlanger to have spent the time and resources of negotiating to a positive conclusion only to find we are being used as a negotiating tool is the ultimate violation of honest and fair business practice.”
Gentry said that had Hutcheson’s original request been for something different than a community-based, non-profit partnership, “our proposal would have looked much different.”