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Central Health approves budget with a Hail Mary provision to halt layoffs at Integral Care

Photo of a sign on a wall reading "Central Health"
Martin do Nascimento
Central Health committed $7 million in its new budget to help stave off layoffs and other cuts at local mental health authority Integral Care.

Travis County’s public hospital district, Central Health, voted Wednesday to approve its fiscal year 2024 budget, which includes a last-minute line item giving $7 million in emergency funding to Integral Care.

Central Health’s budget still needs final approval from Travis County commissioners.

Integral Care is the largest provider of mental health services in Travis County. Its budget woes came as a result of a change in how it receives state and federal funding. Last week, its board passed a budget that was $22 million less than the previous year’s, including an $8.6 million reduction in operating expenses. The board approved 48 layoffs, eliminated dozens of vacant positions and cut several programs.

Union members from the United Workers of Integral Care said the changes would further stress an already overburdened staff and would make local mental health services harder to access.

Austin Mayor Kirk Watson publicly pushed Central Health to step in and provide a short-term solution for Integral Care. In his newsletter, he said Central Health’s board of trustees should tap into its contingency reserves to support mental health care authority.

“Our community has very real health care problems and a homelessness crisis now—today—and Central Health has both the mission and the means to help,” he wrote. “That would prevent lay-offs and prevent a reduction in important services.”

Former Austin City Council Member Ann Kitchen, who is a board member of both Central Health and Integral Care, introduced the $7 million budget amendment, which was added to existing funding Integral Care. The amendment dictates that the CEOs of both agencies meet to determine how to allocate the money for uses that will help “avoid patient disruptions or delays.”

“We’re not talking about doing anything outside of what our mission is: to enhance services for low-income residents and provide health equity,” Kitchen said.

The Central Health board of managers expects to review a detailed plan for how the $7 million will be spent by Oct. 4.

"Integral Care is deeply grateful to Central Health, their Board of Managers, and our Board of Trustees for their ongoing commitment to mental health care in Travis County and continued support to meet the needs of our community," Integral Care said in a statement.

Several board members expressed concern the added funding could become an annual expectation, but Kitchen said Integral Care’s board is committed to finding long-term solutions moving forward.

Likewise, Watson said in his newsletter that he would work to convene with the CEOs and board chairs from Integral Care and Central Health — along with leaders from the Dell Medical School, the City of Austin and Travis County— to work on stabilizing Integral Care’s budget and coordinating services for people who are unhoused and have mental health needs.

Budget breakdown

The additional funding for Integral Care was subtracted from Central Health’s contingency reserves, which will now sit at around $379 million.

Central Health has been steadily growing its reserves for years. It recently unveiled plans to draw heavily on the funds to execute its Health Equity Action Plan, a seven-year vision to add new clinics and direct care services intended to fill gaps in care. Examples include the soon-to-open Rosewood-Zaragosa Specialty Care Clinic and Hornsby Bend Health & Wellness Center.

This marks a shift in how Central Health operates; the organization historically has exclusively contracted with partner organizations to offer care. Last year’s budget included Central Health’s first $5.7 million commitment to direct care, and this year’s budget increases that amount to nearly $29.3 million out of a total of more than $360 million in expenditures.

While Central Health will begin to draw on its reserves this year, the increase will also be accommodated by added tax revenue. The organization has approved a FY 2024 maintenance and operations tax rate of 9.6071, an effective 6.5% increase over last year’s rate. That translates to a $56 annual increase for the average homeowner.

Critiques over Central Health's reserves

Despite Central Health’s insistence that building its reserves has been necessary to plan for the expansion of Travis County’s health safety net, the fund has been a magnet for critique — including by Ascension Seton, which operates Dell Seton Medical Center and has an agreement with Central Health to serve uninsured and low-income residents there.

The two entities sued each other early this year. Central Health accused Ascension of “reducing, capping, and eliminating” services for low-income patients at Dell Seton over the years, and Ascension accused Central Health of intentionally overenrolling patients in the Medical Access Program, which offers care to lower-income residents, without giving Ascension additional funding.

In advertisements Ascension has circulated on social media, the hospital operator calls Central Health’s reserves “a massive war chest,” intended to fund a “takeover” of Dell Seton, despite Central Health having no experience running a hospital directly. Central Health representatives say this is a mischaracterization. Rather, they say, Central Health seeks to trigger a provision in its contract with Ascension that allows it to pursue ownership of the hospital if Ascension fails to offer adequate care to Travis County's safety net population.

Other critics of Central Health’s reserves include the League of United Latin American Citizens and Austin NAACP, which were among the groups that successfully lobbied for Travis County commissioners to authorize an independent audit of Central Health. Those organizations are asking for more transparency into Central Health’s financial practices, including why it has grown its reserves to their current level.

Additionally, they want to know whether $35 million in annual funding to Dell Medical School has been used to provide care “consistent with the mission of Central Health.” That annual payment, authorized by local voters a decade ago, is also the subject of an ongoing lawsuit.

Next steps

With the independent audit of Central Health currently underway, Travis County commissioners have pressed the health district’s leaders to clarify certain aspects of its budget this year. At an Aug. 24 meeting, Commissioner Brigid Shea told Central Health CFO Jeff Knodel to return with a clearer explanation of how much the organization dedicated to reserves and health care delivery funds in the previous year.

“It's important for us to understand what all that reserve money is intended for, and why you need the additional tax increase,” Shea said.

Knodel and other Central Health leaders will present commissioners with their approved budget resolution, including the added funding for Integral Care, on Sept. 12. The commissioners are expected to take a final vote on the organization’s budget and tax rate the following week.

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Olivia Aldridge is KUT's health care reporter. Got a tip? Email her at Follow her on X @ojaldridge.
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