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State Lawmakers Plan to Scrutinize Erlanger in 2015

Legislators want answers, accountability from Chattanooga health-care provider’s governing board

Erlanger Health System of Chattanooga recently announced it’ll delay half of its proposed bonuses to management-level employees until July. But Tennessee lawmakers who’re unhappy with the hospital board’s initial decision to grant gratuities to top executives may take the government-subsidized health care provider to task in the upcoming session anyway.

“I still believe they didn’t operate within the boundaries that they should have operated in,” state Sen. Todd Gardenhire told TNReport. As such, the Republican senator from Chattanooga — along with other area lawmakers — has said he hopes to take action in the next legislative session to make the hospital more accountable to the public.

The Chattanooga-region public hospital recently came under fire from lawmakers for its board’s decision to grant $1.7 million in bonuses to managers and executives just a few months after the hospital was in danger of ending the year with a financial shortfall. Gardenhire said Tennessee politicians at all levels of government worked to get the hospital $19 million in federal aid a few months ago when Erlanger came to them in fear of ending the year with their finances in the negative.

Additionally, state Sen. Bo Watson, the Senate’s speaker pro tem, told TNReport earlier this month that as a public hospital Erlanger was exempted from the hospital assessment fee by the Legislature each year, which also raised questions for him. “Are we making other hospitals pay a fee so that hospitals like Erlanger can award big pay increases to their chief executive officers?” the Hixson Republican said in early December.

Another issue lawmakers took with the board’s decision was the manner in which the bonuses were discussed: during a secret dinner meeting prior to the board’s public vote. Additionally, the bonuses were added to the agenda shortly before the meeting where they were voted on.

Erlanger — which as a publicly-operated hospital is subject to the state’s open meeting laws — was one of many hospitals to receive special exemptions from the General Assembly in 2008 to hold strategic planning meetings so that the public hospitals would not find themselves at a competitive disadvantage to private hospitals.

Watson said the Legislature had considered strategic planning “to be like marketing and five-year-plans, and that kind of stuff.” If the hospital is using that exemption for an executive compensation discussion, “that was never the intent of that law,” he said.

As a result of the controversy, the board delayed those bonuses a few days later pending an internal review by a third-party attorney. However, the board ultimately decided to go ahead with the bonuses after the lawyers conducting the review “informed the Board members that the approval process was appropriate and the action taken by the Board was also appropriate.”

The hospital has maintained the bonuses — which were tied to financial benchmarks set up over a year ago — were promised to their managers, and thus had to be paid out. Hospital officials have also said the federal funds should be considered the same as any revenue the hospital receives.

But Gardenhire said the hospital’s insistence that they fulfill their financial promises to management doesn’t “pass the smell test.”

“If it was all legitimate and they had a leg to stand on, why try to sneak it through?” Gardenhire questioned.

He also pointed out employee benefits that had been cut by the hospital over the past few years to help the meet financial obligations were also promised benefits, and questioned how the board could expect happy and productive employees when they see their benefits cut, but management receiving bonuses.

“I’m not saying the cuts they made were right or wrong, but don’t make the cuts then give yourself a big bonus and claim the reason you’re making the cuts is that you don’t have any money to do it,” Gardenhire said,

Gardenhire added he’s not questioning whether the hospital management deserved the bonuses or not, just the method through which they were given.

“If I have my way — and I don’t know that I will — I want to cut out those secret meetings, and take that little goody away from them that the past legislators gave them, and I want to see if we have legal ground to remove the trustees on there that did this, that were responsible for it,” Gardenhire said.

The Hamilton County legislative delegation appoints three of the hospital’s 11-member board of trustees. Only one hospital trustee voted against the bonuses: Gerald Webb, one of the legislative appointees.

Likewise, Watson said in early December the Legislature would probably consider modifications to the hospital assessment fee and Sunshine Law exemptions.

And House Majority Leader Gerald McCormick told the Times Free Press that he suspected area lawmakers would look into legislation to define what may or may not be discussed in secret planning meetings, as well as defining whether or not a hospital can consider federal aid as revenue.

Additionally, as a consequence of the actions of the Erlanger Board of Trustees, Gardenhire said it would be hard for him to support giving public hospitals additional money under Haslam’s Medicaid expansion plan.

“I’m not saying I’m against [Insure Tennessee] or for it, I’m just saying somebody’s got to assure me they’re not going to — while we take the political hit for doing it, that all of a sudden they don’t pay themselves big bonuses out and say, ‘that’s more revenue for us, therefore I earned a bonus,'” Gardenhire said.

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