Judge to allow county judge, county commissioner to be in room during UMC, Children’s Hospital mediation

Wednesday brought two new major developments in El Paso Children’s Hospital bankruptcy case.

A federal bankruptcy judge ruled Wednesday afternoon that he will allow representatives of El Paso County to take part in the mediation between El Paso Children’s Hospital and University Medical Center.

County Judge Veronica Escobar and County Commissioner David Stout will be able to observe the mediation – and if permitted by the judge – seek input but they will be bound to confidentiality.

The mediation will take place Thursday, June 25, and if necessary, Friday, June 26.

The County found out it could possibly be an observer in the mediation when they learned Texas Tech wanted to sit in on the process as well.

UMC had agreed to have the County participate in the mediation but Children’s did not want UMC allowed to participate.

Children’s argued the County had requested that too late and they’re concerned that Escobar will to the media.

But Escobar says the County just recently learned it might be able to take part in mediation and requested it as soon as the open meetings act allowed.

Escobar says being part of the mediation is important because Commissioners Court is the final authority on any deal between UMC and Children’s.

Any deal reached in mediation between UMC and Children’s would have to be approved by Commissioners Court. But County Commissioners would not have the authority to amend the mediated terms.

Escobar said County Attorneys had advised Commissioners not to accept some of the terms offered by Children’s in the prior mediation.

“Instead of vetoing a deal and then spending more money on another mediation, on more lawyers’ time, we thought it would be more expeditious and more productive if we were in the room and we could respond immediately. ‘Yes, constitutionally we can do that or no that’s going to impact the tax bill,” said Escobar.

Also on Wednesday, ABC-7 was the only media outlet present when a bankruptcy trustee questioned Children’s on its creditors.

No Children’s Board members were present to explain the hospital’s finances to the bankruptcy trustee – only CEO Mark Herbers and Children’s lawyers. Herbers said he expects the hospital to bring in more than $82 million dollars this fiscal year. That’s about $20 million more than last year.

The trustee questioned Herbers, saying this April appeared to be 16% down from April last year and the year so far is down 3% over last year. But Herbers said they’re growing 3 percent a year in patient volumes and will be getting an additional $8 million from the state.

Herbers said they plan to hire someone to go after money from philanthropists, something children’s hasn’t done. Currently, the only philanthropy money the Children’s Hospital gets is $1.5 million a year from the UMC foundation.

It’s not just UMC that is owed money by children’s. At the creditor’s meeting, Herbers went through a slew of creditors. For example, Children’s owes one on-call doctor $66,000 and $77,000 to the company who handles its billing plus nearly $10 million to Texas Tech for professional services.

Children’s, which filed for bankruptcy in May, had a Chapter 11 bankruptcy hearing June 11 in the U.S. Bankruptcy Court, Western District of Texas in El Paso with Judge H. Christopher Mott presiding.

Mott appointed Judge Tony Davis to serve as the mediator between Children’s and University Medical Center (UMC).

A healthcare ombudsman was also approved during the June 11 hearing and is expected to be Suzanne Koenig, a healthcare ombudsman who was listening in on the hearing by phone.

The healthcare ombudsman will be responsible for reporting to the bankruptcy court no less than every 60 days on the patient and quality care of the hospital.

UMC says Children’s owes it around $100 million, a figure Children’s disputes.

Mott and Davis have a little bit of a history.

Davis is a bankruptcy judge in Austin and according to multiple online sources, when he was in private practice he was a lead attorney in the $6.5 billion ASARCO bankruptcy case, which included the El Paso site.

Mott, the bankruptcy judge overseeing the Children’s bankruptcy case, was hired to represent the City of El Paso in the ASARCO bankruptcy case.

How Presiding Judge Came To Decision Allowing County Representatives In Mediation Meeting

The outside attorney hired by the County, Wiley James, III, explained to the court the relationship between El Paso County Commissioners Court and UMC.

Commissioners approve the County hospital’s budget and tax rate, and approve any material changes to the lease agreement between UMC and Children’s. He said commissioners would have to approve any cuts to the hospital lease payments.

“We feel like that if the County of El Paso is there and participating with UMC, we’re able to communicate our economic concerns to UMC and vice versa,” James said.

He also acknowledged the concerns raised by Children’s about County officials being a part of the mediation.

“There has been an issue raised about the ability of the County to ‘keep a secret,’ so to speak,” he said. He argued the court order already has a confidentiality provision participants will abide by.

Children’s attorney, Patricia Tomasco, said having members of Commissioners Court in the mediation “makes it very difficult in a very difficult situation.”

In court documents, Tomasco argued “that the County’s participation may impede the mediation because of (Children’s) real concerns about protection of the confidentiality of the mediation process, particularly in light of Ms. Escobar’s frequent statements to the El Paso media.”

An attorney for UMC said the hospital does not oppose having the County in mediation and deferred to the judge and the mediator to establish the protocol.

Presiding Bankruptcy Judge H. Christopher Mott asked about the impact of having County representatives participate in the mediation.

“If County representatives want to attend the mediation and don’t have ability to bind the County, what benefit do we have for their attendance?” Mott asked.

“If a deal breaker comes up, it can be addressed by the representatives of the County of El Paso,” said James.

Then, Judge Mott turned to the concerns of the Children’s hospital asking, “Will the representatives of the County, will they comply with the confidentiality (provisions)?

“Absolutely,” James responded. “We don’t intend to violate any order this rout issues or the protocol by Judge Davis,” the mediator. James said Escobar and Stout were listening in on the hearing by phone .

“The mediation process is confidential and anything that goes on in mediation cannot be discussed with parties outside the mediation,” warned Judge Mott. “You can’t go talk to the press about it, can’t go talk to your neighbor about it and I want to make sure that whatever County representatives I authorize (to be there) will abide by those confidentiality provisions.”

“I need an unequivocal ‘Yes’ from whoever from the County may be there,” Mott stressed.

James responded on behalf of Escobar and Stout that, “Both have indicated ‘Yes, they will give you unequivocal, affirmative answer that they will abide by the provisions of the case.'”

The judge then announced his decision.

“I recognize that the County is a player in the overall process here, that … any agreement reached in mediation would have to be approved by commissioners and this court. I understand the importance of the County and commissioners to be on board because all of this could be an exercise in futility and would not be good for the hospital or the community,” Judge Mott said.

Although he said he was troubled by the very late request, he authorized Escobar, Stout, Asst. County Attorney Joe Rosales and James to be there as observers, giving the mediator authority to decide on their level of participation and even attendance at some sessions.

Mott reminded the parties again that whatever happens during the mediation process is confidential.

“That’s a really serious matter,” he said.