Erlanger rejects settlement offer over $20M loan to Georgia hospital

A dispute over a $20 million loan Chattanooga, Tenn.-based Erlanger Health System made to Hutcheson Medical Center in Fort Oglethorpe, Ga., continues, as Erlanger has rejected a $1.3 million settlement offer in the case.

In 2011, Erlanger and Hutcheson entered into a management agreement, and Erlanger made the loan to the financially troubled hospital. Catoosa and Walker County officials guaranteed the loan, promising each county would pay Erlanger $10 million if Hutcheson didn't have the funds to repay the loan. Hutcheson Medical Center filed for Chapter 11 bankruptcy protection in 2014. Without enough cash flow to support itself, the hospital closed Dec. 4. However, after securing a buyer, the facility was able to reopen just three weeks later under a new name.

After the hospital was sold, Erlanger filed a lawsuit claiming Catoosa County officials are cooperating with Erlanger to pay back the money, but Walker County officials are not. To settle the suit, Walker County officials recently offered to pay Erlanger $1.3 million, but Erlanger rejected the deal, according to the Times Free Press.

Erlanger is also involved in pending litigation with Hutcheson board members. In February 2014, Erlanger sued the board for the $20 million. Hutcheson countersued, claiming Erlanger's leaders were responsible for Hutcheson's collapse. In late April, a federal judge granted Erlanger's motion for partial summary judgment, and awarded the system $20 million, plus interest and late fees, according to the report.

Erlanger likely will not be able to collect the full amount awarded by the judge from Hutcheson, since the hospital no longer exists. However, Hutcheson's board, which only meets to oversee the end of this litigation, has been negotiating a settlement with Erlanger.

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