El Paso Children’s Hospital tax documents released

Last week, ABC 7 made requests for several tax documents from El Paso Children’s Hospital, which hadn’t filed a return since it opened its doors more than two years ago.

Tuesday, Children’s Hospital officials, while maintaining they are not subject to public information laws, gave ABC 7 copies of the tax filing extension documents previously requested, and explained why there have been issues getting their tax returns prepared.

“The complication of the agreements between UMC and EPCH confounded even a regular opening of an organization,” said Larry Duncan, CEO for El Paso Children’s.

Duncan said there were serious issues around the hospital’s opening that made it necessary to ask for tax filing extensions. In a letter submitted along with the hospital’s second extension request, El Paso Children’s said it needed more time because the accountants hadn’t completed the full audit by the first three month extension.

“It should be noted that our final audit, because of all these complications, wasn’t received until September of 2013,” Duncan said. “So it was actually a month beyond the last extension.”

Duncan also said a service sharing arrangement with University Medical Center had many complicated details, and it took time to get it all right for the hospital’s accounting and audit firms. El Paso Children’s extension expired in August. A letter from the IRS gave the hospital an absolute deadline of April 16 to file its return for fiscal year 2011, or face a substitute filing by the IRS itself, and possible penalties and interest.

“So the 990 is actually going to be filed this week, and it’s going to be filed by paper because it’s late,” Duncan said. “It cannot be filed electronically. And within the next two weeks we hope to have confirmation that it’s approved, and then we can share it with the public.”

Duncan also said that a return that ABC 7 reported as having been available online at guidestar.org was probably not for the hospital itself, but rather for a physician corporation within El Paso Children’s. The IRS also said that it could not discuss a particular tax filing due to federal disclosure laws.

The hospital’s leadership not only gave ABC 7 its tax filing extension documents, but also opened up about the hospital’s financial problems.

“I think we were over-ambitious in how quick the volume would evolve,” said Rosemary Castillo, EPCH board member “And I think in terms of how quickly those revenues would come in, I think the reimbursement really set us back. I think all of the reimbursements are late, they’re always late so you’re always trying to catch up.”

Castillo said that revenue estimates given to justify building the hospital may have been overly optimistic, citing the sluggish economy and changes in Medicaid. But she said that won’t stop the hospital from growing.

University Medical Center has created a committee to explore the financial issues within the hospital. Castillo said El Paso Children’s leadership welcomes the review, and hopes it will place the hospital on a better path to revenue sustainability. It’s also working to improve how it works with clients and insurers.

“We probably did not have as experienced a group of people as we have now in trying to recover those costs from the insurance,” Castillo said. “Each and every insurance provider deals very, very differently with claims. And so we’ve learned that experience over the last year, and I can tell you that our performance year-to-date is significantly better than when we first started.”

It’s estimated that El Paso Children’s still owes about $59 million to UMC, though the final figure could be adjusted based on the committee’s findings. ABC 7 has learned it has already paid about $34 million for rent and support services.