El Paso Children’s Hospital extension granted, UMC says Children’s lied to federal government

Attorneys representing the El Paso Children’s Hospital on Thursday again tried to convince Judge Christopher Mott of why the struggling hospital is not obligated to pay rent to University Medical Center.

After hearing hours of testimony, the Judge said he’d probably have a ruling on the rent next Tuesday. UMC has said Children’s owes it about $100 million in rent though the Judge is only slated to rule on about $3 million of rent from the time period starting when Children’s filed for bankruptcy earlier this summer.

Children’s lawyers contend the rent was not really rent, but instead a disguise for obtaining federal reimbursements moneys that never materialized. “The stated rent under the lease reflects the complex world of healthcare funding but was never meant to be paid if government reimbursements were not available to offset the stated rent. The contingent nature of the rent charged is reflected in various provisions of the lease and the parties’ master agreement all as set forth in EPCH’s pleadings and in the sworn testimony of the witnesses,” said Children’s CEO Mark Herbers in a statement.

But County Judge Veronica Escobar said the lease and the rent were issues vetted publicly, not a guise for reimbursements. “Without the lease, UMC could have kicked them out for not payment. The lease is a very necessary mechanism and they acknowledge that. Because of their very bad management decisions, they don’t have money to pay the rent that was always a part of the plan, that was always a part of the deal,” she said.

Children’s has also said it shouldn’t have to pay UMC rent because UMC was an insider in Children’s decisions, UMC had supposedly told Children’s it didn’t need to pay rent in 2015 and because UMC allegedly negotiated in bad faith.

All of those claims were carefully refuted by UMC’s attorneys who said Children’s had no documented proof of that.

“They just don’t want to pay it because they’ve made such bad decisions in the past, such poor financial decisions, they decided to spend more than they were bringing in. They decided not to engage in shared services contracts that could have saved them money, now they’re trying to find a way out. And the way out is ‘UMC is the bad guy and judge please don’t make us pay the rent that we agreed to,” said Escobar.

Judge Mott issued on Thursday granted El Paso Children’s Hospital motion to extend time to assume or reject the leases of nonresidential real property until December 15, 2015.

“As we have stated before, EPCH maintains that the citizens of El Paso should not have to pay for the building twice. The building occupied by EPCH is fully funded by revenue bonds to provide for the pediatric population of El Paso,” said Herbers.

ABC-7 asked Children’s Hospital Board Chair Rosemary Castillo, who has repeatedly refused interviews, what the incentive is to conclude the proceedings promptly when bankruptcy consultants are being paid upwards of $180,000 a month.
“We’re committed to the taxpayers. They gave us a mission and we will fulfill that mission.that is the motivation,” she responded, not addressing the question directly.

Herbers admitted to reporting to the federal government that Children’s had paid the full rent to UMC, when in fact, Children’s hadn’t paid $27 million at the time. The regulated reporting is part of the information the federal government uses to determine some medicaid reimbursements. Herbers characterized the reporting discrepancy as inconsequential but Escobar said Children’s lied to the federal government.