UMC board approves pursuing $60 million in lines of credit for next 2 years

UMC loans

EL PASO, Texas - The University Medical Center board has authorized the hospital to pursue $60 million in credit lines over the next two years. 

The board voted unanimously Tuesday to secure a line of credit known as a tax anticipation note from Wells Fargo.

That will allow it to have some cash flow until it gets tax revenue.

The board authorized UMC to borrow up to $25 million through the rest of 2014 and $35 million in 2015, with an interest rate of 1.57 percent.

The hospital won't necessarily access all of the money in the credit.

The hospital's finances have been strained because El Paso Children's Hospital has fallen $70 million or more behind on payments UMC says it owes.

The hospital's cash-on hand is expected to be lower because of the investments UMC has made into Children's hospital that have not yet been repaid and the state's month-long delay in reinbursing Texas hospitals for services rendered.

On June 25, UMC and Children's Hospital sent a joint statement that they were working together to solve their problems.

"University Medical Center and El Paso Children's Hospital are working collaboratively to evaluate all options and potential solutions to the issues we face so that we can move forward together in our shared mission of providing access to high quality care for all El Pasoans and their children. We realize that the community and members of the news media have questions about our work, but we ask for patience as we work in partnership to resolve our differences. Our teams are dealing with very complex issues and legal positions that require detailed, balanced analysis, but we are confident that with the capable and committed leadership of both boards and management teams, and the input of our legal experts, we will come to a mutually acceptable resolution that best serves the broad healthcare needs of the El Paso community," the statement reads.

On June 20, Children's Hospital CEO announced a sustainability plan that included renegotiating terms of its agreement with University Medical Center and possibly arbitration between the two to come to an agreement.

Before discussing the plan with the media, Children's Hospital CEO Ray Dziesinski said that a Universial Commercial Code filing had been made this week by UMC.

Dziesinski said "it is a precursor to potential action that may be taken between the two organizations."

"I and the board have the responsibility to move forward with appropriate conduct in the event that occurs so I will speak in generalities," he said.

Dziesinski also said the contract details the procedure to follow in case of a dispute, which is mediation, and he will recommend the board that they consider moving forward with that option on their side.

The parties have 60 days to work with an arbitrator away from the media.

Dziesinski told the media and the doctors and specialists who stood behind him that day that the hospital is not closing down and is looking at how to move forward.

And he wasn't the only one who spoke in support of the hospital.

Doctors who were invited to address the media during the news conference at Children's said they back  it 100 percent and were frustrated and disappointed by the media's portrayal of their institution.

This after months of reports that Children's was in the red and that it owes UMC upwards of $70 million.

In June, the UMC board sent the chair of the Children's board a letter saying it was proposing a confidential plan to bring a long-term solution to their problem.

Dziesinski said the rhetoric between UMC and Children's has become heated and he is recommending to the board that they go through arbitration with UMC to reach an agreement.

He also said Children's debt to UMC is significantly less than what has been told to the media, but didn't elaborate.

One of the hospital's solutions is to examine all expenses to see what can be saved without making cuts to programming or staffing.

And he told ABC-7 after the June 20 news conference that this plan differed from UMC's proposal in that UMC's only addressed changes to UMC's role on the Children's board. He said UMC's proposal did not include economic measures.

Dziesinski said that 24 different options for moving forward have been reviewed, including some that included asking for government funding or shutting down some services at the hospital.

In the plan, Children's Hospital disputes the amount UMC has told the public the hospital owes and "maintain that in light of the services/spaced actually provided by UMC to El Paso Children's Hospital, a more accurate amount is significantly less."

"We have been working with the administration of UMC for three months in hundreds of meetings reviewing our service contracts," Children's Hospital said in a statement. "It was determined through that negotiation that the real costs of services provided to El Paso Children's by UMC is $7.5 million, not the $15 million that we have been charged annually."

Here are the other aspects of Children's plan:

  • Agreements with UMC were written to be renegotiated to make them reflective of actual costs and to reflect actual services compared to estimated needs.
  • El Paso Children's Hospital is paying $14 million a year in rent for a building and equipment that the taxpayers agreed to pay for. The lease needs to be renegotiated.
  • Agreements with UMC were modeled assuming reimbursement and funding assumptions that never materialized and need to be modified to adjust realities.
  • Working together as partners, the community will have a children's hospital providing exceptional care for our children today, tomorrow and a decade from now.

Story is developing and will be updated.


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