Pain and Suffering for Hospital District
City, county spar about money and power over new health care system
By Amy Smith, Fri., Aug. 13, 2004
When all hell broke loose last week over funding for the new Travis Co. hospital district, the multimillion dollar clash between the city and the county served to remind us that this is one intergovernmental relationship with a lot of baggage. If anyone had taken that into consideration during the two years of planning for a hospital district, the district's volunteer board members might not have kicked off their first meeting with the grim discovery that they're not only cash poor but in the middle of a major dustup.
The bad blood between the city and county goes way back, but today's dispute centers on the city's transfer two years ago of $33 million in health-care funding to a new General Fund reserve. The matter came to light when County Auditor Susan Spataro began thumbing through the city's books in preparation for the hospital district, and thus the county, assuming control of the city's public health care programs.
City budget officials, taken aback by the county's angry reaction to the 2002 budget maneuver, say they made the shift in order to maintain a favorable bond rating during the economic downturn (a strategy, they say, the rating agencies noticed and appreciated). They did not hide the transfer, nor did they go out of their way to publicize it at a time when a steering committee was just beginning to lay the foundation for a district and a unified funding system for local public health care. (City leaders also point out that Austin's health care assets, including Brackenridge Hospital, are being transferred to the district debt-free.)
"The timing was awful," County Judge Sam Biscoe said the other day. "We were just starting to get serious about a hospital district." For his part, Biscoe has remained relatively quiet about the funding switch, compared to the loud outcries of County Commissioners Karen Sonleitner, who supported the district, and Gerald Daugherty, who did not. Nevertheless, Biscoe allows that the city's budget shift was in his view "funny and suspicious." Biscoe's predecessor, Bill Aleshire, who opposed the district, has also jumped into the fray, calling the funding transfer a clear-cut case of "theft." "Extremely cheesy," was how one high-ranking county official put it. County Commissioner Margaret Gomez offered the most tempered response, saying she was "extremely concerned" but "hopeful" things would get straightened out.
City Council Member Betty Dunkerley, who before being elected in 2002 was the assistant city manager overseeing health care – and who helped engineer the now-controversial fund transfer – says it's time to move the issue "out of the political arena" so that all parties can figure out the best way to achieve a stable reserve for the hospital district. An additional financial hurdle could be cleared, Dunkerley said, if the district accepts the city's offer to cover operational costs and other expenses for three months. The district would reimburse the city with its tax revenues, once those start coming in – but without the interest fees it would otherwise incur with a bank loan. The city has also offered to continue to pay administrative overhead costs – payroll, HR, etc. – for the city programs and employees now under the purview of the district, and to seek reimbursement as a contractor only for direct clinical services to patients.
Beyond the specifics about the money are larger qualms at the courthouse, as the county walks into new territory that the city has cultivated, funded, and controlled for decades. For the time being, the city will likely continue, as a contractor for the hospital district, to provide clinical care. Most people in and out of county government agree this arrangement would facilitate a seamless transition, but the county is not altogether happy about it. "They want to run the damn thing but don't want to be responsible for the expense of it," one county person groused.
"I think we need to recognize what the practical realities are ... this transition needs to be respectful of the clients and the employees," said Sonleitner. "But the practical realities don't necessarily have to become permanent realities. I don't know how long 'practical' lasts."
On an administrative level, most county officials stop short of endorsing the idea of the hospital district's top two staff jobs – that of administrator and chief financial officer – going to current City Hall executives. There's more acceptance of a city person filling the top spot temporarily while the district Board of Managers searches for a permanent administrator. City finance officer John Stephens has been mentioned as a possible candidate for the interim job, since he already has one foot out the door as a city retiree. (His postretirement transition gig at City Hall lasts another few months.) Another city department head, Trish Young – CEO of the city's Community Care Services department, which operates the clinics – says she intends to apply for the administrator's post. Given the relatively low salary of $154,000 (low compared to what's paid in other Texas hospital districts), some observers say Young would likely not face stiff competition from outside candidates looking for new horizons.
Suffice it to say that the district board will be hearing a lot of advice from the county on this score. "In terms of timing and continuity, it makes sense that the board would use a city person on an interim basis to give the board time to do a good search," Biscoe said. Acknowledging that a city employee could emerge as the most qualified candidate for the post, the county judge said he could live with that if he's satisfied that the board cast a wide net in its recruitment process. "I would be disappointed if the board gets so comfortable [with the city's influence] that they don't conduct a thorough search."
Still another county official expressed strong reservations about a city employee running the hospital district, even temporarily, given the potential conflicts of interest and allegiances that could contradict the district's best interests. Young responds that, since she came to work for the city in 2000, her mission has been to improve the clinics and health care delivery system. "I'm here because I want to do this work," she said. "I want to work with the community and to continue to improve the delivery of health care services. If you get too caught up in the politics, you run the risk of letting politics distract you from that mission."
The prospect of putting a city employee in charge of the hospital district amplifies concerns that Sonleitner says already exist under the current city/county setup. "There are things that we work exceptionally well on," Sonleitner points out, "but health care is not one of them."
"I don't know if I would totally agree with that," Young said. "On an operational level we do our work and I think we work very well together. That's not to say there haven't been frustrations on both sides, but a lot of that just goes with the territory of working for two governmental agencies that may not operate the same way in all cases."
Those operational differences unfolded last week during the city and county budget presentations to the Board of Managers. County financial policy is to sock away 11% of operations costs between allocated and "untouchable" reserves – the latter to be tapped only under the direst circumstances, such as a tornado leveling the courthouse. Under those guidelines, the hospital district would need significantly more cash than what's on hand in its projected reserves now – $3 million from the city, and a little less than $1 million from the county. This shortfall is of particular concern to the county because a poor financial outlook for the hospital district puts the county's cherished AAA bond rating at stake.
The city, which has a AA bond rating, sets its comfort level for reserves much lower – at 5% or 6%, which city leaders say is acceptable to the bond houses. That's a more attainable goal for the hospital district but a potential trouble spot for the county, which ultimately will have the final say on the district's budget. The county has set two dates – Aug. 19 and Aug. 23 – for these budget hearings.
Meanwhile, Biscoe says he's less concerned for now about the $33 million shuffle than he is about straightening out the budget reserve matter. He says he is tired of the city justifying its budget transfer by pointing to the amount that it's already spent on health care in the last 25 years – $630 million by the city's account, over and above patient revenues, state and federal aid, Medicaid reimbursements, and so forth. That figure, Biscoe noted, is just a fraction of what the county shells out for its own money-losing mandate – the criminal justice system. A quick calculation on Monday over the last 10 years – $1.3 billion – doubles what the city spent on health care over 25. "They put a lot of money into health care," Biscoe said, "but I don't know if they deserve any brownie points for their history."
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