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?
- 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.
- 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.
- 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!
Switching from Medicare/Medicaid reimbursement to other health plan reimbursements. In papers filed with the court, El Paso Children’s Hospital alleged that El Paso First, a UMC “wholly owned subsidiary” was underpaying EPCH for services to the tune of $15 million (you can read their filing here). Just as a reminder, here is the board for El Paso First:
James Stephen DeGroat – Also current Chair of the UMC Board
Ron Acton – UMC appointee to the new EPCH Board
Michael Nunez – UMC CFO
Jim Valenti – Current UMC CEO
So, if El Paso First was underpaying the El Paso Children’s Hospital, UMC knew about it and was complicit in doing it. As a recap of where we stand:
- UMC has some control over El Paso first and its reimbursements and was underpaying El Paso Children’s so much that EPCH was losing money in providing services to these patients.
- UMC and the County Commissioners have setup a situation at EPCH which could result in El Paso Children’s losing $5- $20 million in Medicare/Medicaid reimbursement. Not only that, if CMS determines that the Hospital within a Hospital rules have been broken, they can GO BACK AND ADJUST ALL OF THE REIMBURSEMENTS THAT EPCH HAS RECEIVED – This would be even more than the $5 – $20 million that El Paso Children’s could miss out on.
- El Paso Children’s Hospital is paying almost $6 million a year in rent for a building that was paid for by tax payers but that money is not going to pay down the tax payer funded bond.
- As we have stated in some of our other posts, UMC was over charging El Paso Children’s Hospital for services in addition to charging El Paso Children’s Hospital in various ways to pay down the bond, was this money actually used to pay down the bond or was it just added to UMC’s bank accounts?
Exactly how are all of these situations going to be resolved? Because, make no mistake, they MUST be resolved if the El Paso Children’s Hospital is going to remain an independent hospital and off of the tax payer’s bill.
In 2007 the tax payers of El Paso passed a $120 Million bond to establish an independent and separately licensed Children’s Hospital. At the time, it was decided to build the El Paso Children’s Hospital on the UMC campus and to employ a Hospital-Within a-Hospital (HwH) concept. However, if the rules of the HwH model are not followed, EPCH could lose some of its funding from Medicare and Medicaid which would no longer make it viable and it could lose its separate license. If that happens, the intent of the bond would not be satisfied and UMC could have to pay it back.
Hospital-Within A-Hospital (HwH) is an interesting concept. To ensure that two hospitals occupying the same location are not trying to ‘game’ the system by transferring a patient back and forth, CMS (the Centers for Medicare and Medicaid Services) has put some regulations into place:
- “CMS regulations require a high level of organizational separation between host hospitals and HwHs, including separate governing bodies, separate chief medical and chief executive officers, and separate medical staffs” (https://www.law.uh.edu/healthlaw/perspectives/(SC)LTCHWHrev.pdf)
- CMS also requires financial independence “the cost of services that an HwH obtains from its host hospital must not exceed 15% of the HwH’s total inpatient operating costs.” (https://www.law.uh.edu/healthlaw/perspectives/(SC)LTCHWHrev.pdf)
UMC and EPCH need to have COMPLETELY separate boards and they need to quickly straighten out the service contracts. Having an interlocking board (i.e. one or more members who are on both boards) is playing with fire. Service contracts that exceed 15% of the inpatient operating costs are tempting fate. Charging rent and not using that money to pay down the bond is just criminal. Doesn’t it behoove UMC to use the EPCH rent money to pay down the bond as quickly as possible to protect the El Paso Tax Payers?
Bankruptcy is supposed to be a clean slate for the organization, an opportunity to correct the mistakes that were made before. To us it would appear that old mistakes are be propagated into the future and new ones are being added.
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):
- 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.
- 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” (http://elpasospeak.com/2015/10/27/what-happened-to-women-and-children-first/). 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.
- 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.
- 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). (http://murer.com/pdfs/articles/thecolocationequation.pdf). 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.
Although there is a joint plan being filed by UMC and El Paso Children’s Hospital, it would appear that the wrangling over services continues. Children’s has entered a motion to outsource their payroll and HR services to ADP(you can read it here: http://elpasochildrens.org/…/uploa…/2015/08/Document-296.pdf). In the filing they estimate 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. UMC is fighting this (read the motion here: http://elpasochildrens.org/…/uploa…/2015/08/Document-346.pdf). This leads us to ask several questions:
1. Why was UMC charging Children’s so much for these services to begin with?
2. If UMC and the County Commissioners are committed to reducing overhead costs for the Children’s Hospital, why would they be fighting this motion?
Note: This was published on our Facebook account on 10/15/15.
Note: This article was originally published on our Facebook page on 10/4/15.
