Nonsense in the Times

I actually went out and bought a copy of yesterday’s El Paso Times because I could not believe what I was hearing that they had reported.

Their article told us that our county hospital has given the children’s hospital an ultimatum–accept our new offer by Friday or we will stop providing administrative services.

The county hospital provides administrative support to the children’s hospital through 33 staff members.  Those staff members will evidently be reassigned to duties at the county hospital if the children’s hospital does not accept the current offer.

The paper goes on to tell us “The elimination of the services will not have a direct impact on patient care at Children’s Hospital, he said”.

That is simply not true.  According to the article, payroll and information technology are two of the services being performed by county hospital employees.  Not keeping the patient records systems running will affect patient care.  Not paying the children’s hospital employees will affect patient care as employees will have to quit and find a paycheck elsewhere.

The 33 employees do not need to worry about their jobs according to the paper.  Evidently the county hospital is committing to using them to perform other functions.

Either the 33 employees are needed at the children’s hospital or they are not.  If they are not then why are they being charged to the children’s hospital?

They certainly are not needed at the county hospital and we should not pay for them there.

Further, the article tells us “UMC officials have said the medical center loses about $33,000 a day on administrative contractual services that Children’s Hospital hasn’t paid.  Wow, 33 employees, $33,000 a day.

No one has ever explained why after the county voters agreed to spend $120 million to build the children’s hospital building the children’s hospital has to pay rent to the county hospital.

Talk about taking candy from a baby.

We deserve better


15 Responses to Nonsense in the Times

  1. I, too, am still mystified as to how we, the taxpayers ponied up $120mil to build EPCH, and then EPCH still has to pay rent to UMC. If it wasn’t built big enough, why not? If that much was put up for only construction, why wasn’t some thought given to covering those development costs on the part of UMC, and for initial operating costs? I also do not understand how this Stark should apply to non-profits at all.


    • Reality Checker says:

      John — Stark does provide some safe harbor exceptions for non-profits and tax-exempt healthcare organizations, including where lease agreements are involved. I would like to see a legitimate, unbiased legal opinion on whether those apply to the UMC and CH relationship.


    • Haiduc says:

      In short: The days when Hospitals (Including County) can give Doctors & Hospitals (including non profits) special deals are long over !

      PS: The rent is owed to us County Taxpayers


  2. Sleuth says:

    Brutus, maybe this will answer some questions. I known this is long, but bear with me.

    If you review the El Paso Children’s Hospital (EPCH) website, it shows that they are not truly in a truly separate facility. Instead, they occupy several floors of the UMC tower. Also, the County could not issue bonds to build a private facility, but could allow the County Hospital to expand and then lease that space to a separately licensed facility.

    To understand why rent has to be paid for this space, you have to understand a little about federal healthcare regulations. I believe that since EPCH is a separately licensed facility any agreements that UMC has with it have to comply with the Federal Stark law that prevents hospitals from entering into sweetheart deals with those who have the potential to refer them patients. Thus, the federal law requires that there be a written lease for both premises and equipment and that the lease be commercially reasonable. That’s why the rent can’t be some nominal amount. The rental terms of that lease also cannot be changed during the term, but you can cancel the agreement and enter into a new one. In other words, the lease cannot be for some non-market value rent which the Federal government would consider a kickback or incentive to refer UMC patients from EPCH. They have to charge what would be charged in an arms length transaction. That’s what’s going on now.

    According to the EPCH audited financial statement on their website, UMC and EPCH have the following agreements:

    Under the Development Service Agreement, UMC provided certain funding prior to the commencement of operations of the Hospital and funding during the initial six months of operation of the Hospital.

    Effective February 14, 2012, the Hospital entered into an agreement with UMC in the amount of $6,332,603 to repay a portion of funds expended by UMC for the development of the Hospital. The note had an original maturity date of February16, 2018 and bore interest at 4.8% per annum beginning February 14, 2012. The Hospital was not required to make payments within the first twelve months. Monthly installment payments of principal and interest began March 14, 2013 in the amount of $124,633. The principal balance outstanding as of September 30, 2012 was approximately $6,333,000, which excludes interest of approximately $177,000, which is included in the Due to UMC liability in the accompanying consolidated balance sheet. The loan was paid in full during 2013.

    Effective February10, 2012, the Hospital entered into an agreement with UMC to repay an additional portion of funds expended by UMC for the development of the Hospital. The terms of this agreement also allowed the Hospital to borrow funds for use as working capital in an amount not to exceed $25,000,000. The note matured on July 1, 2013 and bore interest at 4.8% per annum. The Hospital was required to make two partial payments of $6,000,000 on August 1,2012 and September 1, 2012,with payments first applied to accrued interest and then to the principal balance. The remaining balance of principal and interest were payable in four monthly installments, beginning
    March 2013 through June 2013. During 2012, the Hospital made partial payments totaling $4,950,000. As of September 30, 2012, the Hospital was in default of the agreement for failure to pay the full amounts due at August 1, 2012 and September 1, 2012. The principal amount outstanding as of September 30, 2012 was approximately $15,989,000, which excludes interest of approximately $399,000 included in the Due to UMC liability in the accompanying consolidated balance sheet. The loan was paid in full during 2013.

