There is one thing that the taxpayers of El Paso may want to celebrate and that is that at least everyone now knows that the El Paso Children’s Hospital is a scam. There was on article in the local newspaper by Marty Schladen titled, “Children’s bankruptcy settlement debated” that was published on Saturday, October 24, 2015. The article is very telling on how Veronica Escobar sees the children’s hospital bankruptcy settlement.

As you know, Andy Krafsur has been a critic of the children’s board for filing the bankruptcy in the first place. There is some controversy about a clause in the Children’s/UMC joint plan about his being able to be appointed to the reconstituted board of children’s. Krafsur was previously a bankruptcy attorney and served as bankruptcy trustee. He has been quoted extensively about the bankruptcy both in the local paper as well as on KVIA, and other news media outlets.

On Saturday’s paper, Krafsur is quoted as stating that the joint settlement “harms” the taxpayers.

Krafsur explains that the settlement agreement turns everything upside down in bankruptcy court, putting the taxpayers in back of all of the other creditors and even forgiving some of the debt. In essence, under the bankruptcy court, the creditors are treated evenly as determined by how the court accepts their classification as a creditor. In the case of UMC, the largest creditor, a bankruptcy court would give them priority over the others.

In the proposed settlement, UMC basically puts itself at the end of the line, in addition to giving up a significant chunk of the monies owed to it. As if that isn’t bad enough, Krafsur points out that not only does UMC give up money, puts itself in the back line but even assumes all of the other debts that are outstanding.

It is clear that this is unheard of and from a business perspective it is malfeasance for any company board to accept such terms. It may even border on criminal.

Schladen asks Veronica Escobar about the questions raised by Andy Krafsur and the obvious damage to the taxpayers. According to Veronica Escobar, as quoted by Marty Schladen, the problem lies in that those questioning the settlement are looking at it from a private point of view, instead of from a public officials’ point of view.

According to Escobar, the children’s hospital is a “vital community asset” whose survival must be ensured. Escobar lists the reasons that have been used before, especially during the 2007 bond election to fund the children’s hospital. These include the argument that El Paso deserves a stand-alone hospital and that it is part of the economic development plan based on a medical campus in El Paso.

Veronica Escobar argues that keeping the children’s hospital “alive as an asset for the community is a whole lot broader” and is a “public-policy discussion.”

The keywords are “public-policy.” They have been since the notion was created that El Paso could be the medical center of the Americas. It is a public policy based on creating jobs through incubating the medical industry in El Paso.

Today, I am not going to debate the merits of a medical center of the Americas as a public policy, instead I am going to focus on a very narrow issue about the children’s hospital.

From the onset, the business model for the El Paso Children’s Hospital is flawed. It is economically unsustainable because it relies on a model of artificially increasing the federal money pot which is consistently under pressure, more so now under Obama Care.

In 2007, the taxpayer voted to tax themselves $120 million. The argument then, as it is now, is that the business model for the children’s hospital would be sustainable because it would leverage additional federal dollars to the community.


The problem is that the federal government is also under pressure to curtail tax expenses because the taxpayers are demanding less taxes. The children’s business model is to operate using tax dollars by leveraging them through schemes.

A certain number of federal dollars, along with state money is allocated to El Paso. Through creative schemes, the children’s hospital is looking to have more tax money come into the community through UMC by “invoicing” services to UMC in order to leverage more money from the state and the federal government.

However, this was the original problem and it continues now as well.

Whether the tax money comes from the federal or state governments is immaterial because it is still taxpayer funds. Therefore, in addition to the $120 million in bonds, the $58 million “forgiven” by UMC and another $48 million to eventually be paid, if it gets paid, the El Paso taxpayers are still adding more to the pot through the creative financing scheme that UMC/Children’s and Escobar are advocating.

Nowhere, not in 2007 and not now do any of the advocates tell you that non-taxpayer funds will be used to pay for the children’s hospital. Think about that, the only money everyone is acknowledging is taxpayer funds. Look closely at the 5-year projection the joint plan calls and you can clearly see the majority is patient revenues floating back and forth between children’s, affiliated UMC entities and UMC itself. Those are the “contractual” agreements. The projection lists them and then subtracts them. Additionally, you have the DSH revenue of about $6 million annually.

The DSH, or Disproportionate Share Hospital is the scheme that drives the whole “rent” scheme. It used to be intergovernmental transfers (IGTs) but the federal government got wise and now they are going after another scheme. The object of DSH is to create “new” revenue streams from tax dollars for indigent care through Medicare payments. However, it all comes from tax dollars!

That is the ugly truth that the newspaper, the news media and the politicians completely ignore.

