The financial model for the El Paso Children’s Hospital was built around the March 2007 Kurt Salmon Study, commissioned by Thomason Hospital. Thomason is now known as the University Medical Center (UMC). The Kurt Salmon Study was the fourth study commissioned to investigate the feasibility of having a children’s hospital in El Paso.
The first two reports found that it was financially unfeasible to create a children’s hospital in El Paso. The Katz Consulting Group report – the third report – found that a children’s hospital in El Paso would be feasible if “preferential reimbursements” from Medicare and Medicaid were available. The Katz report added that there needed to be “sufficient revenue from non-traditional sources.” The report listed the non-traditional sources as “philanthropy and El Paso County property taxes.”
The fourth report – the Kurt Salmon Study – was a study commissioned to build a sustainable financial model based on the 2003 Katz Consulting Group report that argued for county taxes to help fund the children’s hospital.
The Kurt Salmon Study found that “the number of patients admitted in recent years to the pediatric unit at Thomason Hospital (now UMC) would not be sufficient to support a stand-alone Children’s Hospital.” The report added that “a Children’s Hospital will be financially feasible if the number of pediatric patients can be increased.”
The Kurt Salmon Study also stated that “shifting market share from other area hospitals to Thomason and eventually to the Children’s Hospital is essential.”
The El Paso Children’s Hospital was purposely built to use tax monies from the University Medical Center (UMC) to make the project financially sustainable. The financial model for the children’s hospital also required that “the number of pediatric patients” be increased and “preferred reimbursements” from federal programs be leveraged.
To succeed, the El Paso Children’s Hospital needed to siphon pediatric patients away from other local hospitals. The financial model also depended on preferred payments from federal programs.
The children’s hospital opened its doors on February 14, 2012. From the moment it opened its door, the hospital faced low patient volumes. Also, the Medicare reimbursements it needed had changed making the “preferred” rates unavailable as the financial model required.
On April 24, 2014, El Paso Children’s Hospital’s CEO, Ray Dziesinski acknowledged that the children’s hospital had $10 million in losses. It was consistently losing money since it opened.
The El Paso Children’s Hospital filed for bankruptcy on May 19, 2015. Much of its debt was owed to UMC. In October of 2015, the children’s hospital emerged from bankruptcy. Although it remained a separate entity from UMC, it, nonetheless, is fully controlled by UMC as the public hospital is the sole owner of the children’s hospital. [Article III, Section 3.1 of the Amended Bylaws of El Paso Children’s Hospital]
In 2019, the El Paso Children’s Hospital announced that it had generated $2.6 million in profits. It was the first time the children’s hospital was profitable since it opened its doors.
The Saucedo lawsuit against El Paso Children’s Hospital alleges that Dr. Roberto Canales was personally responsible for the death of the three-year-old girl. The lawsuit also alleges that the children’s hospital was negligent in her death.
An affidavit (Exhibit 5) by Dr. Thomas Mayes is included in the lawsuit.
Mayes, in his affidavit, states that he began to work at El Paso Children’s Hospital in January 2017. Mayes was the Chair of the Department of Pediatrics at the children’s hospital from 2018 through 2019. Mayes states in his affidavit that in “late 2018, Dr. Roberto Canales, applied for medical staff privileges” at the children’s hospital.
Dr. Mayes writes that when he refused to provide Canales pediatric intensive care privileges, he “was ambushed by hospital administration, who repeatedly requested” that he “allow an exception for Dr. Canales.” [page 5, Mayes affidavit]
According to Mayes, at a meeting, the CEO of the children’s hospital, Cindy Stout, attempted to “brow beat” Mayes into signing a waiver for Canales. Mayes goes on to write that Stout explained “that the hospital needed Dr. Canales to work as in intensive care specialist because his ability to generate increased inpatient volume and associated revenue for the hospital.” Mayes adds that Stout told him that “the hospital was not doing well financially.” [page, 6, Mayes affidavit]
Mayes goes on to detail that in a following meeting the next day, five doctors told Mayes that Canales “was a great guy” and that the “hospital really needed his business.”
In 2019, Canales began admitting patients, according to the Mayes affidavit. Canales’ patient load increased throughout 2019. Mayes adds that “it was quite clear to me [Mayes] that EPCH was doing everything in its power to appease Dr. Canales in order to continue to obtain his business.” [page 10, Mayes affidavit]
The Mayes affidavit adds that “Cindy Stout, her administration team, and the ECPH [sic] board promoted these accommodations on behalf of Dr. Canales for the sole purpose of appeasing Dr. Canales’ demands so Dr. Canales would continue to generate significant patient volume and revenue” to the children’s hospital. Mayes goes on to state that “prior to Dr. Canales’ arrival, ECPH’s [sic] annually lost money.” “That changed once Dr. Canales began practicing at ECPH [sic],” Mayes wrote in his affidavit. [page 11, Mayes affidavit]
Dr. Mayes closes his affidavit with, “Dr. Canales presents a real danger to his patients and should be removed from the practice of medicine.” [page 12, Mayes affidavit]