El Paso Children's Hospital Causes $70M Hole in District Budget

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DALLAS - El Paso's University Medical Center is seeking $20 million of tax anticipation notes from county commissioners amid layoffs and a worsening financial situation resulting from a $70 million unpaid bill, officials said.

UMC's fiscal problems are due entirely to the fact that the county's two-year-old Children's Hospital has been unable to pay $70 million it owes to UMC, officials said. Children's disputes the $70 million figure, and a spokeswoman said the amount may be half of that.

UMC is the public charity hospital supported by property tax revenue from the El Paso Hospital District. The district is under the supervision of its own board but answers also to the El Paso County Commissioners. Texas Tech University's medical school has used UMC as its teaching hospital since 2009.

With 122 beds, the 10-story Children's Hospital opened in February 2012, five years after voters approved a $120 million bond issue for the project.

Unexpectedly, the state of Texas reduced Medicaid payments for children's hospitals six months after Children's opened. Until that point, reimbursement for stand-alone children's hospitals had been significantly higher than for other hospitals. The higher reimbursement rate was one rationale for building the hospital.

The new hospital has seen rising admissions since it opened, a spokeswoman said.

Children's board chair Sam Legate said that payment rates to UMC are being renegotiated.

Children's chief executive Ray Dziesnski said his hospital will not be able to pay UMC this year or next.

As a result, UMC laid off 56 employees July 25 to cut costs.

At the same time, UMC is seeking a $20 million advance from El Paso County Commissioners, either in the form of tax-anticipation notes or a line of credit.

County Judge Veronica Escobar said the matter would be discussed at the Aug. 4 meeting of the commissioners.

The El Paso County Hospital District carries ratings of AA-minus from Standard & Poor's, and AA from Fitch Ratings with stable outlooks.

The district issued $140 million of combination tax and revenue certificates of obligation in April 2013 to build three outpatient clinics, a new satellite emergency center, and to renovate four floors in the existing hospital.

The outpatient clinics are designed to serve the community to comply with targets set by the Affordable Care Act and the Texas Medicaid Waiver to ensure the district qualifies for reimbursements for uncompensated care.

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