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Central Health spending under attack from three sides

Lawsuit, legislation, and performance audit are all taking aim at Central Health

HomeCentral HealthCentral Health spending under attack from three sides

The right to use Travis County property taxes to fund Dell Medical School has always been precariously perched on the foundation of ballot language approved by voters in 2012, despite the fact that such funding appears to be a violation of Texas statutes.

The Bulldog has published numerous articles on that score, including an investigative report to show that then State Senator Kirk Watson circumvented the law to establish that revenue stream. Our coverage also showed how the ill-advised affiliation agreement that Central Health entered in 2014 prevented that agency from getting any accountability from the medical school concerning how much indigent healthcare services it receives in return.

To honor its obligations under the Affiliation Agreement executed in 2014, Central Health has paid the University of Texas Dell Medical School $35 million  a year for nine years, 2014 through 2022, for a total of $315 million. Central Health is obligated to pay another $35 million this year. Over the initial 25-year term of the Affiliation Agreement these payments would continue for a total of $875 million. In addition, the agreement will automatically renew for additional 25-year terms unless either party provides notice at least a year before the term ends.

Now three separate actions are underway, any one of which might result in barring Central Health from continuing to fund the medical school.

First, tomorrow the Travis County Commissioners Court will consider hiring a company to conduct an independent performance audit of Central Health. A key item in the scope of work is to document what, if any, indigent healthcare services the medical school provides to needy Travis County residents.

Secondly, a bill introduced in the Texas Legislature if enacted would change how members are appointed to Central Health’s Board of Managers and prevent transferring more property tax funds to the medical school by requiring that these monies be spent lawfully and transparently.

Thirdly, a lawsuit filed in 2017 that attacks the legality of funding the medical school appears to be headed for resolution in coming months. Depositions taken recently from senior officials show that the medical school has no records to document how medical treatments are provided to indigent patients.

The performance audit

Tomorrow at the Commissioners Court meeting starting at 9am will consider and take appropriate action on approval of a contract with Mazars USA LLP, in the amount of $845,200. The company’s website describes the firm as an “international audit, tax, and advisory firm.”

Chief among the dozen items listed within the Scope of Services under the contract is an analysis of the amount and type of healthcare services provided to the medically indigent by Dell Medical School in return for Central Health’s annual $35 million payments.

The Mazars USA contract calls for addressing that issue through the lens of what services Dell Medical School provided to Central Health’s patients in a single year, 2022.

The scope also calls for assessing how well Central Health and its providers have served the needs of Travis County’s medical indigent patients and how their performance compares to similar hospital districts.

The end result of the audit is for Mazars to provide a written report and present it at a public meeting to make recommendations to correct any practices in accounting, operations, compliance and management. Mazars is also tasked with reporting significant deficiencies within Central Health’s control structure and would adversely affect the agency’s ability to fulfill its statutory responsibilities or comply with the law. The firm must also timely report any violations of law that it may find.

The initial term of the contract is for one year, but the timeline proposed by Mazars indicates the firm would start work in May, submit a draft report in November, and make a final presentation to the Commissioners Court in January 2024.

Numerous groups started pushing for this performance audit more than a year ago, including NAACP Austin and Texas LULAC District VII, which jointly issued a 40-page Red Flags Report in March 2022. The report claimed that Central Health had serious shortcomings in financial and operational issues. The report was supported by former Travis County Auditor Susan Spataro, who called for an independent third-party audit of the agency.

Gonzalo Barrientos
Gonzalo Barrientos

Others who joined the chorus to support requiring Central Health to undergo a performance audit were retired State Senator Gonzalo Barrientos (D-Austin) who with State Senator Jeff Wentworth (R-San Antonio) coauthored legislation in 2003 that would have allowed voters to authorize establish the Travis County Hospital District. Their bill did not pass but its provisions were made part of House Bill 2292, which did.

The Commissioners Court agenda request states that the solicitation for this work was sent to more than 6,700 firms. Of those, 41 companies viewed the project through BidSync, a software application for suppliers who want to do business with government agencies. Mazars was the only company to respond. The firm scored 89.7 out of a possible 100 points on the county’s evaluation matrix, according to the agenda materials.

Travis County had issued a previous Request for Service in October 2022 and called for responses by November 14th. No submissions were received and the new solicitation, to which Mazars responded, was issued in January 2023.

The pending legislation

Lois Kolkhorst

Senate Bill 2332 authored by Senator Lois Kolkhorst (R-Brenham) would if enacted trigger radical changes in Central Health, including:

Board member appointments—All nine members of Central Health’s board of managers would be appointed by the Travis County Commissioners Court. Currently the City of Austin appoints four members and jointly appoints a fifth with the county. Members would not be able to serve more than eight years.

Board member qualifications—The bill would require that a Central Health board member live within the district for at least three years, not be related to an employee of the district, not have served in an elective office for four years, and not be an employee or contractor of a vendor have a contract of more than $250,000 with the district or any entity created or affiliated with it. At least half the board members must have a minimum of four years experience: as a licensed health professional in a hospital or other healthcare facility; as a financial services or accounting professional; or as an attorney licensed to practice in Texas. At least one member must be an indigent patient or closely related to a patient served by the district.

Board member conflicts—Board members would be required to recuse themselves from deliberations or voting on a contract involving the board member’s employer or a contract in which the board member or employer has a substantial interest.

