Money, Money, Money By The Pound

We have written a lot about the service contracts between UMC and El Paso Children’s Hospital.  Below we outline the amount of what we (and independent resources) classify as ‘extra money’ (i.e. Money that was above what it actually cost UMC to provide these services):

  1.  Rent – we’ve covered this one in GREAT detail.  El Paso Children’s Hospital was paying $869,000 in rent every month with an additional $150,000 monthly which was to cover utilities as well as “Maintenance, repair and replacement of all portions of the building”.  The rent was reduced to $500,000 a month more in line with the actual square footage that the El Paso Children’s Hospital actually occupied.  Will the extra $369,000 a month that El Paso Children’s Hospital paid through 2013 and was charged through October of 2015 be refunded or credited to EPCH?  If we calculate that out, it comes to an overage of $15.867 MILLION for the 43 months (February 2012 – October 2015). What about that $150,000 a month that is actually to cover depreciation? Of course, the building didn’t actually cost UMC anything, so we could argue that ALL of the money (with the exception of the $150,000 a month which actually is for depreciation) is just extra cash in UMC’s accounts.
  2. IT service Contract – UMC was charging EPCH $7.2 million a year for IT personnel and help desk support.  The audit done by an independent consultant “suggested that the annual bill should have been $2.7 million” (  That’s an ANNUAL overage of $4.5 million multiply that by 3 years and you get $13.5 million dollars that EPCH was overcharged.
  3. In a filing done by EPCH, they attempted to move their payroll services from UMC over to another company.  In the filing they stated that they would save themselves $50,000 annually. Instead of paying UMC $125,000 annually for the services they would pay ADP approximately $75,000. If we multiply that number out, we get an overage $150,000 over the last three years.
  4. We have no way of knowing how much El Paso Children’s Hospital actually owed for water, electricity or gas since the building is not separately metered.

Yesterday we discussed the Hospital within a Hospital (HwH) model and said that, in order to qualify, both hospitals must have separate management.  We have also discovered that “CMS’s regulations further ensure that the HwH is a separate entity from the host hospital by requiring that the HwH either perform “basic” hospital functions itself or through a contract with third parties.” The El Paso Children’s Hospital is free to contract with the host hospital (UMC) for basic services, provided that the cost of the services contracted for with the host hospital “is no more than 15 percent of the hospital’s total inpatient operating costs” (excluding the lease payment).  (  Given what we now know, it would appear that UMC was not only gouging El Paso Children’s on the service contracts but that the contracts may have violated the HwH rules.  In their haste to siphon money from the Children’s Hospital UMC may have already endangered EPCH’s status and, thus, its reimbursements.


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