The worst part, though, is that in 2007 it was $120 million. The proposed plan adds another $106 million in addition to reduced rent payments. That is $226 million that the public policy pushers are acknowledging for a hospital that “was not going to cost the taxpayers any money.”

Add to that total the amounts of Medicaid and other health monies that have not been quantified and you begin to see that this whole thing is nothing more than a scam. Now add to the discussion another little inconvenient truth, Texas Tech Health Sciences Center, the second largest creditor of UMC is also a tax-supported entity.

I am sure you can now clearly see how the scam works.

You, the taxpayers pay into Medicaid, Medicare, Obama Care and other taxes that are used to fund UMC, TTHSC and children’s. Each of them takes a piece of that money, invoices each other and then tell you that there isn’t enough money to “pay” the bills. They then demand more from your wallet.

Now you know why it is all a scam to take more money out of your wallet.

Do not look for this explanation in the local news media because Marty Schladen and other reporters don’t bother to ask this rather simple question of the politicians. I wonder why?

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...

7 replies on “Everybody Universally Agrees El Paso Children’s is a Scam”

  1. Martin this is the same group of community actives and politicians that claimed what a great deal CH was to start with and how it would not cost the tax payers more in the future. So what makes them right this time around when they were so wrong to begin with? Oh that’s right this time the tax payers will be footing the bill here on out. Some of us do pointed out it was a scam and were demonized for doing so.
    Seems every one was looked out for in the courts except the El Paso tax payers who got hoodwinked once again. Even worse the citizen who are going to be on the hook for this private business none of the morons at the county made CH accountable to the tax payers again and did not even try to put in a clause that CH records would open to the public. Vero and the CCC failed the citizen of El Paso County once again.
    As to local media when it comes to the dealings of local government they are a joke and are always missing in action. Even when things in local government go badly wrong they show up after the fact even sometime when they were told what was going before it went in the toilet..

  2. The big picture strategy that I heard yesterday from a city economic development official is to create an urban ambience attractive to the millennials so they will want to move here, i.e., a pool of hip educated workers who will attract employers that will invest in facilities that will generate tax revenues to pay for all these QOL projects. She acknowledged that the property tax base is now skewed toward homeowners footing the bill but just you wait a few more years and that will all change.

    El Paso is playing catch up to competitive urban centers where this strategy has already played out, like Portland and San Antonio. It’s all a big debt-financed roll of the dice by the city.

    1. This doesn’t surprise me but let’s restate this policy more clearly. We are betting a billion dollars in bond debt that if we just make downtown pretty. hip (and college debt ridden) millennials will leave their $10 an hour burger flipping jobs in other cities and miraculously employers who have ignored El Paso in the past will get excited about our hip, educated and underemployed workforce and come here to pay their fair share of taxes while employing the hipsters at compensation levels great enough for them to pay their college loan bills plus buy Chihuahuas tickets. Sounds like something our local leaders would come up with.

      1. Look at Wilson and her buddy at HR thomas. Also look at Gonzales. We don’t need Christmas lights in El Paso we have already illuminated ourselves as the most dumb in the process.

  3. Great article. It was informative, but I would like to know how much is going to the clinics and is the Children’s Hospital (a private non-profit) is accountable to antitrust laws….we all know UMC is exempt from laws that restrict biased treatment or monopolistic power. Since these hospitals and clinics have the benefit of tax money and are exempt from antitrust laws and tax payments, to a certain extent, they have a clear unfair advantage toward competition than private hospitals, which help pay for their existence. What other scams does V. Escobar and company are going to push down the line?

    Not many people know there are at least 2 clinics only for government employees, one being at the county building. How much is our tax money going to keep those preferential clinics going?

  4. Very good article. It reveals more than the double talk and magic math.

    It reveals the arrogance of the judge. “We” don’t get it because we think like the little people while she thinks on a much higher level(public official’s view). That says a lot about how she operates. “We” are so stupid that no one will take notice of the sleight of hand tactics. Even worse, the Times writes a glamor piece instead of the facts. The facts being “we” are screwed no matter what the final result. So she and the gonadness dwarfs walk around with that air of superiority.

    She beckons “us” to speak at the court with a simple wave of the hand, and nose in the air as she says “you may approach”. The others look at her with amazement and impressed. They keep looking eagerly to her as she decides which dwarf will be allowed to speak. Reminds me of a dog that jumps up and down, barking as he waits for a treat.

    She missed her calling as a film flam woman or hanging on the corner wiith a table and shells. Now you see the debt, now you don’t. Which shell is hiding the debt ?

    The only legacy that she will leave is that she left us in deep debt and that she kept the gonads nailed on the wall in her office.

    No need for me to rehash the debt issue, the only fact is “we” got screwed !

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