El Paso Children's Hospital / UMC 2015 AgreementOn March 9, 2015, the El Paso Children’s Hospital and the University Medical Center (UMC) announced that they had reached an agreement about monies owed to UMC. As gleefully as the news media and the local politicians proclaim that this is good for El Paso, it is far from it. Absent in the rounds of applauses is an inconvenient truth – the taxpayers will be paying to keep an unviable hospital funded.

From the onset, the business model for El Paso Children’s Hospital was unsustainable. It has been proven by the fact that the hospital cannot pay its bills. The announcement made does not include any solution to the problem that children’s hospital cannot generate the revenues it needs to remain in business. What makes the latest agreement even worse is that the taxpayers of El Paso are now solely responsible for the children’s hospital but without the ability to examine how the money is spent.

The term sheet made, public on March 9, 2015, clearly details this. Under section two, not only does UMC “become the sole corporate member” of the children’s hospital but UMC has taken full control of the children’s hospital. (Attachment A) Every business aspect of the children’s hospital is now under the control of UMC.

Do not let the wording “separate entity” or that the El Paso Children’s Hospital “must first approve” UMC actions because section 2.4, of the term sheet, clearly details that the children’s board’s initial five board members will be “designated” by UMC. In other words, the children’s board will be appointed by UMC. Section 2.4.5 tells you that the initial board members will “nominate” their “successors.” This section adds, “UMC Board has the right to approve and/or remove EPCH Board Members.”

There are other caveats about the CEO’s appointment but I will not bore you with the details because it is moot as long as UMC controls the children’s hospital’s board.

The term sheet goes on to detail the debt owed by El Paso Children’s Hospital to UMC. According to the term sheet, the children’s hospital and UMC have agreed that the total owed to UMC is $49.3 million as of December 31, 2014. Additionally, both of them agree that charges will continue to accrue for the children’s hospital until the final agreement is accepted by County Commissioners.

Although the news media has reported that $40 million was “forgiven” by UMC, the fact is that, the actual amount owed is disputed by El Paso Children’s Hospital. The amount forgiven is an amount that UMC unilaterally stated as being owed. The term sheet does not state what El Paso Children’s Hospital believes it owes.

This should be troubling for every taxpayer in the city because there is a nebulous amount being bandied about as money that has been forgiven. Not only do we not know the actual amount but conveniently ignored is that any monies owed are owed to the taxpayers and not to UMC.

However, it gets so much worse. The taxpayers had agreed to give the children’s hospital $120 million in 2007 to create it. Although the taxpayers were promised that El Paso Children’s Hospital would be self-sufficient by year two that did not happen, as evidenced by the recent debacle. As a matter of fact, the recent agreement “forgives” $40 million and leaves another $49.3 million as owed to the taxpayers. In other words, the taxpayers have already contributed over $200 million to the children’s hospital based on the numbers that have been made public so far. However, that is not the whole picture and as they say, a picture is worth a thousand words. So let me illustrate it for you:

El Paso Children's Hospital / UMC 2015 Agreement

Notice where all of the money comes from? That would be you, the taxpayers. Worse, El Paso Children’s Hospital and UMC have created a circular funding model that conveniently keeps part of the money hidden under the notion that the children’s hospital is a non-profit. As you can clearly see, the whole deal has been created to keep you in the dark as to the true finances. It is designed to keep financial secrets while they use your money.

Remember how long it took before the public became aware of the problems at El Paso Children’s Hospital? It was your money but you were the last to know. Under the latest agreement, nothing has changed. You continue to fund the El Paso Children’s Hospital but you do not get to look at its finances.

Yes, a non-profit must make its tax returns public, but you already know that the children’s hospital is habitually late in filing its tax returns. Additionally, the tax returns only gives you a macro picture of the financial status of the hospital. Most financial items are grouped, making it difficult to study the expenses and revenues in detail. By structuring the deal as it has been announced, El Paso Children’s Hospital gets to avoid answering open records requests under the Texas Public Information Act. Yet, it gets to use public monies to operate.

Unfortunately, there is even worse news. Under the announced structure, UMC now has full control of the finances of El Paso Children’s Hospital. I know that they are pretending it is a separate entity but look at the term sheet; they control the board. It is a separate entity where money goes in, your money, and you don’t get to see the details of how the money is spent.

