State files objection to UMC-El Paso Children’s Hospital plan

The state has objected to part of the recently drafted joint plan between University Medical Center (UMC) and the El Paso Children’s Hospital. The plan is meant to bring Chidren’s out of bankruptcy and make it a subsidiary of UMC.

“They said ‘we can’t live with that language you have in the plan,” said County Judge Veronica Escobar of the Health and Human Services Commission (HHSC).

Filing through the state Attorney General’s office, HHSC objected to a portion of the plan that prevented it from collecting fines and fees associated with Children’s incorrectly reporting of costs. Last year Children’s incorrectly reported to the government that it paid $27 million of rent to UMC when it really didn’t. Children’s was reimbursed money from the government for reporting that. In its objection, HHSC said it still needs the option to fine Children’s for possibly receiving money it wasn’t entitled to.

“What they said is ‘you cant tie our hands that way in language that way. You can’t state in a plan that we’re not going to do something and that we’re not going to do essentially our duty,” said Escobar referring to HHSC’s filing.

Last month, County officials said Children’s could be fined up to $66 million for the reporting inaccuracy. The potential for such steep fines had the County contemplating removing an offer to take Children’s under its wing. Since then, County officials and State Senator Jose Rodriguez have worked with HHSC, urging the agency to fine Children’s a more palatable amount. “The conversations that we’ve been having and the work that’s been done behind the scenes has given us great comfort that they don’t want the reorganized Children’s hospital harmed,” said Escobar.

She added HHSC has been collaborative. “What we’ve been working on are what are the avenues we can pursue to not have the debt necessarily forgiven or wiped away but to have HHSC work with the reorganized debtor to make it not a financial burden than will inhibit their ability to grow or succeed,” she said.

HHSC also objected to a clause of the plan that protected Children’s board members from liability. “And so the attorney general said ‘sorry the liability still exists so we need you to essentially rewrite that language. So that if there’s a decision by HHSC to pursue any members of the board or any members of current or former Children’s board, they have the right to do it,” said Escobar.

Until the Bankruptcy Judge Christopher Mott confirms UMC and Children’s joint deal in December, other parties can object to the plan as well.

Another person who appears to be ready to object to the plan: former bankuptcy attorney Andy Krafsur, who was critical of the Children’s Hosptial board during the bankruptcy process. Escobar said County officials reluctantly agreed to a clause that prohibited Krafsur from being part of the Children’s hospital board in the future. As of Wednesday, the county tried to remove that clause but Children’s didn’t budge.

Lawyers for the two hospitals also released the financial outlook for the reorganized Children’s Hospital. According to the five-year proforma, Children’s will lose about $19.4 million in the current 2015 fiscal year, with total revenue estimated at $84.6 million and expenses at $99.3 million. The hospital is expected to turn a small profit the next fiscal year, 2016, with a surplus of $188,000.

And by 2020, it’s forecasted to have a surplus of $5.8 million.

“I think it’s great news for the region and my hope is that once the dust settles, once there is permanent stability there that this hospital will become a hospital for the entire region and the care will extend to people beyond the el paso city limits,” said Escobar. She said part of the reason Children’s is expected to recover financially is because of UMC’s ability to draw down money for its new subsidiary from medical government reimbursements.