epch-rush-bdgtAs many of you have noticed, Veronica Escobar has been working overtime trying to get the scheduled October court hearing postponed for 45 days. She has been taking the tact that she is trying to give the Children’s Hospital time to find a strategic partner to bail them out. However, that is not the real reason.

The Children’s Hospital has been proven to be financially unfeasible. Escobar has been peddling the notion that giving the hospital 45 days to find a strategic partner will somehow save it from being taken over by UMC.

You will notice that Veronica Escobar has said that there are two possibilities on the table; finding a strategic partner or have UMC take them over. Only one is feasible.

What Escobar is really trying to do is end the litigation.

The following 6-minute documentary video shows you why she is desperate to end the public litigation.

It all boils down to the rent that is not a rent.

In 2012, UMC received $10.1 million from IGTs. [2] This should give you a quick understanding of the importance of the Intergovernmental Transfers (IGTs). What makes IGTs so confusing is that they are legal and many entities, both private and public partake of them.

The problem with the children’s hospital is that Medicaid changed the rules in 2007 making it extremely difficult to use monies that are not owned by a government entity to leverage federal dollars from. This is unique to Medicaid. When Jim Valenti tells you that IGT’s are a normal process, he is correct in most aspects, except when it comes to Medicaid.

The problem that UMC faced, after the rule change, was that instead of bringing in additional federal dollars to offset the Medicaid loss for UMC, the hospital ended up taking the Medicaid money away from UMC.

This created the situation that required finding a way to still use the IGTs through a private entity like the children’s hospital. That is why, although the taxpayers had built the tower, a rent was immediately necessary. It also made the economics of the children’s hospital untenable as the feasibility studies proved. All of them, including the Kurt Salmon Study.

The rent was the stopgap for the loss of the IGT program that made the Kurt Salmon Study feasible, but it was not sustainable.

With the rent, UMC could now claim that the money it was transferring to the state was money it controlled because it was derived from “rent.”

This is the key that is inconvenient for the politicians. Under the new Medicaid rules, only a taxing entity can complete the transfers. The El Paso Children’s Hospital is not a taxing entity and thus the liability for the IGTs is UMC’s.

As you can clearly see, Veronica Escobar tried every trick in the book to get children’s to comply. She has taken the stance that the bankruptcy was bad for the community. She has postured that she is trying to save it.

Once children’s made the rent that is not rent argument, the realization must have set in that the liability is the County’s regardless of how children’s emerges from bankruptcy, if it does.

That is why, after threatening to cut off services, Veronica Escobar has delayed for as long as possible the County’s budget to allow children’s to agree to delay the October court hearings into the rent that is not rent.

The news media is distracted with the court ruling about children’s having to pay rent.

The fact is that the court ruled on the validity of the signed lease. The court did not rule on why the lease was signed. That is scheduled for October.

What Escobar’s plan really calls for is postponing the litigation. Why?

That is what all the taxpayers should focus on.

The County must accommodate the children’s liabilities through its budget today while ending the litigation that would make too many individuals uncomfortable. The video gives you a glimpse into some of them and if an investigation begins, many more will be named.

The outcome is the same as it has always been; the taxpayers will pay for children’s one way or another. Absorbing children’s will keep the much needed Medicaid monies. Ending the litigation will keep the secrets.

If you still think my analysis is farfetched consider the following press release issued by the United States Department of Justice on June 15, 2015. They announced that the Children’s Hospital in Washington DC agreed to pay the US government $12.9 Million to “Settle False Claim Acts.”

According to the justice department, the hospital “misstated information on the cost reports and applications…to calculate reimbursement rates.” In addition to misreporting the number of beds, the children’s hospital “filed cost reports misstating their overhead costs, resulting in overpayment from Medicare.” [1] Overhead costs tie directly into IGTs.

I have found some other interesting tidbits in the various depositions I have read so far that I will be sharing with you in the coming days. The County is up against a hard budget deadline. It cannot adopt a budget without having an agreement in place with Children’s because then the court hearings will reveal uncomfortable truths. This makes the situation very fluid. I’ll keep you abreast of the information as it emerges.

However, as you look at the new information, weight it against the rent that is isn’t really rent and it will all make better sense to you.

I would also appreciate knowing if you found the documentary helpful or distracting as well as knowing whether I should create more. Also, let me know how I can make them better.

I have been writing about the children’s fiasco since it emerged. You can read the full details about this fiasco by visiting the following links on my blog:






1. Department of Justice, Office of Public Affairs, statement on June 15, 2015

2. Texas Health and Human Services Commission, 2012 Uncompensated Care Intergovernmental Transfers (IGT), Revised May 20, 2013

3. Alameda County Medical Center v. The Honorable Michael O. Leavitt, in his official capacity as Secretary, United States Department of Health and Human Services; Memorandum in Support of Plaintiff’s Motion for Preliminary Injunction [on video: Intergovernmental Transfers IGTs rules changes]

4. El Paso Children’s Hospital Corporation Bankruptcy Case (15-30784-HCM); Debtor’s Objection to Motion to Compel Payment of Facility Lease; pages 4 & 5 [on video: Rent is not rent issue is really an IGT transfer]

5. Oral deposition of James Valenti on July 21, 2015, pages 176-177 [on video: Ray Dziesinski refuses to sign IGT documents]

6. Kaiser Commission; Medicaid Financing Issues: Intergovernmental Transfers and Fiscal Integrity; February 2005. [on video: IGT explanation and profit example]


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...

5 replies on “Children’s Hospital Medicaid Scheme”

  1. So would Vince Perez along with a new bunk mate named “Popeye,” I am sure Abeytia wouldn’t mind keeping Claudia Ordaz company while Vince is in jail. Wishful thinking

  2. Wow! Simply wow! I am flabbergasted that I haven’t seen this anywhere else. Is this the smoking gun we’ve all been waiting for?

  3. This is such a complex and perplexing situation that one would need classes to fully understand. The most important question is how do we as voters and taxpayers get the truth in order to make an informed decision when we vote.

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