    In 2012, UMC agreed to various cancelable and non‐cancelable agreements with the Hospital including but not limited to the following: a) Master Agreement; b) Facility Lease Agreement; c) Development Services Agreement; d) Administrative Services Agreement; e) Information Technology Lease Agreement; f) Interim Equipment Agreement; g) Contract Services Agreement for Diagnostic Imaging and Laboratory; and h) Repayment Phase Agreements (Phase I and Phase II) (see Note 6). The Due to UMC liability on the accompanying balance sheets includes leases payable, administrative service fees, and accrued interest on notes payable.

    Facility lease agreement ‐ UMC has leased building space to the Hospital to provide general and pediatric care. The lease matures in February 2042 and includes a monthly payment of approximately $861,000 for the first 36 months with a 1% increase per year thereafter. The lease also has two renewal options of 10 years. Total lease payments, inclusive of the 1% escalations, are recognized on a straight‐line basis over the term of the lease, resulting in monthly rent expense of approximately $969,000. As of September 30, 2013, the Hospital was in arrears on scheduled payments, under terms of the agreement, in the amount of approximately $17,579,000. Late lease payments are subject to a monthly late payment charge of 5% of the overdue amount and interest of 4.8% per annum. Under the terms of the agreement, during the first lease year, late payment charges were waived provided that monthly rental payments are received within six months of the date on which it is due and all monthly rental payments are current as of February 1, 2013. Further, interest accrues only on payments which remain unpaid after six months. Interest and penalties totaling approximately $940,000 have been accrued as of September 30, 2013 and are included in the Due to UMC liability in the accompanying consolidated balance sheet.

    Administrative services agreement ‐ UMC and the Hospital entered into an Administrative Services Agreement under which UMC will provide specified administrative and support services to the Hospital. These services shall include but are not limited to the following: 1) fiscal and revenue cycle; 2) information technology; 3) human resources; 4) ancillary support; 5) nursing support; 6) medical staff support; and 7) diagnostic imaging and laboratory services. These services are due once billed to the Hospital. During the years ended September 30, 2013 and 2012, the Hospital was billed approximately $17,072,000 and $10,722,000 under the agreement. The Hospital was in arrears on scheduled payments under terms of the agreement, in the amount of approximately $27,546,000, as of September 30, 2013. Payments are due (in full) within 30 days of receipt of the monthly invoice. Payments not made when due are subject to a monthly late payment charge of 1.5% of the overdue amount. Late liabilities penalties totaling approximately $978,000 have been accrued as of September 30, 2013 and are included in the Due to UMC liability in the accompanying consolidated balance sheet.

    In April 2013, the Hospital and UMC entered into a Forbearance Agreement on obligations past due to UMC by the Hospital, which amounted to $17,987,146 as of December 31, 2012. The past due amounts constituted an event of default under the terms of the Master Agreement. Under the terms of the Forbearance Agreement, UMC agreed to forbear demanding payments due in exchange for revised payment terms on amounts outstanding as of December 31, 2012 under the covered agreements, including the Facility Lease Agreement, Phase II Working Capital Loan, Administrative Services Agreement, Diagnostic Imaging Services Agreement and the Laboratory Services Agreement. The agreement was made effective February 1, 2012 and continued until March 1, 2015 or until an occurrence of default under the agreement. The revised payment terms required the Hospital to pay $17,000,000 before September 30, 2013, and for the period from October 1, 2013 through March 1, 2015, to make all current payments due under the covered agreements. The Hospital made the required $17,000,000 in payments by September 30, 2013 but was unable to make all current payments due under the covered agreements. This constitutes an event of default and all amounts owed to UMC are immediately due and payable. Accordingly, all obligations to UMC are classified as current in the accompanying consolidated balance sheets.

    This last paragraph is important as the Forbearance agreement only gives to March 1, 2015 to come up to date on all payments owed. That’s why there is the Friday deadline, the last business day in February 2015, to reach a deal. The bankruptcy threat is part of the same – an attempt to extend the Forbearance agreement.

    I know this was long, but that’s the story.


    • Haiduc says:

      Bravo Sleuth
      UMC has done all it could to support Children’s but the Children’s Board spent more more funds than it collected..BAD Business…and now they blame Mr Valenti for their self independent management?


    • Reality Checker says:

      Before you excuse this situation as being totally a function of the Stark regulations, you need to do some research (and probably an unbiased legal opinion) to make certain that is the case…not just say “I believe” and then copy and paste.

