ABC-7 I Team: Shroud of mystery surrounds El Paso Children’s Hospital finances

There is a shroud of mystery surrounding the financial picture of El Paso Children’s Hospital.

ABC-7 learned this week that University Medical Center will form a committee to ensure the financial viability of El Paso Children’s Hospital, which owes it money.

The not-for-profit hospital was built with $120 million in bonds that El Pasoans are still paying for, yet Children’s isn’t disclosing its financial information.

ABC-7 has learned that Children’s hasn’t filed a required form 990 financial disclosure to the IRS since fiscal 2010. Without it, there’s no clear picture of the hospital’s finances. The statement for fiscal 2011 was due in February of last year.

Children’s CEO Larry Duncan said federal extensions have pushed the form’s due date back to April 16. But ABC-7 isn’t sure how he arrived at that date. The CEO said Children’s received two extensions, and the form said those are good for just 90 days each.

“We actually didn’t receive that first year’s audit until a few months ago, and then we had to go through and scrub it with Lauterbach (Financial Group),” Duncan said.

Auditing firm Lauterbach Financial Group wasn’t available for comment Thursday. Duncan said the fiscal 2011 form delays are partly because the 990 is very complicated.

“(It’s) actually a planned committee,” Duncan said. “It was part of our original agreements with University Medical Center. We agreed that actually this coming summer, that a group of representatives from their board and our board and El Paso First would convene to revisit all the contract that we have.”

UMC shares a building with Children’s, but is a separate entity. Changing reimbursement formulas have hurt many children’s hospitals’ bottom lines, said UMC spokeswoman Margaret Althoff-Olivas.

“There was a special reimbursement for children’s hospitals called cost-based reimbursement,” Althoff-Olivas said, “which reimbursed children’s hospitals at a higher rate than a hospital like ours, an acute-care hospital.”

Children’s pays UMC about $860,000 a month to rent out the top five floors of the UMC tower. Duncan said payments for other shared services like IT, human resources and nursing-staff support can be difficult to calculate.

When asked if Children’s has been able to meet its obligations to UMC, Althoff-Olivas responded, “I’m going to let Children’s talk about their own finances. I don’t want to be the person to speak for them when it comes to their bottom line.”

“I can tell you that in the last three years we’ve paid over $33 million back to University Medical Center to meet obligations,” Duncan said, before being asked how much Children’s owed UMC. “That’s the whole reason we’re sitting down for this meeting. What’s owed is debatable and has to be resolved through this group.”

Duncan wouldn’t give an ballpark estimate of the hospital’s annual losses. He confirmed that the hospital was in the red but not facing bankruptcy. Children’s does about $300 million in gross revenue every year.

The CEO said hospitals typically take between three and seven years to cross into the black. Duncan said generally about 75 percent occupancy will allow a hospital to break even. Today Children’s is at roughly 60 percent.