Did they cheat?

According to our county hospital’s 2014 financial statements the hospital has already sold the $150 million of bonds that are to be used to finance the new outpatient clinics.

Interest rates according to the auditor’s report are between 3 and 5 percent.  Using 4 percent as the average we are now paying $6 million each year to handle the interest.

None of us have seen a clinic springing up anywhere yet the bonds have already been sold and we are paying interest.

The financial ratings firm Fitch recently warned that the hospital district’s credit rating is being evaluated and may be lowered.  The mess with the children’s hospital is evidently the prime cause.

Why were the bonds sold so much before the construction money was needed?  Could it be that the administrators at the county hospital knew that their financial condition would ultimately lower their credit rating and make the bonds more expensive?

What will the buyers of the bonds think if they learn that they bought bonds not being told that the hospital’s financial situation would soon worsen?  Have they been cheated?

Might we see some federal agency looking into this?

We deserve better

Brutus

8 Responses to Did they cheat?

  1. U says:

    First thing to ask is the bond money for the clinics sitting in an account or has UMC used to to help run the hospital, If so then the SEC should be informed. They have been coming downing on municipalities who issue bonds for one thing and use it for others. They even have filed charges of fraud, So if you thing there is a problem file a complaint with the SEC and the FBI. No one in this city county or state can be trusted,

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  2. Haiduc says:

    Maybe UMC’s insurance premium revenue is doing better thanks to “OBAMACARE” ???

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  3. Reality Checker says:

    Are they still cheating?

    The following auditors disclaimer is buried in the 2014 audited financial statements:

    “Management of the Medical Center is responsible for the discretely presented component units of the Medical Center, El Paso First Health Plans, Inc. (the Health Plan), and the University Medical Center Foundation of El Paso (the Foundation), which collectively comprise the “Hospital District.”

    “While presentation of combined financial statements is not in accordance with accounting principles generally accepted in the United States of America (GAAP), management believes it is important for readers of the financial statements to comprehend the combined activities of these component units.”

    UMC’s financial statements are NOT — NOT— in accordance with accepted accounting principles. If you own a business, try presenting non-GAAP financials to your bank and see how quickly they pull your credit line. That disclaimer alone is reason for Fitch to downgrade UMC’s credit rating and for the regulators and others to dig in.

    The relationship between the hospital and First Health Plans is particularly interesting. UMC’s insurance premium revenue is growing at a faster rate than the hospital’s net patient revenue. Over the past three years, the spread between UMC’s premium revenue and claims expense looks as though it has magically stayed at about $20 million every year. Those healthy margins also make one wonder if the insured are being denied services to maximize profit margins.

    If my reading of the numbers is wrong, chalk it up to UMC’s creative financial reporting.

    It is stunning that the auditors even signed off on the financials presented in a way dictated by hospital management, but their caveat made it clear that management insisted on doing so to manage how the numbers are interpreted.

    The incestuousness of the various UMC related entities is reminiscent of Enron. Like the guys at Enron, the guys at UMC also think they are the smartest guys in the room. Look how that turned out for the Enron guys.

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  4. Jerry Kurtyka says:

    Maybe the bond investors will sue Valenti for fraud?

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    • Reality Checker says:

      The bondholders would sue UMC and El Paso County, which means more legal bills for taxpayers. The plaintiffs could also name Valenti personally as a defendant, but you and I both know that the UMC board, Escobar and the commissioners would have us pay his legal bills.

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  5. I bet the monies raised are no longer available to build the supposed clinics. Knowing what we know about UMC, their Board, the Administrators, and their relationship with County Commisioners Court, I bet that money is already gone up in smoke. And, yes, we should have had the FBI all over this mess long ago. But, of course, now it is too late, as all our money is already gone! Bonuses, EPCH in the red so deep they’ll never get out. On and on and on.

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    • Reality Checker says:

      It looks like the bond money is reportedly in “trust” and reflected as an asset on the balance sheet and that the repayment of the bonds is shown as a liability. This is the link to the audited financial statements:

      http://www.umcelpaso.org/webshell/umcep.nsf/0/859d34c8d95eccc187257bd4004ed190/$FILE/Auditor%20Report%202014.pdf

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      • Jerry Kurtyka says:

        Bond money designated for a specific use is frequently deposited in a GIC (guaranteed investment contract) until withdrawn for use. That is how it was done when I managed the HFC and we issued bonds for mortgages that could take a year or more to be closed. The money was not in our checking account, it was in the GIC until needed.

        Let’s hope the same is true for our $150MM unless Valenti makes good his threat to “re-purpose” it. Hope, too, that the State intervenes and takes over UMC/EPCH. Write to Gov. Abbott and ask him to act on this, as I have.

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