County financial controls—Commissioners would set policies for fiscal accountability to ensure that district revenue is spent lawfully and is transparent to district residents. The commissioners must contract at least every five years for a performance audit of the district.

Legal services restricted—The county attorney’s office, which has a duty to represent the county in civil matters, may not advise both the commissioners court and the district if there is a potential conflict of interest between the county and district. In which case the commissioners shall hire private legal counsel at the county’s expense. From June 2012 through June 2022, when the Bulldog obtained records through a public information request, Central Health had paid the county attorney’s office a total of $5.4 million for legal services.

Nonprofit to be transparent—The district may create a nonprofit but that entity would be subject to both the Texas Open Meetings Act and the Texas Public Information Act and subject to legal restrictions on the use of district money.

SB 2332 was filed March 10th and was referred to the Local Government Committee March 23rd.

Sarah Eckhardt

State Senator Sarah Eckhardt (D-Austin) who as Travis County judge led the Commissioners Court in its oversight of Central Health, did not respond to email and text message requests for comments about SB 2332.

The pending lawsuit

As the Bulldog reported at the time, three Travis County taxpayers filed a lawsuit against Central Health and its president and CEO Mike Geeslin in October 2017. If successful the litigation’s biggest impact would be to force Central Health to stop transferring $35 million a year to the University of Texas for Dell Medical School. (Rebecca Birch, Richard Franklin III, and Esther Govea, vs. Travis County Healthcare District, dba Central Health, and Mike Geeslin, in his official capacity only, Cause No. D-1-GN-17-005824.)

Manuel Quinto-Pozos

Now more than five years later, plaintiffs’ attorney Manuel Quinto-Pozos of Deats Durst & Owen PLLC has recently deposed two top officials who work for Dell Medical School.

The key facts that emerge from the transcripts of those depositions are that Dell Medical School has no idea how much of Central Health’s $35 million a year in payments are spent to provide medical services to the poor, they have no basis for how they allocate these funds to Dell Medical School departments, and they have no idea how many Central Health patients are being treated by Dell Medical School.

Amy Young

The deposed officials include Amy Elise Young, MD, who serves as vice dean of professional practice at Dell Medical School, chief clinical officer of UT Health Austin, interim chair of the school’s Department of Diagnostic Medicine, and teaches as a distinguished professor in the Department of Women’s Health.

Young’s March 7th testimony in the 185-page transcript made clear that Central Health or its nonprofit subsidiary, Community Care Collaborative, makes payments to Dell Medical School or UT Health Austin over and above to the $35 million a year for Central Health patients that receive specialty care for musculoskeletal and women’s health services.

Dr. Young also stated that recently a new claims-based agreement had been struck for Central Health to also pay additionally for sterilizations, ambulatory surgery, podiatry, ophthalmology, advanced imaging, and outpatient care for patients with long Covid.

The other official deposed was Dwain Morris, executive vice president and chief business officer for the University of Texas at Tyler, who until August 1, 2022, was with Dell Medical School as its chief administrative and financial officer.

Dwain Morris

Morris’s 220 pages of testimony reinforced what is clearly stated in the University of Texas’ Operating Budget, that the $35 million a year Dell Medical School receives from Central Health is classified as “non-operating revenue,” meaning that no exchange of goods or services is considered to have occurred in return for those funds.

He further testified that internally Dell Medical School allocates salaries for its personnel based on revenue gaps, not according to how medical services are provided to Central Health patients.

Mike Geeslin

Attorneys for the plaintiff indicate that Mike Geeslin, president and CEO of Central Health, is scheduled for a deposition sometime in mid-May, followed by further action that may be concluded this summer.

Photo of Ken MartinTrust indicators: Ken Martin has been doing investigative reporting in the three-county Austin metro area since 1981. His aggressive reporting twice garnered first-place national awards for investigative reporting. Both of those projects resulted in successful criminal prosecutions. His 2011 investigation of the Austin City Council’s open meetings violations triggered a 20-month investigation by the Travis County attorney that resulted in the mayor and council members signing deferred prosecution agreements to avoid being charged, tried, and if convicted serving one to six months in jail and forfeiting their elective offices. See more on Ken on the About page. Email [email protected].

Related documents:

Agenda Request for Travis County Commissioners Court to consider contract with Mazars USA LLP, April 4, 2023 (5 pages)

Professional Services Agreement between Travis County and Mazars USA LLP for Independent Performance Audit of Central Health, April 4, 2023 (37 pages)

Senate Bill 2332 by Senator Lois Kolkhorst, filed March 10, 2023 (14 pages)

Transcript of deposition of Dwain Morris, March 1, 2023 (220 pages)

Transcript of deposition of Amy Elise Young, March 7, 2023 (185 pages)

Related Bulldog coverage:

Second effort to find Central Health auditors, February 3, 2023

Central Health seeks control of Dell Teaching Hospital, January 25, 2023

Watson circumvented law to fund new medical school, November 1, 2022

Commissioners order Central Health performance audit, again, October 3, 2022

Central Health’s quest for Medical School accountability blocked by 2014 agreement, August 5, 2022

Commissioners opt for tougher Central Health audit, August 3, 2022

Central Health critics ramp up pressure ahead of vote on audit, July 25, 2022

Central Health’s $35 million payments to Dell Medical School an unlawful ‘gift of public funds’ that exceed statutory authority, June 30, 2022

New documentary takes aim at diversion of indigent healthcare funds, November 15, 2021

Lawsuit challenges Central Health spending, October 18, 2017

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