An international consulting firm being paid $180,000 a month to run El Paso Children’s Hospital is justifying a significant part of that fee with the time it takes executives to fly from their homes to El Paso, Bankruptcy Court records show.
More than 13 percent of the charges listed by the consultant, AP Services LLC, from May 19 to June 30 were for “travel time” for the executives, mostly for flying back and forth between El Paso and Chicago or Dallas.
The travel time for the two executives, CEO Mark Herbers and treasury operations officer Mark Adams, was valued at $26,579.80 for 65.7 hours of flying or waiting in airports for delayed flights, according to the filing submitted to the U.S. Bankruptcy Court on Thursday. That was based on an hourly rate of $528.95 for Herbers and $493.45 for Adams.
The travel time represented 10 percent of the billable hours submitted by AP Service from the bankruptcy filing on May 19 through June 30, and 13 percent of the total fees of $204,387.10 for that period.
AP Services also is seeking reimbursement for $20,168.23 in expenses for airfare, lodging, meals, rental cars and other ground transportation. That includes $126.69 for Adams to use a car service from DFW Airport to his home in Rockwall, Texas, on June 5.
On Friday, Herbers said: “I’m usually working while in flight and waiting in airports, rarely idle.
“AlixPartners (parent company of AP Services) is under a fixed-fee arrangement irrespective of the hours spent. The Bankruptcy Court process is to have us report hours in tenths of an hour,” he said.
But County Judge Veronica Escobar said she was outraged by the billing records used to justify the $180,000 monthly payment to AP Services, an affiliate of the international consultancy AlixPartners, which specializes in managing distressed companies. Herbers and Adams work for AlixPartners and are assigned to Children’s Hospital.
“Mr. Herbers bills Children’s Hospital for his flights home to Chicago, his flight delays, the actual flight time, and the time he spends sitting in a cab going home. His partner bills Children’s $127 for rides to the airport to come to El Paso. Every time the board refuses to talk to the media and Herbers does it, he bills for it,” Escobar said.
Herbers said speaking to the news media was part of his engagement duties. The billing records indicate he spent 1.9 hours preparing for and doing an interview with the El Paso Times on June 4, which at Herbers’ hourly rate translates to $1,005.
“The blame for this situation doesn’t fall exclusively or even primarily on those who take advantage of it to line their pockets, but on the Children’s board, which is obviously unmoved by the fact that this money could either pay off their debt or fund health care for our children,” Escobar added.
Children’s board Chairwoman Rosemary Castillo did not respond to requests for comment.
Escobar said El Paso County will file an objection to the fee request with the Bankruptcy Court.
“UMC has had a plan drafted and ready for implementation for months that could potentially end this dramatic outflow of resources,” UMC spokesman Ryan Mielke said in an email. “The latest draft of our plan is the fifth attempt by UMC to end the tragic loss of resources that should be flowing to patient care, particularly for El Paso families. Instead, hundreds of thousands, perhaps millions of dollars will be spent on distant consulting firms and legal fees. It did not have to be this way.”
Andy Krafsur, a former Chapter 7 bankruptcy trustee in El Paso and a businessman who practiced bankruptcy law for years, said although AlixPartners can bill Children’s Hospital up to $180,000 a month for the services of Herbers and other four people, the company has to justify the fees.
“They have to demonstrate that there is benefit for the bankruptcy state for the services they are providing,” said Krafsur, who has been a critic of Children’s decision to seek bankruptcy protection.
He said the charges for travel didn’t seem very efficient. He said it would be up to creditors, such as University Medical Center, to keep the hospital’s expenses in check.
“While the court could do it on its own, it’s really not the court’s job to get in the middle of fee disputes. It’s not the court’s job to raise the issue. It is up to the creditors and parties of interest to raise these issues,” he said.