On Monday, I shared with you a video (link) on how I believe that the whole El Paso Children’s Hospital debacle hinges on the intergovernmental transfers also known as IGTs. As I initially wrote, although legal, IGTs were severely limited for Medicaid use because of abuse. As a reminder, the financial model that was heavily relied upon for the viability of the children’s hospital was the Medicaid transfers under IGTs. What the proponents of the children’s hospital hadn’t counted on was the federal government restricting non-governmental entities from participating in the transfers.
UMC was already committed to the children’s hospital and it was working on the assumption that the Medicaid monies it was giving up by transferring the pediatric services would be transferred back, with additional funds, to UMC under the IGTs.
When the IGTs were restricted by the federal government, UMC faced not only the loss of its pediatric Medicaid funding but it could no longer count on the additional Medicaid monies it had anticipated by building a “separately licensed” children’s hospital. Thus, the rent that isn’t really a rent was created.
Most of you have already heard, through the news media, that children’s officials are arguing before the bankruptcy court that they were under pressure by UMC officials to sign agreements, including a lease agreement right before the children’s hospital was set to open.
You all witnessed Veronica Escobar last week plead with children’s officials to agree to postpone litigation under the guise of allowing them to find a financial savior. Escobar, along with supportive county commissioners postponed adopting the county’s budget to last possible moment. Up until Monday morning, Escobar was publicly stating that UMC was “close” to finalizing a deal with children’s.
And in typical fashion, recriminations again arose with one side, UMC and Escobar, arguing that children’s did not meet the deadlines and children’s officials arguing they had accepted the agreement that UMC had tendered to them.
Obviously one side is lying. Because of the secrecy, we don’t know who is lying.
What we do know, through the comments proffered through the news media, is very telling on their own.
In “El Paso Children’s Hospital, UMC again in talks” by Marty Schladen in Tuesday’s local paper, Veronica Escobar is quoted as stating that she has “concluded that the only viable solution is for UMC – which has a massive investment in Children’s – to be” the partner that takes over children’s at the conclusion of the bankruptcy.
This makes prefect since if you consider what I have written about the IGTs. Remember, UMC gave up its pediatrics to children’s as part of the supporting financial model identified by the feasibility study. What the study was anticipating was that the pediatrics’ money, given up by UMC, would be returned to them through the IGTs and the “profits” would fund the children’s hospital.
It was a win – win transaction for both entities. Except that the rules were changed and IGTs could no longer be leveraged by a private entity, the children’s hospital.
That forced UMC to force the children’s hospital to pay “rent” to recover the lost Medicaid monies. Except that “rent” is against the rules for the Medicaid IGTs, and more importantly, the rent did not generate extra money and thus children’s economic model was unfeasible again, as predicted by the feasibility studies.
Now that the scheme has come back to haunt them, the only way out of the scheme is to make the children’s hospital a subsidiary of UMC. That brings back the pediatric Medicaid revenues into UMC.
Remember, in contention are the service fees and the rent that UMC is demanding. Making children’s a subsidiary does not increase the services but it brings back the Medicaid revenues to UMC. The “rent” is being paid by the taxpayers through the 2007 bonds.
There is of course the question of remaining a “stand-alone” hospital. This point of contention is precisely why we know what we know. Many of the medical staff and some of the board of the El Paso Children’s Hospital have taken the position that the community was promised a “stand-alone” children’s hospital. They were.
From the children’s hospital point of view, they should not have to pay the rent because the taxpayers’ paid for their building. From UMC’s point of view, the loss of the pediatric Medicaid monies is a hard pill to swallow. The fact is, though, except for the egos, having the children’s remain a stand-alone hospital does not give it any financial advantage from the taxpayers’ point of view. It does not generate extra revenues by being a stand-alone hospital when compared to the costs to keep it a separate entity.
Of course, if the “rent” were to go away, the children’s hospital would be operating in the black. Removing the rent component would make children’s attractive to investors looking for a payday. That, however, would leave UMC having to scramble to fill in the void left by the loss of the pediatric Medicaid monies.
As you can see, there is only one way for the schemers to walk away from this mess and that is to have UMC absorb the children’s hospital.
As for the taxpayers, whether children’s is absorbed or moves to another hospital, it is the taxpayers that will foot the bill, both in the original 2007 bonds and making up for the loss of pediatric Medicaid funds.