State health agency tells judge not to waste time, resources on Children’s hospital plan

The state has weighed in on the El Paso Children’s Hospital bankruptcy case — and it’s not good for the troubled hospital.

In a document filed Wednesday, the Texas Health and Human Services Commission tells Judge M. Christopher Mott he shouldn’t waste time or resources on a reorganization plan that can’t be confirmed, or approved by its creditors.

The state’s objection, filed by the Office of the Attorney General, asserts the plan filed by EPCH is deeply flawed because it does not disclose the “identity of the purported ‘strategic partner’ ” or a timeline and process for Children’s to select that outside party that could come in and rescue it from bankruptcy.

The main concern for the state’s health commission is the ability to recover Medicaid funds it may have overpaid to EPCH. The state says the plan submitted by the bankrupt hospital September 16 does not make provision for that.

The state’s position should not come as a surprise to Children’s, as attorneys warned the hospital they were against the plan even before it was filed.

“Counsel for HHSC sought to avoid filing this Objection by advising the Debtor’s counsel in advance of the filing of the Debtor’s Plan the concerns of HHSC regarding its rights to recoupment being negatively impacted by the Debtor’s Plan,” a footnote reads.

As ABC-7 has reported, Children’s may owe the federal government up to $26 million dollars after it reported nearly $30 million dollars in rent expenses. The hospital didn’t pay the rent to its landlord, University Medical Center, the county hospital for more than a year.

When asked about the discrepancy, Children’s hospital CEO Mark Herbers told ABC-7, “our cost reports are filed consistent with Medicaid guidelines which matches our audit report.”

The 3-year-old El Paso Children’s Hospital filed for bankruptcy in May and has been tangled in a bitter fight with UMC, alleging the county hospital set them up for failure by negotiating overly burdensome, lopsided contracts. UMC maintains the contracts reflect market rates for services provided to Children’s, which include payroll, administrative, janitorial and food services, to name a few.

This week, the parties have exchanged offers to resolve the dispute outside of bankruptcy court.