Central Health Lays Out Its FY 2019 Budget
For your health
By Mike Clark-Madison, Fri., Aug. 17, 2018
Raise your hand if you know what Central Health is. It's OK; you're not alone. Polling shows that most folks in Travis County are unfamiliar with their voter-created health care district. But if you're a property owner, you may be familiar with the "hospital district" line item on your most recent tax bill. That 10.7385-cent assessment, which generates more than 90% of Central Health's annual budget of around $200 million, pays for a lot of health care services for our lower-income neighbors, as well as helping float an insurance plan, bringing the Dell Medical School to life, and catalyzing property development both Downtown and on the far Eastside.
In recent years, particularly last year, the Central Health budget process has become more newsy. Among other things, the district's funding of Dell Med was challenged (by the omnipresent Fred Lewis and his posse), although voters in 2012 approved a Central Health tax hike for this express purpose. This begat an audit and performance review and heightened scrutiny by the Travis County Commissioners Court, which must approve the budget despite Central Health not being a county department.
Between Dell Med, the bumpy road to redevelopment of the old Brackenridge Hospital campus, the signs of fragility at Sendero Health Plans, the loud demand for clinics and services in the Eastern Crescent, and the complicated structure and short- and long-term financial position of the entire Central Health "enterprise," people who hadn't been paying attention now have questions they'd like answered. The district's new 2019 budget proposal may help:
• Where does all that money go? Mostly to pay for health care for more than 101,000 Travis County residents, of whom 75% are below the federal poverty line. Most of that money – about two-thirds of the entire Central Health budget – is basically nondiscretionary; some of it is matching money for federal funds.
Central Health doesn't provide services directly; instead, it's a partner in the Community Care Collaborative (CCC) with Seton, which manages the money, contracts with providers, and pursues efficiency, best practices, better patient outcomes, and so forth. The largest of those providers is CommUnityCare (not the same thing), which like the CCC and Sendero is part of the Central Health "enterprise."
For civilians, the important fact is that Central Health doesn't have a huge amount of money that isn't being spent on direct services. Some would like all the money to be so spent – the crux of Lewis' legal crusade and a tenet of advocates like Central Health board member Cynthia Valadez, who at the board's latest budget presentation last week said that "our primary reason for existing is to serve MAP patients," referring to Central Health's benefit plan for the lowest-income people it serves. "We need to look at aligning our budget to serve that population and its needs. We need to have serious conversations about what we're supposed to be doing."
• What is Dell Med doing with our money? Despite the 2012 public vote enabling it, the CCC's $35 million annual contribution to Dell Med is a flashpoint for Central Health critics. They begrudge the perceived lack of transparency, deviation from Central Health's core mission as expressed by Valadez, and/or the fact that our local taxpayers have to support a marquee program at one of the wealthiest universities in the nation – and one that Valadez described as "a historically racist institution."
In response, the medical school has amped up its PR game to tout its progress, brought on a new director of local affairs (Foundation Communities vet Elizabeth Colvin), and highlighted how the $35 million is being allocated toward services that safety-net patients can use. "This year is a pivot point for Dell Med," Colvin told the Central Health board. "Previously, we'd been focused on creating infrastructure, recruiting, developing models, and now we can use that work to bring innovative services that benefit people in Austin. ... You can see that our allocation is shifting to focus on clinical services that provide benefits to MAP patients and others in the community."
• Is Sendero going to make it? The decision to meet the needs of more county residents by providing low-cost, nonprofit health insurance, though ambitious and altruistic, was never without risk. Despite seeing 50% growth in the first years of the Obamacare exchange, when its IdealCare plans were the lowest-cost in Travis, Sendero abruptly exited the market for Medicaid managed care and Children's Health Insurance Program plans earlier this year. Sendero required a midyear investment of $26 million, and the FY 2019 budget calls for an additional $20 million, which raised eyebrows among board members before they discussed Sendero in executive session.
"That's a lot of money," said Travis County Judge Sarah Eckhardt. "I do have concerns. That's a lot of money. I'm concerned that the return on investment is not defensible, and that trajectory doesn't seem to show any sign of changing." Eckhardt noted that Sendero's own figures in the budget indicate that "members have saved approximately $34 million" – that is, less than Central Health has paid in just in the last two years.
"I don't believe there is incompetent money managing," Eckhardt continued. "I can't express enough how well intentioned it was, but it's a pilot that didn't pan out, and the respective boards at Central Health and Sendero are having a hell of a time bringing it to the end of its life."
• What's going to happen to Brackenridge and in the Eastern Crescent? After developing a master plan for Brack's 14.3-acre campus and beginning negotiations with a master developer (Wexford Science & Technology), Central Health's board changed course and agreed to quickly lease out two of the six Brackenridge blocks. The district says the master plan is still in place, but it's feeling the pain of losing the $32 million annual lease income it got from Seton when it was operating Brackenridge. The FY 2019 proposal assumes $18.2 million in lease revenue, offsetting the $6.2 million anticipated cost of demolishing the tower and other buildings on those two blocks.
As for the Eastern Crescent, the new budget proposes issuing $23 million in debt to pay for the facilities residents have loudly advocated for since the district's founding. Whether that means building new clinics, repurposing old ones, expanding the successful mobile clinic program, or all of the above remains to be seen. "We're looking at how to get services on the ground as quickly as possible," Central Health CFO Jeff Knobel told the board.
• Does Central Health have enough money to pay for all this? Knobel showed the board eye-opening charts of the district's anticipated cash flow in FY 2019 – going negative this fall, before the tax revenues come in, likely requiring the district to issue the government IOUs called tax anticipation notes – and the parlous state of its reserves going forward. While the budget was developed assuming a 4.5% increase in the effective tax rate (about $11/month for the average Austin homeowner), the district gave strong signals it would end up at a 6% increase and continue at that rate well into the future to replenish its reserves.
"It does not shock me that they have to go to 6% year over year," said Eckhardt, who along with her colleagues needs to approve that tax rate. "It was probable they were going to have to build their budget around built-in tax increases. We still have a historically low tax rate for a major metropolitan hospital district in Texas." (This is true, by a substantial margin.) "They were going to have to build in tax increases at some point in order to be a real health care district in a major metro area."
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