El Paso Children’s Hospital Getting Its Own Foundation?

An interesting item on the UMC Board agenda last week:

UMC Board Agenda

You can read the full agenda here. Does this mean that they are FINALLY separating the UMC and El Paso Children’s Hospital Foundations?  If you recall, we addressed the fact that the EPCH Foundation and UMC Foundation were basically the same here.  Perhaps this is the first step in ensuring that the money that is donated to the El Paso Children’s Hospital STAYS with the El Paso Children’s Hospital.  Would you be more willing to donate to EPCH if you knew for sure that the money wasn’t going to UMC?

The Sound of Your Money Being Spent

El Paso Times is reporting that El Paso Children’s Hospital’s revenue jumped in December:  “After losing an average of $1.85 million in each of the first six months of the hospital’s controversial bankruptcy, Children’s reported to U.S. Bankruptcy Court that it had earned $650,000 in December. Revenue that month increased $3.9 million, or 62 percent, over November.”  That’s good news, right?  At least for the tax payers that is good news, the El Paso Children’s Hospital did well.  Granted, part of that was due to the fact that “Children’s received a $3.1 million payment under the disproportionate share program — which benefits hospitals with a high percentage of low-income patients.” But still, EPCH earned that money because it took care of low-income patients and, honestly, do we care where the money comes from as long as it doesn’t come from us?

HOWEVER, if you’re trying to paint a picture that the consulting company that was helping to run the hospital at that time was incompetent and that they shouldn’t be paid, then this is bad news.  If, for example, you are the El Paso County Commissioners and are using tax payer dollars on lawyers to fight these fees, this ruins the story you’ve been spreading:  “County Judge Veronica Escobar has said the firm did little to restructure the hospital’s operations and finances. She also has said that the hospital went through the expense of a bankruptcy only to end up with a settlement that was similar to one that was on the table in 2014.”

We’ve already spoken about how the two plans are WILDLY different (you can read our post here), assuming that they are talking about the plan that was being considered in early 2015, we’re not sure which plan they are talking about from 2014.  Now we’re hearing that the El Paso Children’s Hospital is doing better.  Yet, Veronica Escobar will continue to spend your money fighting against AlixPartners’ fees.  Is she being a good steward of our money or is she using our money to pursue her own personal vendetta?

 

Lack of Oversight Corrected?

“This ruling is also a victory for the taxpayers of El Paso County, who will now have greater oversight over the Children’s Hospital. The lack of accountability in the past, I believe, is one reason this whole situation was able to metastasize in the first place. However, with diligent work and stewardship, both UMC and the Children’s Hospital, which provide immeasurable services to this community, can continue to flourish and offer our residents the highest quality of healthcare.”  Commissioner David Stout in his January Newsletter.

Anyone else concerned about this new oversight?  This debacle happened under the current County Commissioner’s watch and, as we have proven time and again, UMC was able to enter into contracts with EPCH that were widely inflated and a way to bilk money from the Children’s Hospital.  Where was the oversight there?  Are the County Commissioners committed to doing something to correct the obvious problems with UMC as well?  Finally, how much oversight do they really have?  When Jim Valenti got a bonus in 2013, the County Commissioners could do NOTHING about it, they couldn’t even remove the board members.  This is a victory for someone, just not necessarily the tax payers.

UMC Spent $1.9 Million Of Your Money- So Far

The latest El Paso Times article states that $3.5 million has been spent in the El Paso Children’s Hospital bankruptcy case.  HOWEVER, that title is misleading as $3.5 million is what has been spent total by all sides.  Buried in the article is the fact that UMC spent $1.9 million of your money in the bankruptcy case through the end of November of last year.  That is A LOT of money. Add to that the $262,000 the County spent on their own lawyers (mostly to dispute the legal fees being billed by EPCH’s lawyers) and you have $2.162 MILLION  of your money that they spent on this action.  Compare that to the $1.3 million of non-tax payer money that EPCH spent on lawyers.  That means that UMC and the County spent at least 1.6 times as much money (your money) on the bankruptcy as the El Paso Children’s Hospital.  Of course, this number does not include the salary for UMC’s in-house council who was also involved in the case, so legal fees for UMC and the County are actually higher that $2.162 million.

