Judge Allows Possible Sale Of Hutcheson Nursing Home To Go Forward, But Says May Be Time To Shut Down Fort Oglethorpe Hospital

Walker Attorney Says Erlanger Aim Is "To Put Hutcheson Out Of Business"; Catoosa Attorney Says Hutcheson Doomed To Failure

Thursday, October 22, 2015

A bankruptcy court judge at Rome, Ga., on Wednesday allowed a possible sale of the nursing home at Hutcheson Medical Center to go forward, but said it may be time soon to "shut down" the hospital portion.

Judge Paul Bonapfel, after a five-hour hearing, said, "It may be, if nobody wants it, and you only have eight patients, time to close it."

Hutcheson is down from 800 employees when bankruptcy was filed 11 months ago to 375.

Hutcheson attorneys said the hospital, with the cuts, is now holding its own financially.

Officials said New Beginnings is offering $7 million for the nursing home portion, but Erlanger Health System is not going along with the deal. Erlanger, which put $20 million into the Fort Oglethorpe Hospital at a time it was managing it, says it is now owed over $30 million. Erlanger has a lien on the property where the hospital and nursing home sit.

Judge Bonapfel said the Erlanger objection may eventually "spook" the nursing home deal.

He chided "two charitable 501(c)(3) institutions and two governments (Walker and Catoosa counties) for continuing to war and not entering into "a global settlement" in which each side would make concessions.

He said it may come down to the medical facilities closing and a receiver being named to dispose of the assets.

Walker County Attorney Don Oliver said Erlanger's aim is "to put Hutcheson Medical Center out of business."

And the attorney for Catoosa County said he believes Hutcheson is doomed to failure. Skip Patty said, "I have to agree that this ox is dead. I hate it; we all hate it."

Attorney Patty said Hutcheson is facing too much competition from three big hospitals in Chattanooga - all of which are seeking North Georgia patients. He also said the longtime Fort Oglethorpe hospital "is in the wrong place. You almost can't get there from here. And it's too big for what it can serve."

Rob Williamson, Atlanta attorney for Hutcheson, said a trustee who was appointed a month ago has been making some positive changes. He said there will continue to be some trouble meeting payroll in coming weeks, but he said the funds are projected to come in to cover those.

He said a tentative deal has been worked out to sell the Hutcheson nursing home that is by the main hospital for $7 million to New Beginnings. However, other attorneys said that is not a valid deal and that a major problem is that Erlanger has a lien on the property where the nursing home sits and Erlanger maintains it is owed over $30 million by Hutcheson.

The two county attorneys noted that their citizens are on the hook for $10 million each related to a period when Erlanger was managing Hutcheson and put $20 million into the facility. Attorney Patty said during the Erlanger management the Hutcheson finances were looking up, then "they took a nose dive." They said they also sank several million dollars more into trying to bolster the community hospital.

A major concern during the hearing is what will happen to over 100 residents of the nursing home if the bankruptcy is dismissed.

Assistant U.S. Trustee Martin Ochs said there are available beds for them within 60 miles under a state process for moving them.

Attorney Oliver said they "are local folks. If they move, they are not going to be visited as often. This will hasten their deaths."

An Erlanger attorney noted that the nursing home does not have a cafeteria and depends on the hospital cafeteria.

Trustee Ochs, noting that the judge said the hearing was about "getting this ox out of the ditch," said, "This ox is dead. It is not worthy of being taken out of the ditch. There should be a funeral today. It's time to bring this to an end."

 Hutcheson attorneys said the trustee for the hospital, Ronald Glass, is making progress, but needs more time.

They said he had paid a visit in Chattanooga on Tuesday to Erlanger CEO Kevin Spiegel, but he had been rebuffed on a settlement on that and another occasion.

The auction, that could be for the nursing home, the hospital, or both, is set to take place In an attorney's office next month. Erlanger attorneys asked if they could attend, but Hutcheson and creditor lawyers said they might be antagonistic and chill the sale. The judge said three Erlanger representatives could attend if they "will behave and don't chill the bidding." 

Trustee Ochs said he was not optimistic that any of the property is going to be sold. He said, "Thirty days down the road, we are really going to be in trouble." 

He said there will also be the issue of what should happen to the medical records.

Judge Bonapfel said the case involves "two charitable institutions that are supposed to be serving the public. But they can't solve this business problem. This case frustrates me." 

He suggested mediation of the contentious issues, but said he was not going to order it. He recommended "getting all the parties in a room without the lawyers, or all the lawyers without the parties." He said, "We're not going to sort this out in a courtroom. This is a business problem."

It was agreed that if a sale does go through that the proceeds will be set aside for the judge to rule later how they will be distributed. Regions Bank was the lender for the failing hospital. A Regions attorney said the bank has continued to help shore up the hospital though it has been costly to the bank.

An Erlanger attorney, who said Hutcheson is now "moribund," said the state has an orderly process for transferring nursing home patients who have to be moved. She said, "I think it is inevitable that they should be moved."

Another Erlanger attorney said it was "hogwash" that Erlanger ever had "fiduciary control" during its management of Hutcheson. He said, "There is no market for these assets."  

The head of the unsecured creditors committee said Hutcheson "is on its last leg and Erlanger is trying to take advantage of the situation."

Judge Bonapfel said of the nursing home residents that "102 lives in a nursing home should not be disrupted." But he said there may be no alternative to closing the nursing home.

He said it appeared that "Erlanger would rather have dirt (hospital property) than money (from a sale)."

The judge said the case would stay in bankruptcy to insure "an orderly" wind down and out of the interest of the patients and residents.

At the end of the hearing, he asked, "Is there anybody who feels like you won today?" No one answered.

A further hearing before the judge will be in Atlanta on Nov. 30 at 10 a.m.


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