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Community leaders release ‘red flags’ report on Central Health

Thursday, March 24, 2022 by Jo Clifton

Leaders of the NAACP Austin and Texas League of United Latin American Citizens District VII released a scathing report Wednesday on Central Health’s financial and operational activities. The organizations called on the Travis County Commissioners Court to order a “comprehensive, independent, third-party performance audit” of the agency.

Frank Ortega, director of the LULAC district, and Nelson Linder, president of the local NAACP chapter, said Central Health had failed in its mission to effectively provide health care to the poor and to use taxpayers’ funds efficiently.

Linder said commissioners “had financial supervisory authority by law over Central Health” and should order the audit. Linder said the “red flags” report demonstrates the need for an independent audit. “Without accountability, there is no equity,” he said.

Ortega said Travis County’s 185,000 uninsured are predominantly people of color. “They depend on Central Health for their health care. Health equity requires that Central Health serve the poor’s health care needs effectively,” he said.

Central Health recently announced it would soon begin construction on two new clinics in eastern Travis County, exactly the sort of thing Central Health’s critics would like to see. The agency has also recently released a health care equity plan.

Joining Linder and Ortega at a news conference calling for the audit were former Travis County auditor Susan Spataro and attorney Fred Lewis. Spataro said auditors would find out why Central Health raised its tax rate by 6 percent for this fiscal year yet decreased health services for the poor by 34 percent. Lewis, who has sued Central Health, said if commissioners approve a resolution seeking the audit in the near future, they would hire an outside firm to conduct the audit and get the results back sometime this fall. He said the lawsuit is still in the discovery stage.

Here are the eight allegations – called red flags – cited by the report:

  • The federal Health and Human Services inspector general found $83 million in impermissible provider-related payments involving Central Health’s nonprofit partner Community Care Collaborative.
  • Seton, one of Central Health’s partners, paid a $20 million fine for alleged provider kickbacks.
  • Ascension Seton and Central Health are in a protracted contractual and funding dispute over Seton’s provision of direct health care to the poor.
  • Community Care Collaborative has no approved budget and Central Health and Seton have both discontinued their payments to the collaborative.
  • Central Health’s contingency reserves have multiplied eightfold from $36.6 million to $298 million in the last five years for unclear reasons. Central Health’s contingency reserves in Fiscal Year 2022 are three times its health care spending.
  • The Dell Medical School has received $280 million from Central Health, but has never produced any documentation of the specific amount and type of direct care it has delivered for these funds. The authors of the report, quoting a 2012 Austin American-Statesman article, say Central Health promised the voters in 2012 that $35 million of the estimated $54 million a year in new tax revenue would be permanently earmarked for services provided to needy patients by the medical school’s faculty and residents. They say, “There is no evidence that happened.”
  • The report says Central Health claims to have only 3 percent administrative costs, but the agency’s non-health care costs appear to be at least 35 percent.
  • “Despite repeated costly failures to establish an integrated delivery system, Central Health is planning major expenditures to develop a new ‘equity-focused service delivery plan.’ Central Health projects the cost will be $7 million and require the addition of 20 new employees.”

Central Health’s vice president of communications, Ted Burton, told the Austin Monitor via email, “Some of the people who orchestrated the press conference, such as Fred Lewis, are plaintiffs in an ongoing lawsuit against Central Health regarding our investment in Dell Medical School at the University of Texas. While that lawsuit is pending, our attorneys have advised us it would be inappropriate to comment at this time.”

However, Burton did provide this statement: “At the request of Travis County Commissioners, Central Health undergoes an independent, third-party, five-year performance review to evaluate the effectiveness and efficiency of the organization and provide recommendations about opportunities for performance improvement. Our next performance review will be in 2023.”

Burton also provided these statistics:

  • Ninety-seven percent ($491 million) of Central Health’s Fiscal Year 2022 $506 million budget is dedicated to health care delivery for people with low incomes. These are people at or below 200 percent of the federal poverty level. The FPL is $13,590 for an individual, or $27,750 for a family of four, in 2022.
  • In Fiscal Year 2021, Central Health served more than 147,000 people, a 6 percent year-over-year increase.

The budgets are posted on Central Health’s website.

Download (PDF, 6.59MB)

Photo by Larry D. Moore, CC BY-SA 4.0, via Wikimedia Commons.

The Austin Monitor’s work is made possible by donations from the community. Though our reporting covers donors from time to time, we are careful to keep business and editorial efforts separate while maintaining transparency. A complete list of donors is available here, and our code of ethics is explained here. This story has been changed since publication to correct the federal poverty threshold numbers.

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