Unfortunately, the bleeding won’t stop any time soon.  According to a KVIA article published on January 11th, Judge Escobar said: “There are hearings for example on the consultants fees and the attorney’s fees. Those final hearings have yet to take place.”  So, expect the legal fees to climb as the County continues to dispute the fees that EPCH lawyers charged for the case.  Again, we have to ask, what did the tax payers get for our $2.162 million?  Will the tax payers get an opportunity to dispute the legal fees that UMC and the County Commissioners built up?

So far we have found out that the new CEO of Children’s, the consultant chosen and approved by UMC and the County Commissioners, will cost $170,000 plus expenses (presumably $10,000 less than the consultant that EPCH had hired) and that the County and UMC have spent 1.6 times as much money on lawyers as EPCH.  Also, County Commissioners are willing to risk losing Medicaid/Medicare money just so that they can maintain control of the El Paso Children’s Hospital.  We have to ask ourselves, why is so much TAX PAYER money being thrown around?  What exactly did UMC and the County Commissioner gain in this fight?

 

Turns Out They Didn’t Fight It

Buried in an El Paso Times article about how much UMC will pay for their new CEO search, we discovered that the UMC Board approved the contract with Deloitte.  If you recall, Veronica Escobar and Steve DeGroat were upset about the $170,000 a month that Deloitte was going to charge the El Paso Children’s Hospital (you can read our post about it here) and vowed to ‘fight it’:  “If the interim CEO for El Paso Children’s Hospital is going to be paid $170,000 a month as stated in federal court documents, El Paso County and UMC officials will fight it, they said.”  The odd thing about it was that UMC chose a consultant that was already working with UMC and that they were now feigning surprise over how much it was going to cost.

Well, in the UMC board meeting this week, they decided that Deloitte was actually worth the cost.  From the El Paso Times article:  “We looked at the value at what was being paid. You can’t really compare the two. The value of what we are getting from Deloitte in terms of services is far greater than what was provided previously,” Mielke said.”  So, as we all knew they would, they approved the contract and did not end up fighting it, after all. Were they ever really upset with the costs or were they just upset that they were called out on how the fees did not actually go down by much?

 

The Rest of the Story

In its January 4th article, the El Paso Times reported that El Paso Children’s lost more than $13 million while in bankruptcy (June 2015 – November 2015).  We thought it would be interesting to see  who was the major creditor in that $13.2 million bucket.

First of all, we’re not sure where the $13.2 million number came from.  We went and got a copy of the most recent filing (document 542) and this is what we found:

EPCH Income

According to EPCH’s filing with the court they calculate their operating loss at the highlighted number above:  $12,820,469, so $12.8 million dollars.  Now let’s look at the payments made to UMC, on page 12 of the document:

Payments

If you add up all of the payments made to UMC on line 2, the total is $10,312,076.   Then there are the payments that are still outstanding:

Accrued EPCH

That is another $2,420,503 that is recorded for the month of November.  If we add all of that together, we get $12,732,579 (that’s almost 13 million dollars).  Subtracting $12,732,589 from $12,820,469 we get $87,880.  What do all of these numbers mean?  That means that only $87,880 of the $12.8 million loss is attributable to other creditors.  $12,732,679 ($12.7 million or 99.3% of the loss) is attributable to UMC.  Should UMC be paid for the services it provides?  Absolutely!  Is it fair to blame the consultants that were running EPCH during the bankruptcy for the loses?  We’ll leave that for you to decide.  It just seems that UMC and the County Commissioners have complete control over MANY of these loses that they are blaming on the current EPCH consultants.

We can’t wait for the MIRACULOUS turn around that is about to occur at El Paso Children’s Hospital – UMC and the County Commissioners are going to find all of these amazing ways to cut costs!

How Is The Bond Paid Down?

We pulled this graphic from the El Paso County Web Site (here).  The entire document was created to talk about the 2015 property tax rate.  We pulled out the debt portion that talks about the bonds that are currently being paid by UMC.  Interesting to note, bonds paid by the Hospital District are NOT paid by the Tax Assessor’s office.  Instead, your property taxes are given directly to UMC who then decides how to allocate the money based off of the budget that was approved by the County Commissioners Court.

2008A General Obligation Bonds is the $120 million for the El Paso Children’s Hospital.  If you look closely, you’ll notice that only 27% of total that they are paying on that bond goes toward actually paying it down, 73% of the money goes toward paying interest.  We know that the rent from the El Paso Children’s Hospital goes into UMC’s general fund.  If even a portion of that $6 million were used to pay down the bond, think how much faster YOUR property taxes could go down.

Did We Get What We Paid For?

