The city’s leverage in its latest flap with the Seton Healthcare Network may shift dramatically when former City Manager Jesus Garza crosses over to the Seton team later this month. On Monday, Seton announced that Garza has been hired as president and CEO of a new Seton division that will include Brackenridge and three of Seton’s rural health care centers. The decision to leave the Lower Colorado River Authority, where Garza has worked since leaving City Hall seven months ago, was not an easy one, he said. “But I have a passion for health care and I think, at the end of the day, this is where I have a better fit. I almost feel like I’ll be coming back to the city.”
Whether that leverage shifts up or down will depend on how aggressively Garza’s successor, Toby Futrell, and the City Council are willing to fight for concessions in the tussle over Children’s Hospital, the most profitable division of the city-owned Brackenridge Hospital. Seton has leased and managed the Brackenridge complex for the city since 1995, but the marriage hasn’t exactly been blissful. In October, Seton stunned and angered elected officials and civic leaders when it announced plans to build a “replacement” children’s hospital — effectively privatizing a community institution without public input and “cherry-picking” the most valuable asset of a proposed Travis County hospital district likely to be presented to voters for approval next November.
“So far, to the best of our knowledge, there is nothing in the lease that precludes Seton from building another hospital,” Futrell said. She just wants to make sure the city doesn’t get stiffed in the upcoming reorganization and has hired outside counsel — seasoned lawyers Jim George and John Boehm — and a health care consultant to advise on renegotiating the lease agreement. “I want to protect the quality of health care for every citizen in Austin,” she said. “My concern [with the new hospital] is that Seton continues to provide health care to every child, regardless of whether they’re able to pay or not.”
The obvious question is whether the city’s position will be seriously compromised with Garza officially on the Seton team. It was Garza who brokered that original 1995 lease agreement, as well as the recently negotiated amendment to it creating a city-run “hospital within a hospital” to provide women’s health services that the Catholic hospital decided it cannot offer.
The timing of Garza’s hiring raises additional questions: What did Garza know, when did he know it, and whose side was he on? According to Futrell, Seton officials told Garza of their intentions regarding Children’s in February, after he had announced his resignation but before he actually left City Hall, and right after the City Council had approved the lease amendment for the “hospital within a hospital.” He did not, however, pass this information on to Futrell or other city staffers. If the city — that is, City Manager Garza — knew of the Children’s plans during the women’s-services negotiations, the city could have crafted a better deal with Seton on that front. Moreover, it would have been more than helpful for hospital-district proponents to have known back in February of Seton’s plans. Instead, Seton representatives joined other community leaders for several months of planning discussions for a hospital district — discussions that consistently included Children’s in the equation — and Seton said nothing of its intention to keep for itself the crown jewel of Austin’s public health care dowry. It remains unclear why Garza kept that information to himself.
Seton’s ability to lure Garza away from his post-City Hall position at the Lower Colorado River Authority is viewed by some with suspicion as a serious effort to buy some credibility after the Children’s flare-up. “I don’t subscribe to that at all,” Garza said. “Seton has very capable people who have been dealing with that issue and will continue to deal with it.”
But Garza’s hiring “sends a suggestion, whether accurate or not, that Jesus was not as aggressive as he should have been in negotiating the lease we have now,” said Texas Monthly publisher Mike Levy, a vocal critic both of Garza as city manager and of Seton’s handling of Children’s. Levy sharply questions Seton’s stated commitment to a hospital district. “This is not about children; it’s about control of the health care dynamic in Austin. They don’t want any dilution of control and a hospital district would threaten to do just that,” Levy said.
But Travis Co. Probate Judge Guy Herman, who led the initial campaign to create a hospital district, doesn’t think Garza’s new position will jeopardize that effort. “As his participation in the leasing away of our public hospital shows, he knows the city could not continue to run, much less finance, a hospital. That’s why other communities have hospital districts,” he said. “I can only assume he will support the creation of a hospital district just as Seton claims it does.”
It’s uncertain what role, if any, Garza will play in Seton’s future contract negotiations with his former employer. The city’s ethics rules preclude Garza from doing business with the city for one year after leaving his post. That’s five months away, and Futrell says she expects to have the Children’s matter settled before then — the first meeting with Seton is scheduled for the middle of this month. For now, at least, Seton spokeswoman Gayle Granberry says that Interim President and CEO Pat Hayes and her boss Charles Barnett, a senior VP at Seton’s parent company Ascension Health, will lead any discussions with the city about the new children’s hospital. “We are aware of the city’s ethics ordinance and will comply with its requirements,” Granberry said.
Mayor Gus Garcia, at least publicly, is taking the Garza news in stride. “If he is the one placed in charge of negotiating our contract with Seton, we’ll deal with it,” he said. Garcia added that the former city manager called him at home last weekend to inform him of his career change. “I was a little bit surprised, but I didn’t ask him why he was taking the job,” he said. “I told him I appreciated the call.” Garza also placed a call to Futrell with the same news.
Council Member Betty Dunkerley, who before being elected in May was the assistant city manager working on the Seton contract, said she was surprised by Garza’s decision, but that “It’s always good to negotiate with someone who knows and understands the issues. He also brings a spirit of public service to the table that I think will stay with him, regardless of whether he’s working in the private sector.”
News of the Garza-Seton partnership may have been particularly startling at LCRA, where Garza was widely regarded as a likely successor to LCRA General Manager Joe Beal, who had convinced Garza to become his deputy for less than his City Hall salary. Garza’s current $180,000 paycheck will likely grow substantially when he moves to Seton on Dec. 16. “He must have gotten a hold of their 990s,” one elected official quipped, referring to the IRS form filed by nonprofits such as Seton. Seton’s 990 for 2000 indicates that top administrators are paid extremely well — from $250,000.
While Beal has publicly wished Garza well, his sudden departure has, of course, raised eyebrows at the LCRA offices. “I would guess that [Beal] is not real happy about this because he’s the one who brought Jesus over here,” said one source. “But I’m assuming that Jesus got an offer he couldn’t refuse and … he took it.”
This article appears in December 6 • 2002.
