On 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:
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.