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Bankruptcy judge approves Children's Hospital-UMC joint plan of reorganization

EL PASO, Texas - U.S. Bankruptcy Judge H. Christopher Mott has confirmed the joint plan of reorganization between El Paso Children's Hospital and University Medical Center.

As part of the process, a new interim CEO and board will be installed at the Children's Hospital.

George P. Caralis, a consultant with Deloitte CRG has been appointed interim CEO, according to court documents filed in bankruptcy court.

Caralis has held several positions in hospitals in Detroit, Mich., and he consults for Deloitte CRG and Pitts Management Associates.

Caralis will replace Mark Herbers, the chief reorganization officer and AlixPartners consultant who has steered the hospital through its bankruptcy case. It is unclear when the transition will happen.

According to the document, Caralis will be paid $170,000 plus expenses.

The board members are Rosemary Castillo, Dr. Sadhana Chheda, Ron Acton, Ted Houghton, Patrick Gordon and Miguel Fernandez. Castillo and Chheda, who are with the current Children's board, will serve for 90 days to help in the transition.

Doctors have yet to select their board representative.

It was back in March 2014 that ABC-7 first brought to light the financial struggles of El Paso Children's Hospital.

Now, more than 21 months later, the saga appears to finally be reaching its climax.

Other Details Of Plan

El Paso County Commissioners and University Medical Center expect El Paso Children's to pay back $48 million, but they don't know when, nor can they guarantee that money will be paid back.

In October, the proposed joint plan calls for Children's to repay UMC $15 million, which is a secured debt.

This debt will be paid after the other creditors are paid off, but it must be paid.

The plan also calls for EPCH to pay UMC $33 million, which is an unsecured debt. This will be paid last, although its not expected for a long time.

The county says it expects $48 million to be repaid, it is forgiving the other $58 million, but has no timeline or deadline for full repayment.

"Fifty million was essentially forgiven," Commissioner David Stout said in October. "But if we would have given this hospital to a third party, we wouldn't have been able to recoup any of that money."

UMC claims Children's owes it $106 million, 50 percent of which County Judge Veronica Escobar says was accrued after EPCH stopped paying rent.

She said that wasn't money UMC lost, but rent money UMC didn't collect. The other 50 percent was money taken from UMC's budget.

She says the county deliberately didn't raise taxes this year to ensure residents didn't bear a direct tax burden due to EPCH's bankruptcy.

Escobar also explained local taxes aren't paying for Children's unpaid debt: local taxes only make up 15 percent of UMC's budget, although this doesn't account for state and federal taxes which make up the rest.

"I'm prepared to hear the criticism from members of the public, who say, 'why didn't you just walk away?'" Escobar said in October. She said it's an investment worth making: EPCH provides 400 jobs and vital clinical services to the area.

When asked why taxpayers didn't have more of an input in the decision-making process, Escobar and Stout said a public election would have been too costly and tedious.

"I really don't think that should have gone to a public vote," Escobar said. "And in part because I don't see it as forgiving. I really do think at some point Children's can be profitable under a different business model."

Children's filed for bankruptcy protection on May 19, 2015 after a deal with UMC fell apart.


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