Veronica Escobar claims that the rent being charged to Children’s is for depreciation so that the tax payers won’t have to issue bonds later on to fix the building, repair it or upgrade it. The $152 million bond that was approved by the Commissioner’s Court without voter approval lists the following items that were specifically for UMC:
5th, 6th and 7th Floor Renovation – $23.3 M
OR Prep and Recovery – $1.4 M
Interventional Laboratory (I-Lab) – $4.4 M
Intermediate Care Unit (IMCU) – $8.2 M
Veronica Escobar in March of 2015 explaining the relationship between rent and depreciation and KVIA in September of 2015 talking about the rent that UMC pays itself: https://www.youtube.com/watch?v=aRg0ta7yGCA
Where is the depreciation/rent money? #watchyourmoneydisapear
Note: This article was originally published on our Facebook page on 10/8/15
In the latest article from KVIA: “Escobar said the priority right now is to execute a smooth transition and rebuild trust. She said at some point, UMC would have to have “delicate conversations” with Children’s leadership and staff about possibly renegotiating costs and further cutting costs.” (http://www.kvia.com/…/umc-childrens-officials-say-…/35714540) Of course those conversations are going to be “delicate”. If you’ve read Nunez’s deposition, you can see how crazy some of those service contracts are. Starting on page 140 of his deposition(http://bloximages.newyork1.vip.townnews.com/…/55e47eaf16721…), he talks about how the Children’s Hospital is not separately metered, so all bills for water, utilities and gas go directly to UMC and then UMC decides how much of that bill is passed along. So, how are they going to ‘delicately’ renegotiate some of these contracts when they have no idea how much of these services the Children’s Hospital was using and no way of determining that going forward?
We know that UMC and El Paso Children’s Hospital have come to an agreement on the rent. Now, instead of paying the exorbitant amount of $860,000 a month, EPCH must pay the slightly less exorbitant amount of $500,000 per month with none of this money going back to tax payers. Presumably, this rent is to cover depreciation: “You have to pay for the maintenance and upkeep and depreciation. So the rent is really to provide for that. Otherwise you wake up 10, 15, 20 years down the road and you have a dilapidated building and dilapidated equipment and no money to replace it,” said DeGroat. (http://www.kvia.com/news/audits-show-el-paso-childrens-hospital-board-overspent-despite-declining-state-funding/33389690). If that is the case, why did the original lease include a section called “Additional Rent” which was to cover utilities as well as “Maintenance, repair and replacement of all portions of the building” (see screenshot at the top of this article)? Will this concept of “Additional Rent” be removed from the new lease agreement between UMC and EPCH? This looks as if EPCH was (will be?) paying for the same thing twice.
According to the plan filed with the court, UMC has agreed to drop the rent they are charging El Paso Children’s Hospital to $500,000 a month (http://elpasochildrens.org/…/uploa…/2015/08/Document-436.pdf pg 33). Veronica Escobar has stated numerous times that rent (for both Children’s and UMC) is to be used for depreciation. However, we questioned this in an earlier post (https://plus.google.com/11748609634482589…/posts/TQhwDvxo37E). If the rent that UMC was paying itself was insufficient (or non-existent) enough for it to need a bond for the recent upgrades, what is going to happen to the rent that El Paso Children’s will now be paying on a regular basis? Will El Paso Children’s have access to this money in the event that they want/need updates to the building, or will they have to pay for those separately? Finally, where will this money be held? Is it going to be in a separate account specifically for the El Paso Children’s building, or is it just going to disappear into the UMC financials and be used to pay bonuses to the UMC executives?
From the court case we know that UMC was providing services to the El Paso Children’s Hospital in the following areas (from the Master Services Agreement between EPCH and UMC):
1. Finance & Accounting Services
2. IT & Communications
3. Human Resources
4. Ancillary Support (Laundry, Dietary, etc)
5. Nursing Support
6. Medical Staff Support
So far we have heard that Children’s could save themselves $50,000 if they outsource HR and Payroll to ADP (http://elpasochildrens.org/…/uploa…/2015/08/Document-346.pdf). We have also heard about the IT costs that Children’s was paying to UMC (http://elpasospeak.com/…/what-happened-to-women-and-childr…/) and how the building is not separately metered (http://bloximages.newyork1.vip.townnews.com/…/55e47eaf16721… page 140). We even found the screen shot below when going through court documents where the UMC lawyer was encouraging El Paso Children’s to explore other avenues for getting services. Now that El Paso Children’s and UMC have reached a deal and have a joint plan, our hope is that both sides would adhere to the agreement that they signed where they committed that ‘neither party would profit from the other’. If UMC continues to charge exorbitant amounts for services in an effort to shuffle money from El Paso Children’s Hospital over to UMC, it benefits no one, especially not the tax payers.