Catoosa County pledges Hutcheson support

The Catoosa County Board of Commissioners is unanimous in its support of Hutcheson hospital’s ongoing efforts to regain its fiscal health.

During a called meeting last Thursday, the commissioners pledged that Catoosa will be an equal partner in offering the financially strapped hospital a $25 million line of credit. By doing so, the commissioners restated, in a slightly modified fashion, a commitment they agreed to last December.

The earlier agreement pledged support of a short-term bond in the amount of $25 million, an amount that would allow the hospital time to arrange a long-term bond of as much as $70 million — its total indebtedness — that might be issued within the next few years.

County Attorney Chad Young explained that this newly adopted resolution, jointly signed with Walker County, has specific conditions that must be met if the counties pledge their support of these bond anticipation notes, BAN’s.

The short-term BAN’s are interest-only and Walker and Catoosa would be responsible for the interest only to the extent that hospital revenues are not sufficient to pay it, Young said.

“That interest rate is anticipated to be between 1 percent and 1.5 percent,” he said.

The short term BAN’s will be for one year, rather than two years as proposed in December, and will be in the form of a line of credit. The counties will offer input and must approve any draws made against this $25 million line of credit.

Young said the BAN’s will probably be used to pay down the hospital’s vendor and Medicare debt as well as provide capital improvements. Rather than set specific amounts, the counties, along with the Hospital Authority and Hutcheson’s management team, will jointly agree on where and how the money will be spent.

Commissioner Jim Cutler pointed out that the hospital’s huge debt is the result of past administrations. Noting that Hutcheson’s day-to-day operations have recently returned to profitability, he said, “We are seeing a slow, steady turnaround.”

Commission Chairman Keith Greene reiterated that Catoosa and Walker are united in this pledge to support BAN’s — “the $25 million is split between the two” — and that what is being offered is a line of credit, not a loan or lump sum payment.

Greene said the counties being able to borrow money at an interest rate of 1 percent will immediately help the less creditworthy hospital retire obligations to the federal government that amount to nearly $12 million.

“The Medicare debt is the driving factor here,” he said. “With its 11 percent rate (the interest Medicare charges), they will never get ahead.”

Another change in the latest agreement is that the counties are only committing to long-term bonds equal to the short-term $25 million BAN’s and that the hospital will make payment on bonds backed by the counties before repaying its obligations to Regions Financial or Erlanger.

Dade County Commissioner Robert Geoff and Commission Chairman Ted Rumley attended last Thursday’s meeting, as did Dade County Attorney Robin Roberts.

While Dade has always been a Hospital Authority partner, the county was unable to commit any funds — or credit — to either the $20 million pledge to repay Erlanger, should Hutcheson fail, or the just-adopted $25 million letter of credit. Before Catoosa’s commission voted to join with Walker County in backing the hospital financially, its and Dade’s members met in executive session to discuss proposed changes to the makeup and selection of the Hospital Authority’s board of directors.

When the hospital was formed in 1953, the Authority that jointly owned the grounds and buildings had numbers of members that reflected the relative populations of the three counties: Walker, the largest, had four members; Catoosa three; and Dade, the least populated, had two. Today, the population of both Walker and Catoosa is very nearly equal, but Dade has grown only slightly. Using the previous formula to maintain a nine-member Hospital Authority would make Walker and Catoosa each have four members and Dade just one.

Dade’s officials have suggested the total number of trustees be increased to 13 — with each of the larger counties having five members and Dade having three board members.

Unless the three counties can reach a decision about the board’s makeup, the state Legislature will decide the matter during the current legislative session.


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