Legislators introduce Erlanger Modernization Act

Hamilton County State legislators introduced a bill this week in the General Assembly that paves the way for the Hospital Authority board to create a newly-formed 501(C)3 not-for-profit organization for the Erlanger Health System.

Among the key benefits created by the enabling legislation is the ability of Erlanger’s board to adopt more modernized, market-based purchasing guidelines.

Under the new status, the current Authority board would remain in place and a new operating board would be created.  Erlanger will continue to serve its public hospital mission to provide comprehensive and essential medical services, as well as meet the healthcare needs of the underserved population of the tri-state region.

Under the Modernization Act, for example, Erlanger’s board will be able to adopt procurement and purchasing policies which conform to current market-based purchasing guidelines.

It’s important that the Chattanooga and surrounding community become better informed about what the Erlanger Modernization Act is really about and what a significant and positive impact it can have on local residents.


Q & A regarding Modernization Act bill


1. What’s the rationale behind this bill?


 This legislation will allow Erlanger’s board to respond more quickly and adequately to rapidly changing conditions in the healthcare marketplace.  The healthcare market place has changed dramatically since the original Hospital Authority Act was enacted in 1976. This bill enables the Hospital Authority to create a newly formed 501(C)3 not-for-profit organization.


2. What will change after this bill is enacted?


 Once this public law is enacted and the process completed, it will no longer be necessary for Erlanger to seek legislative authority to respond to changes in the market for healthcare. It will allow Erlanger to move more quickly and decisively to respond to current market conditions.


3. Will this move have any negative impact on any Erlanger bond issues?


 No.  Debt market advisors encourage hospitals like Erlanger to make this type of conversion to resemble other successful urban safety net hospitals. They tend to believe that the market will have more confidence in Erlanger as a borrower with the restructuring – since it will be more like other successful teaching hospitals that are also safety net providers.


4. Could this have a positive impact on charitable contributions?


Yes.  Under the new structure, charitable contributions to Erlanger are likely to increase as donors feel more comfortable donating to a non-profit rather than a governmental entity. Grady Hospital, for example, received a significant donation after its conversion.


5. What other hospitals besides Grady have made this type of conversion?


 By enacting this Act, the Legislature would be permitting Erlanger to follow the same general path it permitted UT Medical Center in Knoxville to follow in 1999, and the Med in Memphis in 1981.  Grady Hospital in Atlanta restructured in a similar manner in 2007.


6. How will this restructuring affect Erlanger’s current board?


 The new operating board will draw members from the community, and will continue to work with local government and provide a breadth of experience that will enable Erlanger to continue to meet its commitment to provide quality, essential healthcare.