Hutcheson Medical Center may be headed for appointment of a bankruptcy trustee, who would focus on the sale of the financially-strapped Fort Oglethorpe hospital.
An attorney told a bankruptcy court judge in Rome, Ga., on Wednesday afternoon that a buyer is discussing paying over $20 million for all the assets of the community hospital.
Attorney Rob Williamson also said that six to eight purchasers are interested in the nursing home at the hospital's main campus.
He and attorneys for unsecured creditors and Regions Bank were seeking to convince Judge Paul Bonapfel not to dismiss the bankruptcy filed last November. They asked for additional time in which to work out a sale.
At the close of the first day of the long hearing, Judge Bonapfel said it appeared that attorneys in the case did not oppose a bankruptcy trustee being appointed. However, U.S. Trustee Martin Ochs continued to request the bankruptcy dismissal, saying the losses continue to mount and are now up to $6.3 million. On the opposition to the trustee, Judge Bonapfel suggested that Trustee Ochs talk to his boss, U.S. Trustee Guy Gephardt.
Judge Bonapfel asked several questions about "the Erlanger problem" and said all the legal wrangling "could cause it (Hutcheson) to implode and all you have left is a pile of dirt with no hospital."
Erlanger says it is owed over $32 million related to money put into Hutcheson during a period it provided management. Several Erlanger officials were at the hearing.
The judge also said, "Nobody here has told me how anybody is going to be paid or how we are going to get this ox out of the ditch."
An attorney for the unsecured creditors said, "Everybody is cooperating - just not with each other."
Ferrell Hayes, Hutcheson CEO, said, "Our team has known that we need to sell this hospital."
He said the hospital got in "catastrophic" trouble last year when it had its computers set to go on a new required government billing system on Oct. 1, then the government decided to delay a year. He said for 45 days the hospital was not sending out bills.
The hospital ombudsman, Susan Goodman of Arizona, painted a dismal picture of the condition of the hospital. She said it is "incredibly antiquated" with old equipment that sometimes does not work, leaking roofs and periodic shortages of supplies.
She said the hospital staff "is incredibly dedicated," but she said she is concerned about increasing staff turnover.
She said two intensive care nurses resigned after the motion was filed to dissolve the bankruptcy.
Dr. Lori Emerson, an employee of a firm that operated the Hutcheson lab, testified about concerns with the lab operation, saying it might not pass its next inspection.
Trustee Ochs, saying it is "an extremely serious matter," said the hospital debt has grown from just over $5 million in three weeks to the $6.3 million.
He said that includes payroll taxes that were as high as $1.17 million before being cut to $850,000.
A serious concern, he said, is that Hutcheson is behind "a staggering $1.8 million" on paying for its self-funded employee health insurance. He said, "That hits employees literally in their paychecks."
He said the hospital also owes $1.1 million in trade debt, including professional fees. He said, "They are operating on the funds of other unwilling people."
Trustee Ochs said, "This is not the way any bankruptcy should be run. This is not the way any hospital should be run."
He said the ombudsman has many patient care concerns and she likened the situation to an amusement game "where you whack down one problem and another one pops up."
He stated, "The debtor is in a far worse financial situation than when the bankruptcy was filed."
Attorney Williamson said the hospital was coming out of the usual summer doldrums and hoping to improve its financial picture soon. He said additional government DISH payments were due in October.
He said allowing time for the sale "would yield much more for the creditors."
The attorney said dissolving the bankruptcy would likely lead to a "fire sale" and the sudden closing of the hospital and nursing home. He said a number of patients would need to be moved.
Attorney Williamson also said the hospital may come into money over some litigation, including a planned lawsuit against a former attorney.
He said some hospital officials and physicians have voluntarily taken pay cuts and the work force has been cut by 50 employees.
He said that has brought over $750,000 in monthly savings.
The attorney called the patient care "very good." He said the hospital got a recent surprise visit from federal inspectors and he was advised "that we passed with flying colors."
However, Ms. Goodman said the hospital's single MRI sometimes does not work and CT scanners and EKGs are old and unreliable.
She said at one time the hospital ran out of blood and plasma "because they didn't pay the bill."
She said the hospital has to get some supplies from other medical facilities and that nurses have paid for equipment and supplies out of their pockets.
She said the chemo lab has run out of cartridges for blood testing.
Mr. Hayes said he is paid $280,000 and has not missed any paychecks, but he said some physicians have. He said, "We tell them, 'We need you. We're going to pay you next week.' That goes on constantly."
Mr. Hayes defended patient care and the loyal employees. He said, "At least half of our employees could get on with other hospitals, but they stay on."
Several dozen hospital employees were at the hearing.
Mr. Hayes said it is common practice for hospitals to swap out supplies, saying Hutcheson often does with Hamilton Memorial in Dalton.
He said the hospital did get behind $60,000 on funding employee pension programs, but should catch up soon.
He said he knew that recent publicity about concerns of the ombudsman about patient care would cause the census to drop. He said, "We are in the reputation business."
He said the hospital has prepared a 13-week budget with new cuts and believes it can make it work.
Mr. Hayes said he believes "we are very close to filing a motion on a sale." He said it might only be a week away. But he said it might take four months to finalize it."
He said as part of the reductions the LaFayette center has closed. He said the Trenton center is still open.
The CEO said the hospital had to close its birthing department because it needed to have at least 40 births per month and was getting only 25.
Clifton Patty of Catoosa County expressed concerns about the sale of the Trenton clinic for $350,000. He said it is on the assessor's books at $500,000.
Catoosa and Walker County lent their backing to the $20 million Erlanger loaned during its management of Hutcheson.