Walker County Has Another Hospital Crisis on Its Hands

A couple of weeks ago, I wrote a post about Cornerstone Health in Walker County. The company that manages the hospital, ApolloMD, had sued Blue Cross Blue Shield of Georgia for not honoring contractually agreed upon reimbursements for emergency services. Now the county is on the hook for $8.7 million for a separate issue stemming from the hospital’s sale, according to a Thursday ruling by the U.S. Court of Appeals.

As a short refresher, ApolloMD bought Cornerstone Health when it had a different name, Hutcheson Medical Center. Hutcheson had been losing money to the tune of $1 million a month, and in April 2011, the hospital entered an agreement with Chattanooga-based Erlanger Health System, which took over day-to-day management of the hospital. In turn, Erlanger loaned Hutcheson $20 million to stay afloat. As a guarantee, the county commissioners for the two counties Hutcheson served (Walker and Catoosa) each agreed to be responsible for half of the loan.

In 2013, the arrangement fell apart, with both sides blaming each other. In retrospect, it appears that Erlanger had been successful in reducing the deficit at which the hospital was operating, so Hutcheson’s board might have been expecting too much too quickly. Instead of fixing the problem, though, the ouster of Erlanger made the situation worse as the hospital limped along, bleeding money. When Hutcheson finally declared bankruptcy in 2014, ApolloMD bought it for $4.2 million.

Obviously, $4.2 million is a lot less than $20 million, and also not all of the money from the sale went to Erlanger. The amount that did, however, reduced the responsibility of Walker and Catoosa Counties to $8.7 million a piece.

Catoosa County settled with Erlanger in 2016 for $6.3 million. Walker County continued to ignore Erlanger’s requests and eventually defaulted on the loan. Unshockingly, Erlanger sued Walker County to try to recoup the money.

Walker County has been pretty creative in trying to find ways it might not be responsible for the money. The county attorney, Stuart James, argued that Walker County couldn’t be responsible because the agreement was between former Commissioner Bebe Heiskell and the Hutcheson hospital board, not Erlanger. Another argument suggested that Walker County could not enter an agreement with a nongovernmental entity like Erlanger. Finally, James argued that Walker County cannot be sued under the state’s sovereign immunity clause. The judge in the case, Harold Murphy, disagreed and ruled that Walker County was responsible for repaying Erlanger the $8.7 million.

The new commissioner, Shannon Whitfield, has no idea where the county will come up with the money. He wouldn’t say outright that taxes would need to increase, but it sounds like things are headed in that direction as there aren’t many other ways to go.

Rural health care is in crisis. We know that; we discuss it regularly here at GeorgiaPol.com. Stories about rural health care in our state have appeared recently in outlets from Atlanta Magazine to The New Yorker. This is how bad it is: the state is trying to backdoor a way using Medicaid in rural schools to ensure kids at least have access to a nurse. There are issues that are way out of a county’s control. However, when county commissioners and hospital boards in these areas try to game the system or expect a savior on a white horse to rescue them from bad management instead of creating reasonable benchmarks for a path to solvency, the people suffer.