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Central Health OKs teaching hospital agreements

Monday, October 20, 2014 by Beth Cortez-Neavel

Despite public requests to postpone the vote, Central Health’s Board of Managers approved two crucial lease agreements for the new teaching hospital Wednesday night. Under the agreements, Seton Family Healthcare will pay $877,621 a year to the University of Texas for the land to build the Seton Medical Center teaching hospital.

The hospital will be replacing the Central Health-owned University Medical Center Brackenridge, currently operated by Seton, which serves as the health care district’s safety net provider of services for uninsured and underinsured populations. Seton will build the new hospital across the street from Brackenridge at 15th and Red River streets. Brackenridge will close once the medical center has opened.

Central Health will lease the hospital’s land from the university, under a ground lease, and will sublease the land to Seton under a second agreement. Seton will fund the construction and operation of the facility and pay rent directly to the university, although Central Health will act as the intermediary between the two.

David Hilgers, an attorney responsible for negotiating the lease agreements on Central Health’s behalf, said that with this setup, Central Health will have more control over the hospital, which will continue to serve the safety net population.

“Without this, we could lose control over the hospital facility,” Hilgers said. “And that would be a dereliction of our responsibility, because we have to have this ground lease to make sure the obligations that Seton has and that (the university) has to us can be enforced to a maximum degree as possible.”

Seton’s sublease agreement with Central Health is for 60 years and has two 10-year renewal options. If Seton defaults on the lease in any way, such as by missing a monthly payment, failing to operate the hospital as part of the safety net system or not providing the required teaching hospital services, Central Health would step in. If Seton defaults and the three parties are unable to negotiate a solution, Central Health will take over ownership of the hospital facility. If Seton is not bankrupt, it would be required to manage the hospital for two more years until a new operator is found.

Frank Rodriguez, the committee chair of health advocates Community Health Working Group, asked the board to postpone the vote during Citizens Communication.

“Our concern is that there just hasn’t been enough time to really look at this agreement,” he said. “This agreement is really important because it immortalizes the terms of the hospital piece of the safety net system, and we think the safety net deserves a little more attention than simply one week to review the agreement.”

Community members from the Dove Springs Neighborhood Association and the League of United Latin American Citizens also stepped forward to ask for postponement.

Board members Dr. Guadalupe Zamora and William “Kirk” Kuykendall took up the issue, asking whether it would be prudent to postpone the vote until the community had more time to look over the agreements.

Kuykendall said he also had some anxiety on the short time frame allotted to look over the lease agreements, but was able to get his questions answered over the week. “I am comfortable with the contents of the lease agreement,” he said. “But I did hear a sense of displeasure with the process that we control. If we can avoid quieting (community) voices in making an adjustment, I think it is in our best interest to do so.”

Hilgers said if any changes were necessary after community input, negotiations with Seton and the university would resume and could take more time.

“The timing is really very tight,” Hilgers said, pointing out that Seton is paying penalties to its contractors until construction begins. “Seton has to start building this hospital, and they can’t build this hospital until these leases are signed.”

Board member Rosie Mendoza noted that the community concerns raised at the meeting and the lease agreements were two separate issues.

“I’m not quite sure that those concerns that this community has, which are very valid, are addressed in this lease agreement,” she said. “We have this issue of this lease agreement, these agreements we need to move forward with, and then we have these valid concerns to the community that I believe we have to address.”

The board approved the ground lease 7-1, with Clarke Heidrick abstaining and Zamora voting against. The board also approved the sublease 7-1, with Tom Coopwood abstaining and Zamora voting against.

Staff said they would meet with community leaders to address the concerns brought up during the meeting. Hilgers said the University of Texas, Seton and Central Health will close on the leases Friday, and Seton will begin paying rent. Construction is slated to begin shortly.

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