As I wrote yesterday, the Michael Nuñez deposition on September 29, 2015 further bolsters my belief that the children’s hospital scheme revolves around the so-called intergovernmental transfers, or IGTs. This is the little dirty secret that Veronica Escobar and Jose Rodriguez are desperately trying to keep you from finding out about. You see, if you were to effectively connect the dots between the IGTs and the rent that the children’s hospital is supposed to be paying UMC, it would result in serious repercussions for the County and its taxpayers.
The problem with the IGTs is that the way they were used by UMC exposes the county to criminal liability and serious civil problems. Were the County to admit that the rent was to be used for IGTs the immediate result would be that the Texas Department of Health and Human Services would open an investigation. This would likely result in an immediate suspension of Medicaid/Medicare monies to UMC and the County. Suspending payments is usually the first step in fraud investigations. However, it would not stop there as the fraud would expose criminal liability and the federal government would likely get involved. Neither the County, the State nor UMC wants this exposure and thus everyone is gearing up to quietly end the bankruptcy and have UMC pay a fine for irregularities.
Jose Rodriguez and Veronica Escobar have told the news media that they have had talks with the Texas Department of Health and Human Services looking to settle some irregularities in some reports that were filed detailing rent payments that were never paid. This ties directly into the IGTs, although they are masking them as documenting issues.
Because of the serious destabilization to UMC, the County and the possibly the State, everyone, including Judge Christopher Mott have decided that the best thing is to end the bankruptcy as quickly as possible. Judge Mott usually rules in favor of governmental entities. Mott, as an attorney, represented the City when it was forcing Asarco to shut down. Mott also ruled against the Three Legged Monkey in its suit against the City.
Additionally, if the truth were to come out, its ramifications would be catastrophic for the county.
You see, not only are there criminal overtones but should the proof be made it would result in the County’s bond rating significantly dropping and further criminal and civil exposure would become evident. Remember, UMC has certified a budget to the County annually that included not only the rent payments from children’s but also the IGT’s that they were supposed to leverage. Additionally, the County certified the tax rate and allocated monies from bonds for things like the clinics. If it is proven that the bonds were issued on financial statements that contained erroneous or fraudulent information, then it would result in bond rating companies and bond holders demanding a correction. This would also result in civil and possibly criminal investigations as well.
No one wants that and this is why the bankruptcy is in the fast-track towards resolution.
Consider the following, the bankruptcy court has accepted that an unknown liability exists that is owed to the Texas Department of Health and Human Services. UMC has agreed to assume that unknown liability and the court has allowed that unknown to remain. Think about that for a moment, an unknown liability is being allowed to remain in the bankruptcy case.
Now add to that the simple fact that UMC is the largest creditor in the bankruptcy and instead of being paid first, it is forgiving part of the debt, paying itself the rest at the end of the other debtors and is assuming all of the liabilities. In return, UMC gets to control the new children’s board but does not get to own the El Paso Children’s Hospital outright. Why is that?
UMC is a tax-based entity that must certify its budget through the elected officials that comprise the county commissioners each year. There is no doubt that UMC is a public tax-based entity using tax dollars to operate. Yet, through creative lawyering, it is “forgiving” some debt, assuming liability for other debt and accepting responsibility for an unknown amount owed to the Texas Department of Health and Human Services.
When was the last time a tax entity “forgave” a debt? When was the last time that a tax entity assumed a liability that judicially it had no reason to? More importantly, when was the last time that one pubic tax-based entity (UMC-County) assumed the liabilities and possible fines of a private entity because of erroneous information filed with the State of Texas? Remember, the El Paso Children’s Hospital is a private entity and will largely remain so after the bankruptcy is settled.
Michael Nuñez is UMC’s financial officer. Nuñez is the highest authority at UMC that is supposed to understand the finances of the hospital. He is also the one that certifies that the finances are accurate. Nuñez is also a CPA. During his deposition, Nuñez took great care to separate the issue of IGTs from the rent that El Paso Children’s Hospital was supposed to be paying UMC. Yet, as much as he tried to separate the two, his testimony showed that the two are likely related.
Consider the following:
According to Nuñez, UMC is the IGT sponsor for El Paso Children’s Hospital. [page 122] UMC is the “anchor entity for Region 15, which covers the counties of El Paso County and Hudspeth County.” [page 123]
UMC regularly drew funds for IGT from the “general operating fund.” The general operating fund is comprised of all of UMC’s “sources of revenue.” [page 184]
Between May 2013 through January 2014, UMC paid the Texas Department of Health and Human Services “approximately $12.3 million of Medicaid supplemental payments.” From that amount, “UMC made an intergovernmental transfer of approximately 5.1 million.” [page 201]
Michael Nuñez testified that Ray Dziesinski, who took over Larry Duncan on March or April of 2014, did not certify the Medicaid forms used for the IGT allocations. [page 148] Dziesinski has “never signed” the certifications. [page 150] Nuñez also testified that Ray Dziesinksi would not sign the annual certification forms. [page 150] What does Ray Dziesinski know that made him refuse to sign certifying documents?
During the deposition, Nuñez was asked to diagram how money flows from UMC to the State of Texas and then back to local hospitals, that include the El Paso Children’s Hospital. Nuñez produced three diagrams describing the three different process. All are related to IGTs.
The way the process is supposed to work is that a private hospital undertakes to serve a specific health issue or patient. UMC serves as the “Regional Anchor Hospital” and is the clearing house for the federal monies that filter down through the state back to the private hospitals that comprise the “Region 15 hospitals.” The asterisk signifies the El Paso Children’s Hospital as one of the regional hospitals.
The idea is that non-tax monies are used to resolve a medical issue and as a result the state government leverages that nontax-based money for more federal dollars. The State then passes on the monies to help offset the additional costs the regional hospital undertakes. They key is that the monies passed on to the state, labeled in the diagrams as “HHSC” is new money that did not originally come from tax health funds. As you look closely at the graphs you will notice that the money is supposed to flow directly to the “Region 15 Hospitals.”
The scheme that the El Paso Children’s Hospital and UMC undertook was to add an additional money flow between children’s and UMC, the “Region Anchor Hospital.” This was in the form of the “rent” children’s was supposed to pay.
This is the dirty little secret everyone wants to hide because if it were to come out it would make the Bob Jones scandal nothing more than a minor infraction.
There is one other piece of testimony you should all also consider that Nuñez testified about. It was in reference to a “leaked document” that was made available to a local news media outlet. According to the testimony by Nuñez, there is a passage in the document that reads; “Valenti inflated 14 million costs to charge El Paso Children’s Hospital 30 million, and then accused them of not being able to pay. UMC’s receivables are overstated.” [page 279]
The bottom line is that IGT’s threaten to expose the County, the State of Texas and UMC to serious taxpayer monies scandal. None of them want that and as a result all of it is being hushed up by expediting the settlement of the El Paso Children’s Hospital as quickly as possible.
The problem, though, remains that the El Paso Children’s Hospital is not financially sound and the underlining problem has not been solved. In addition to the “forgiveness” of debt and the assumption of an unknown liability, the underlining problem is that the only way the El Paso Children’s Hospital is viable is if it is continuously supported by the taxpayers in the future.
Look for your next UMC tax increase next year.