      There are Stark exceptions and safe harbor exemptions when both organizations are non-profits. These exceptions and safe harbors might (or might not) apply to the financial dealings between UMC and CH, but it would be nice to know.

      Also, just because UMC billed certain amounts does not mean they were fair and reasonable amounts. CH has alleged that it was overcharged, which wouldn’t be the first time a hospital overcharged a customer.

      If all this were as easily explained as being Stark related,then why, as one of the other commenters points out, do the County Judge and commissioners refuse to answer questions about the rationale for the rent agreements. One would think they would jump at the opportunity to clear the air and restore trust.

      As it stands, none of us know the facts or the truth because of the lack of transparency. We have plenty of reasons not to trust the parties and individuals involved.


    • Jerry Kurtyka says:

      Sleuth, thank you for some clarity that has not been forthcoming from our elected reps.

      So, WTF did our $120MM bond issue for a CH buy us, in addition to a pipeline of perpetual debt? Will there be any accountability for the promoters of CH?

      If it’s anything like the stadium and QoL projects, the horde will probably blame the critics who pointed out the impossibility of these boondoggles at the start.


  3. Reality Checker says:

    News Flash!! The egos of Valenti and Hansen might just end up costing UMC and the taxpayers a lot of money. Children’s Hospital might be outsmarting them. Bankruptcy is being considered. This is going to be both painful and funny to watch. If the majority of CH debt is uncollectible, this could have serious consequences for UMC.


  4. U says:

    I have asked the County Judge to explain why the CH has to pay rent in open session and she and the others remained quite. Its time for the FBI and the SEC to investigate UMC and the County with regards to bond issues and UMC/CH.

    I wonder if UMC is using that 155 million dollars we voted for clinics for other uses.


  5. Haiduc says:

    To all concerned…
    Fact: CHILDREN’s Hospital is not paying their rent/bills because HealthCare is NOT FREE! ….the money is owed to us local taxpayers. Their plan is at this stage is to take down UMC !
    PS no translation is needed


  6. Reality Checker says:

    I said from the very beginning of this dispute that the Children’s Hospital rent and fees were structured to supplement UMC’s income and cover up its own losses. I also said that Valenti, Hanson and board were orchestrating a hostile takeover of CH, which has turned out to be the case. This is all empire building.

    If UMC is a county facility, funded by taxpayers and under the supervision of the county commissioners, that means the CH debt is money owed to the taxpayers. So, who the %$#! are Jim Valenti and William Hansen to make the decision to forgive that debt, especially without public discussion and a public vote by the commissioners? WTF is that all about?

    Veronica Escobar also proved once again just how intellectually dishonest she is. She told the Times that the UMC offer this week is not a hostile takeover by UMC and that CH will continue to operate independently, Yet, when you read the terms of the proposed agreement, CH would report to Valenti and Valenti is like the Godfather who controls CH, including the hiring of the new CH CEO. For her to say that CH would be operating independently is pure BS.

    Next we’ll be told that poor Jim Valenti deserves more salary and a bigger bonus for the added responsibility.

    It’s amazing what you can get away with when you say you’re doing something for the children … and when you work in an entity funded by the taxpayers.


    • Haiduc says:

      Newsflash: the Children’s Hospital just said that their solution is BANKRUPTCY….Mr Valenti has managed UMC better than Children’s 3rd interim CEOs…This is just SAD !


      • Reality Checker says:

        If as you say Valenti and Hansen managed UMC so well, then how is it that Children’s Hospital was allowed to run up such a big debt, especially considering that Hansen sat on the boards of both hospitals and had a clear picture of the financial situations of both entities? Don’t try to tell me it was done out of kindness and generosity. Apparently, neither Valenti nor the CFO were managing accounts receivable. Why wasn’t the UMC board concerned about the rising debt owed by CH? Could it be that they had a plan?

        UMC allowing CH to run up a giant tab over such a long period of time is not unlike the tactics used by drug dealers, who then make the junkies work for them.


  7. homeowner777 says:

    To start with, I’m surprised that you actually found a RACK that sells the El Paso Times in English.
    THAT’s the big story here. (probably not)
    (I know. . . . . . . 7-11 and Circle K sell English newspapers !)
    But, I have, from time to time, gone back to where racks used to carry the Times in English only to find racks that only sell Spanish language newspapers of 2-3 kinds now.
    I have asked MANY about stories in Spanish and those that speak Spanish and English tell me that the stories are NOT the same.
    In direct translation. . . . . the stories and point of the stories are different. The translated stories put a different spin, a new and different concept, and emphasis to the stories.
    Not only does the El Paso Times run these twisted and (wrong) stories, like you mention above, but then, it’s re-twisted into Spanish.


    • Helen Marshall says:

      The reporting by El Diario is not “re-twisted” into Spanish! El Diario has its own reporters and editorial board, and the subjects reported on are often entirely different. Even if they are not, they are not “translated stories!” I regret that the Diario does not produce an English version.


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