El Paso Children’s Hospital had no choice but to file for bankruptcy protection to prevent University Medical Center of El Paso from executing a lien that would have given it control, said Rosemary Castillo, chairwoman of the Children’s Hospital Board of Directors.
But UMC officials said they had no plan on executing the lien â€” another issue, of many, in dispute by officials of both hospitals.
Castillo, who had not addressed questions from the news media since before the hospital filed for bankruptcy protection almost three weeks ago, broke her silence Thursday in an interview with El Paso Times and said one of the things that prevented a final agreement between both hospitals was that UMC was holding on to a lien and it was supposed to exercise it on May 28.
She said not filing for protection under Chapter 11 of bankruptcy laws would have resulted in “handing over the keys” to UMC.
Castillo said Children’s Hospital asked UMC to sign the agreement reached at the March 9 mediation session and retract the lien, but instead UMC stalled the process. “We let everybody know that our deadline was May 15 and they had until the 15 to make their decision,” Castillo said. “They took until the 18, when they came back they said they wanted to make changes so we had no choice, we had no choice.”
Castillo’s statement was disputed by UMC and County Judge Veronica Escobar, who said there was no plan to exercise a lien over the Children’s Hospital.
“That’s ridiculous. I don’t know who gave them that outrageous story but I haven’t spoken to a lawyer yet who agrees with that assessment,” Escobar said.
As part of an agreement to forgive $40 million of almost $90 million in debt, UMC refused to withdraw its “security interest” unless Children’s Hospital could find another lender to take it over. Ryan Mielke, a spokesman for UMC, said Children’s Hospital had one year to protest the lien and that would had expire at the end of May, “which is different than saying that we were planning on enforcing it.”
He said the UMC board of managers or the administration has not formally taken any action to enforce the lien.
“Our intent was for Children’s Hospital to work with us to find a solution that works best for both hospitals and El Paso. Never did the board take an action to say in May we are going to enforce the lien,” he added.
Escobar said there was nothing special about the one year anniversary of the lien.
“We keep hearing back rumors about this one year anniversary and the lien none of the lawyers at the county, none of the lawyers at UMC, and none of the bankruptcy people that I have spoken to understand what they are talking about,” she said.
“I suspect now that someone, possible their out-of-town lawyers or their out-of-town CEO scared them into thinking there were something special or significant about that one year anniversary,” she added.
Escobar has been critical of the Children’s Hospital board of directors saying that they have made poor decisions.
Castillo said Escobar is entitled to her opinion. She said the board of directors acted “as responsible as any board would have.”
She said their goal was to protect the independence of the hospital. Castillo also responded to criticism by county officials and at least one bankruptcy expert about the Children’s Hospital spending hundreds of thousands of dollars to out-of-town firms to assist them in the bankruptcy case.
“You can make those statements, but you have to do it within the global setting of what we need to have done in this community from time to time, and sometimes that expertise is not here, so you hire people external to the community that can do that for you,” Castillo said.
She said that everything â€” from the feasibility study that was done before the Children’s Hospital was built to the people hired to negotiate the $120 million bond approved by the voters to build the hospital, and the architects that designed the facility â€” was done by out-of-town experts.
The bankruptcy court documents state that in May, Children’s Hospital paid $439,000 to Jackson Walker, an Austin law firm, and $135,000 to AlixPartners, a Chicago-based business consulting firm that lists the Children’s Hospital CEO Mark C. Herbers on its website. The documents show that Children’s Hospital is expected to pay $200,000 a month in June and July to AlixPartners, $200,000 in July to Jackson Walker, and $100,000 each month in other costs in June and July.
The consultant cost includes Herbers salary, Castillo said.
“When you look at people that we hire that have the expertise to deal with the situation, they are external, but so are the attorneys that are being hired by UMC,” Castillo said.
Mielke said the amount UMC is paying its attorneys is minimal to the money Children’s Hospital is spending in lawyers and consultants.
UMC hired Norton Rose Fulbright US LLP â€” a global law firm with no office in El Paso â€” last year to assist the hospital in the negotiation process with Children’s Hospital and it is now representing UMC in bankruptcy court.
Mielke has said UMC paid Norton Rose Fulbright US LLP $289,448 from June to March. He said UMC has not received the bill for April and May.