Martin Paredes

Martín Paredes is a Mexican immigrant who built his business on the U.S.-Mexican border. As an immigrant, Martín brings the perspective of someone who sees México as a native through the experience...

15 replies on “Children’s Hospital Settlement Exactly As I Predicted”

  1. Please, please bring this back up when pensions for government employees including police, firefighters, etc. can’t be paid. Please bring this back up when the city itself considers bankruptcy. Please recall the ballpark and other expensive pet projects the city/county adopted. Please bring this up when people start crying about their property taxes. Attach the names Escobar, Ortega. Byrd, O’Rourke, Niland and others so their legacy will be remembered.

  2. Dear Martin,

    From your tropical home far away you do not see the GOOD and NEED for a Childrens Hospital in El Paso…
    Yes it is Taxpayer supported from the start…as is all healthcare today!

  3. Your graphic is the best explanation I have seen about how we are paying it. Can I share it on my facebook?

  4. Haiduc….if we NEEDED a childrens’s hopital. It would be profitable no. There is just not the demand, hence the issue. Providence already has one.

    1. Providence has a non independent Childrens’ floor/wing..not the same…not even close.
      Please support EPCH by donating !

      1. again..if we needed a whole hospital, dont you think the current would be raking profits…..fuck donating, Im already paying for this unneeded thing

  5. We should be able to ORR UMC for EPCH board documents as UMC is a public entity and now has a position officially, I.e., not in the capacity of a private citizen, on UMCs board.

    1. Rotten Peppers, I hope you are right. However I fear that what they will be doing is releasing a macro view of the documents, aka an accountant’s audit and financial reports. Those are already available as they are a nonprofit. (990’s) However, for example, if we wanted to look at Susie Byrd’s contract my feeling is that UMC will argue that they have not been given a copy and therefore it is not subject to ORRs. We can glean an idea of how much Byrd was paid by looking at the line items on the financials for “advertising, promotion etc” but we would not know the actual amount or the terms of the contract because those are in possession of children’s. Remember, the board will be appointed by UMC so the board members can discuss with UMC specific details about contracts in executive session meetings (financial negotiations), or person to person without having a document to release under an ORR. That is why I believe this is a bad plan for the taxpayers because they are paying for something they have no control or oversight over. Voters do not vote for board members and county commissioners will argue they have no control over the board. Look at Valenti’s bonus as an example. The Children’s Hospital is even more insulated then Valenti’s bonuses were.

      Thanks for your comments,

      1. Martin; we will see. After this becomes official, all we need to do is to start filing ORRS. If they stonewall us, then ask the AG as I have in the past. The AG is prone to a strict interpretation of ORRs in favor of the public.

        Thank you for your good work on this. Why don’t you come back to El Paso, Mexican or not 🙂

  6. Haiduc, I don’t want to be insensitive. Children everywhere get sick and I hope that I never have a child who needs a specialist. However, it is often necessary to travel because this place or that place has a better facility. Take MD Anderson. People from all over, even from big cities with cancer hospitals, travel there.

    I bet children in Ruidoso would benefit from a children’s hospital. The question is whether it SUSTAINABLE or not. It wouldn’t be.

    1. The Children in El Paso and Ruidoso now have a Children’ hospital nearby….The previous Independent Children Hospital Board was not fiscally responsible and hopefully going forward will be!
      PS: the Kids in Ruidoso could go to Albuquerque

  7. Haiduc, you miss the point. I would love to have Disneyland in El Paso. I’d love to have a Formula 1 racetrack here. I’d love to have the ocean outside my backdoor! Just because we want it or even feel it’s necessary, does not mean we should make it happen. Dubai might be able to create man-made islands in the ocean. That does not mean El Paso should import sand and ocean water to create a beach to improve quality of life or “draw tourism”. Each community needs to look at what it can realistically sustain!

  8. I cant believe we are such a passive city. We should be screaming at city council and demanding they step down immediately. This is monumental. All politicians who supported this should be at EPCH and demanding for the board to change course. Once done, they should never hold another government position. Escobar was the primary individual spearheading all this and now shes trying to save her hide by pointing fingers. Who appointed the board? Who appointed the UMC board? With this and the Impending Chihuahuas blow up, the city will bankrupt. How about a group of citizens get together and SUE the city for fiscal irresponsibility. Include the city officials unless they step down.

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