The path to Erlanger’s financial stability remains uncertain a year after the rejection of the private offer


A PBS documentary released in May drew attention to a long-standing US healthcare crisis brought to the fore by the COVID-19 pandemic – the future of many safety net hospitals, such as the healthcare system Erlanger of Chattanooga, is in danger.

The documentary featured several prominent doctors from Erlanger and former US Senator and Chattanooga Mayor Bob Corker, all calling for the need for a path to financial sustainability in Erlanger, the only public hospital and center. academic medicine in the region, in the era of modern healthcare.

Although some local officials acknowledge the gravity of Erlanger’s situation, no elected officials have taken any action or spoken publicly about the issues highlighted in the documentary since it aired.

Erlanger provides essential and expensive specialist services – such as the highest standard of trauma, stroke and pediatric care – not offered by other hospitals in the region and serves as a training center for future clinicians.

At the same time, Erlanger treats more uninsured patients and those on Medicaid – which pays significantly less than commercial insurance – than its competitors.

The healthcare system is expected to provide a record $ 160 million in unpaid care in the current fiscal year, according to Erlanger’s budget.

“From everything I’ve seen, Erlanger isn’t getting the funding that he should be getting, given his mission, given his patients, and given its complexity – whether it’s local government, whether it is the state government, whether it is the federal government. Something is missing here, “said Dr. Bruce Siegel, CEO of America’s Essential Hospitals, who this month gave an educational talk on hospital finances from the safety net to the medical staff of Erlanger.

(READ MORE: Chattanooga’s Erlanger featured in ‘Frontline’ investigation into impact of COVID-19 on safety net hospitals)

Although Tennessee’s public health systems receive additional funding from the state and the federal government, this does not compensate for the significant cost they incur, especially as these sources of funding stagnate and the cost of medical care. continues to increase, he said.

Siegel said that many of Erlanger’s challenges are similar to those of other large public and not-for-profit health systems that provide high levels of unpaid care and Medicaid to vulnerable populations, but there are other factors. which disadvantage Erlanger even more than many similar health systems across the country. .

Tennessee and Arizona spent the least amount of money on public hospitals of any state, according to Siegel. Erlanger also serves a large area of ​​Tennessee, Georgia, North Carolina and Alabama which is more unhealthy and has higher rates of chronic disease, poverty and health disparities than the country in his outfit.

While other public hospitals in Tennessee are looking to the local government for additional funds, Hamilton County’s only financial contribution to Erlanger is around $ 1.5 million to provide care for inmates. The Town of Chattanooga does not provide funding to Erlanger.

For comparison, Metro Nashville Mayor John Cooper’s last city and county budget included a $ 49 million grant for Nashville General Hospital, and the Shelby County Commission recently approved 11 , An additional $ 6 million for the Regional One Health Medical Center in Memphis to increase staff.

Hamilton County Commission Chair Sabrena Smedley R-Ooltewah and Commissioner Greg Martin R-Hixson said they had not seen the documentary, as did Commissioner Tim Boyd R-Chattanooga , who made the statement below via email:

“The shell game that Erlanger plays with his financial statements year after year suggests that what they report as profit and loss cannot be understood as telling the whole story. Millions of losses one year follow. millions of profits the next, ”Boyd said. . “How does it work if the organization is properly managed for sustainability? “

Speaking on behalf of the Hamilton County Legislative Delegation, Representative Patsy Hazlewood, of R-Signal Mountain, said in a statement that she has confidence in Erlanger Council, which “has enormous expertise.”

Hazlewood also said most of the state’s budget goes towards health care, followed closely by education.

“Payments to safety net providers like Erlanger are based on an uncompensated volume of care and are distributed proportionately among all eligible hospitals in the state so that each receives its respective share of the pool,” the statement said. “You can argue that the pool should be bigger. But you have to remember that the state has no other money than that which comes from the pockets of the taxpayers. It is a continuous balancing act between the financial obligations that the state has on behalf of its citizens and the resources available from taxes on its citizens.

Tennessee could reduce the number of unpaid care in Erlanger, along with all other hospitals in the state, if it extends Medicaid under the Affordable Care Act.

Tennessee’s Medicaid program covers approximately 1.5 million low-income children, pregnant women, families, and people with disabilities. The expansion would add eligibility for approximately 226,000 low-income uninsured adults under the age of 65.

However, Tennessee remains one of 12 states to pull out additional federal dollars that would cover a Medicaid expansion.

Former Gov. Bill Haslam attempted to expand Medicaid, but his proposal was rejected by the Republican-controlled General Assembly, with a majority ideologically opposed to expanding what some members call “a broken system.”

Erlanger’s board of directors – made up of six members appointed by the county mayor with the approval of the committee, four members appointed by the legislative delegation and the hospital’s chief of staff – said in a statement joint that the board “is aware of the documentary” and Siegel’s speech.

“The challenges of being a public hospital in the era of modern healthcare are well known and well documented. The long-term sustainability of Erlanger is always a top priority of the Board of Directors, and we are fortunate to have a good working relationship with our elected officials, with whom we constantly communicate, as well as with many our other stakeholders, ”the statement read.

“We serve tens of thousands of patients in four states, and we are continually evaluating how best to provide the high quality care our patients expect and deserve. We regularly review operations and strategy, and like all health systems across the country, we convene teams of experts to help us overcome a variety of issues. “

Siegel explained several strategies that similar hospitals have used to become more sustainable, including improving efficiency, focusing on more profitable service lines, taking increased financial risks, consolidating, changing governance. and the pursuit of public policy changes.

Local leaders united in saying “Erlanger is not for sale” when a private equity firm offered to buy the health care system for $ 475 million in August 2020, and Erlanger management already pulled many of the levers mentioned by Siegel.

From 2016 to 2018, Erlanger was characterized by rapid growth and expansion, construction and acquisition of new facilities as well as medical practices. The healthcare system has also focused heavily on promoting more lucrative services, including cardiac care, neurology and orthopedics.

When CEO Will Jackson took office in the fall of 2019, the healthcare system focused on efficiency and cost control, so Erlanger began to show positive profits again.

While Erlanger’s most recent financial reports have been strong, recent success does not make up for the many years of low margins and financial losses. Erlanger continues to struggle to reinvest in new infrastructure and associates. Many beds that could be occupied by income-generating patients have been empty since the pandemic has exacerbated staff shortages.

Siegel cited examples of public hospitals moving to a private, not-for-profit model and retaining their safety net status, but noted that this path presents many political hurdles and requires community buy-in.

Hamilton County Mayor Jim Coppinger said it had been a long time since he saw the documentary, but many of the points made did not surprise him.

“I don’t think the model we have right now is sustainable, and you know, obviously we have to keep looking for ways to make it more stable and sustainable in the long run,” he said at a telephone interview, acknowledging that although a change was needed, it would be difficult.

“I always want to do it in a way that I protect employees and protect pensions and that sort of thing, which makes it a little more difficult,” Coppinger said. “But I think we can all agree – I can’t imagine this region, let alone this county, without the Erlanger hospital or without a safety net.”

Contact Elizabeth Fite at [email protected] or follow her on Twitter @ecfite.

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