Erlanger transition to private hospital clears last Hamilton County hurdle

Staff Photo by Robin Rudd / The rising sun illuminates the Erlanger Baroness Campus and Baroness Hospital on August 23, 2022, with Elder Mountain serving as a backdrop. The Baroness Hospital is one of six in the Erlanger Health System.

The Tennessee attorney general's approval is the last remaining step before Erlanger Health System becomes a private nonprofit organization following a vote by Hamilton County commissioners Wednesday.

Commissioners unanimously approved a resolution authorizing Hamilton County Mayor Weston Wamp to transfer the Chattanooga-Hamilton County Hospital Authority — the formal name for Erlanger Health System — to a newly formed Tennessee private nonprofit corporation called Erlanger Health organized under section 501(c)(3) of the Internal Revenue Code.

"We began this journey over a year ago to create a sustainable, stronger future for our health system," Sheila Boyington, chairwoman of the Erlanger Board of Trustees, said in an emailed statement. "Becoming an independent nonprofit 501(c)(3) organization will give us the flexibility we need to sustain and grow our services, better support and invest in our people, improve quality and safety, optimize finances and, ultimately, enhance our ability to care for our patients and communities now and for decades to come."

Boyington in her statement thanked the commission along with the county and city mayors, Hamilton County's legislative delegation and Erlanger trustees — who have worked together since February 2022 to come to an agreement and facilitate Erlanger's transition from a government entity to an independent nonprofit.

Commission Chairman Chip Baker, R-Signal Mountain, who worked as an administrator at Erlanger in the 1990s, voiced his support for the move and the Erlanger board during both this week's and last week's commission meetings.

"This has been a long, thorough and very team-focused process — and all for the betterment of our community," Baker said during Wednesday's meeting.

Wednesday's vote ratifies the legally binding covenants and protections the county and Erlanger's attorneys crafted to hold the health system accountable to its commitments once it's no longer a public entity subject to open government requirements, Boyington said in her statement.

Some of those promises include maintaining Erlanger's safety-net mission as an acute care, teaching hospital and regional referral center with robust specialty services, including the trauma center, children's hospital, community health centers and academic affiliation.

  photo  Staff photo by Olivia Ross / Jim Coleman Jr. listens to Lynn DeJaco speak during a budget and finance meeting on Oct. 24. The group discussed Erlanger's year-end fiscal year audit.

The switch to the new nonprofit — which is anticipated to launch July 1 — will not change day-to-day operations within the health system, Erlanger CEO Jim Colemen said in a statement Wednesday.

"Patients will continue to be able to access the care they need from the providers they know and trust," Coleman said. "This is about being able to plan for and quickly respond to the changing health care marketplace to better meet the needs of our patients, associates and physicians."

Commissioners approved several other resolutions Wednesday concerning Erlanger. One of those was a contract for Erlanger to provide medical care to local inmates and another granting Erlanger first right of refusal to the Health Department property next to the system's main hospital on East Third Street.

Claire McVay, Wamp's chief of staff, said in a phone interview that prisoner care was one of the lingering issues remaining for Wamp's team once becoming involved in Erlanger's transition process after he took over as mayor in September. Erlanger has historically provided care to local inmates based on the understanding that the county allocated $1.5 million to the health system each year.

"When they transition to a nonprofit, the county will no longer be responsible for that payment. However, we will then have to compensate Erlanger for prisoner care," McVay said.

Because the county had never paid Erlanger directly for those services, McVay said the two parties decided moving forward Erlanger would bill the county for inmate care using Medicare rates. The mayor's proposed budget allocates funding to the Sheriff's Office to offset those costs, she said.

In terms of the Health Department property, Erlanger has expressed interest in purchasing that property, and the county is exploring options for relocating the department in the future, McVay said.

"This will give us a couple of years to look at options and maybe come to some kind of agreement with them," she said.

Commissioners also unanimously approved a resolution Wednesday to appoint businessman and philanthropist Barry Large to the Erlanger Board of Trustees.

As a government entity, Erlanger is overseen by 11 trustees — six of which are appointed by the county mayor. Many of those trustees will likely join the board of the new private entity while the public authority board remains in effect for several years as transactions for the old Erlanger wind down.

Contact Elizabeth Fite at [email protected] or 423-757-6673.

  photo  Staff photo by Olivia Ross / Matt Stuart speaks during a budget and finance meeting on Oct. 24. The group discussed Erlanger's year-end fiscal year audit.