Mediation between El Paso Children’s Hospital, UMC fails

The mediation between the El Paso Children’s Hospital and its landlord and creditor, University Medical Center, has failed.

After three days of court-ordered mediation, Children’s Hospital CEO Mark Herbers issued this statement Tuesday evening:

“Tonight, we are saddened to announce that formal mediation between El Paso Children’s Hospital and University Medical Center has failed. While we were hopeful that issues could be resolved via the mediation process, it is evident at this point there are serious and substantial differences between the two parties. We will now proceed with litigation to resolve these matters in court.”

Resolution to the multi-million dollar dispute lies in the hands of Bankruptcy Judge H. Christopher Mott, who will have to determine how to reorganize the debt the Children’s hospital accumulated in the three years since it opened, and how –and if– creditors will be paid.

University Medical Center, El Paso’s public hospital, said in a statement, “UMC and the El Paso County Commissioners Court made every reasonable effort to reach an agreement on the issues raised by EPCH’s bankruptcy filing.”

UMC is by far Children’s largest creditor and has a lien on the bankrupt hospital. As of last year, UMC said its tenant owed it more than $100 million. Children’s administrators maintain the charges are inflated.

Herbers stated he could not release details on the mediation, but said the hospital remains optimistic it can emerge from bankruptcy by the end of this year.

“As always, the care we provide to our children will not be compromised. Our physicians, hospital staff, and our Board remain committed to providing the best possible treatments and medical care for the children of this region,” he said.

The Children’s hospital cited the adage, “the third time’s the charm” in its bankruptcy filing asking the judge to compel UMC to mediation earlier this year.

“Mediation is the most appropriate place to fashion a resolution of the dispute concerning the amount owed by the Debtor to UMC that preserves the Debtor’s mission,” argued Children’s.

The first mediation happened February 17, 2015. The half-day session was presided by Jim Curtis of Kemp Smith LLP, and according to Children’s assertion, “it nearly resulted in an agreement, but when the Debtor requested that the mediation be continued to finish the deal, UMC declined.”

Weeks later, UMC returned to the negotiating table and the second session lasted a full day. The mediator was former Bankruptcy Judge Leif Clark. The hospitals reached an agreement that was signed and approved by both hospital boards, but was never executed due to ongoing disputes.

Then Children’s filed for bankruptcy May 19 and asked the judge to order mediation. This time, the agreement would be binding and subject to approval by the El Paso Commissioners Court and the bankruptcy judge.

The two parties agreed to two days of mediation in El Paso, June 25 and 26. After failing to reach an agreement, they agreed to extend the mediation a third day, in Austin, but it, too, ended without a deal.

“We prepared for these discussions with the absolute best of hopes that this time we would be able to find the common ground that our fellow El Paso citizens want. All members of our Board had the highest of hopes that our talks would bear a result that would respect our obligation to do what’s right for UMC and El Paso County taxpayers,” said UMC Board of Managers Chair Steve DeGroat, who took part in the mediation talks in El Paso.

He thanked members of the commissioners court who were there “seeing firsthand what was taking place.”

County Judge Veronica Escobar and Commissioner David Stout were authorized by the judge to observe mediation, since the final agreement would have to be approved by the court.

“I wish this could have ended in a better way,” DeGroat said.

ABC-7 caught up with Valenti, Herbers and Escobar at the El Paso International Airport Tuesday night. See what they had to say here.