In its latest article, the El Paso Times once again criticizes the consulting company that is running El Paso Children’s Hospital and tells us that the County Commissioners will continue to use your money to dispute payment of AlixPartners’ fees.  According to information we found about Chapter 11 procedures: “The bankruptcy court can appoint a trustee to take over operations from the debtor if it finds sufficient cause. Cause for appointing a trustee includes fraud, dishonesty, incompetence, and gross mismanagement of the debtor’s affairs.”  (You can read more about it here).  If, as the County Commissioners claim, AlixPartners and the hospital’s law firm, Jackson Walker were mismanaging the hospital, why didn’t they petition the court to have them removed for cause?  Instead, they continue to spend tax payer dollars on legal fights over fees.  This implies that their discontent is not with who was running the hospital or how they did it, just with the fact that the people who helped the El Paso Children’s Hospital declare bankruptcy are getting paid for it.

Finally, when are the County Commissioners and UMC going to tell us how much of our money they spent in this fight?  While they are screaming over how much money the El Paso Children’s Hospital spent, they are eerily quiet on what the price tag actually was to tax payers for the lawyers that were hired for UMC and the County Commissioners.  Do we, the tax payers, get an opportunity to argue against payment of those fees?  Did we get what we paid for?

We Were Wrong

An eagle-eyed reader pointed out an error that we made in our post Rent, On Demand.  Our graphic stated that UMC got approximately $7 million a year in property taxes.  Actually, that should have been $7 million a MONTH in property taxes.  So, that means that UMC receives $7 million a month in property taxes as well as $650,000 a month from El Paso Children’s Hospital for rent + base rent.

Property taxes are being used to pay down the bond, at a very slow rate. On a $120.1 million bond, UMC has managed to pay down a little less than $4 million in 6 years. According to UMC CFO Nunez in his second deposition (document page 184), the rent that is being paid by El Paso Children’s Hospital would eventually go toward depreciation but currently just goes into UMC’s general fund (bolded letters are Nunez, non-bolded is EPCH lawyer asking questions):

Nunez Depo

So, there is no separate fund for the depreciation, no way these funds are segregated out for this time in the future when the building needs repairs.  This money just goes into UMC’s general funds to be used for… whatever.  What is to keep UMC from spending this money now and then raising taxes or additional bonds later to pay for repairs on the building ?  They should be segregating the money into a separate account and using AT LEAST a portion of it to pay down the bond.

By Request

In June of this year the El Paso Chamber of Commerce issued a letter to then El Paso Children’s Board Chair, Rosemary Castillo.  In it they asked “the leadership of both UMC and El Paso Children’s Hospital to put their differences aside to come to a solution that: 1) will be financially sustainable, 2) in the best interest of the children of our region, and 3) and will not impose an additional burden to the taxpayers of El Paso.” You can read the entire letter here. Since that time, UMC, El Paso Children’s and the County Commissioners Court have come to an agreement on a plan.  But does that plan fulfill the requests set forth by the El Paso Chamber?

  1. Financially Sustainable – if you have been following our posts, you will see how UMC was taking money from the Children’s Hospital at every opportunity:  Rent, Overcharging on contracts, even El Paso First was under reimbursing EPCH. Finally, there is the matter of the County Commissioners choosing control over the Children’s Hospital INSTEAD of Money.  If things don’t change, we’re going to rate this one as a big fat NO.
  2. Best Interest of the Children – this is a fuzzy one.  There will still be a children’s hospital, so we’re told.  However, it depends on how that hospital continues as to whether or not the physicians stick around.  We’re going to rate this one a MAYBE.
  3. Additional Tax Burden – HA!  We’ve spoken at great length about how UMC and the County Commissioners have decided to maintain control instead of allowing EPCH to have a higher reimbursement rate.  In fact, you can read Veronica’s letter about this here.  They think it will be ‘a wash’ but they don’t know.  So far, it looks like the hospital is being set up to fail… again.  Just like the last 3 years, expect anything that is going wrong at UMC to be blamed on El Paso Children’s Hospital.  So, just like #1, if things don’t change, we’re going to rate this one a big fat NO.

So far, it isn’t looking that great for the Chamber of Commerce’s requests.  There is still time, UMC and the County Commissioners can still fix this.  However, the clock is ticking and January 8th is rapidly approaching.  After that date, many of the items set in motion can no longer be corrected.  Hold onto your hats, folks, it’s going to be a bumpy ride!