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Travis County judge hears arguments over Central Health’s payments to Dell Medical School

A Travis County district judge will hear a case involving Central Health on Thursday.
Renee Dominguez
KUT News
A Travis County district judge will hear a case involving Central Health on Thursday.

A Travis County district judge heard arguments Thursday in a lawsuit that alleges Travis County’s taxing hospital district Central Health has improperly given money to Dell Medical School since 2014.

Birch v. Travis County Healthcare District was filed by a group of local taxpayers in 2017. At issue is a $35 million annual payment from Central Health to Dell Medical School at UT Austin, which was enabled by a ballot proposition voters approved in 2012. The proposition raised taxes collected by Central Health, in part to help support the development of a new medical school “consistent with the mission of Central Health.”

The suit’s plaintiffs — Rebecca Birch, Richard Franklin III and Esther Govea — say around 90% of that money has been used by Dell Medical School for things like education, research and administrative costs. Fred Lewis, an attorney for the plaintiffs, said that funds raised by a narrowly designated, special-purpose district like Central Health should be used only to pay medical costs for poor residents.

“[Central Health’s] argument has to be that having a medical school is indispensable to serving poor people, and that's a pretty weak argument because there are a lot of hospital districts in Texas that serve poor people and do not have medical schools,” Lewis told KUT News ahead of Thursday's hearing.

The plaintiffs’ lawyers asked Judge Amy Clark Meachum to order a halt to any spending that does not directly fund medical care for poor residents. They also want the judge to order Dell Medical School to start keeping detailed records that show Central Health funds were spent on the poor, Lewis said.

Leading up to the hearing, Central Health’s lawyers filed a motion for dismissal, arguing citizens don’t have standing to sue government entities like Central Health.

They also said Dell Medical School’s spending is in line with Central Health’s mission and is “necessary to expand the health care services Central Health is able to fund and improve outcomes for the patients it serves.”

“We are confident that the voter-approved annual payment to UT, as well as any other spending that the plaintiffs may challenge, complies with the Texas Constitution and is within Central Health’s statutory authority,” Ted Burton, a communications officer for Central Health, said in an emailed statement.

Sinéad O'Carroll, an attorney representing Central Health, argued Thursday that investing in Dell Medical School had served needy residents in Travis County by creating critical local health care infrastructure. For instance, she cited how the opening of the UT Health Austin Musculoskeletal Institute had eliminated a year-long wait faced by Central Health patients who needed to see an orthopedic specialist.

Additionally, O'Carroll said the medical school had attracted hundreds of doctors to Austin, and nearly half the residents and fellows who graduated from the school had chosen to remain in Central Texas.

"Central Health does not make the permitted investment payment for the sole purpose of supporting the medical school," she said. "It does so to increase the availability of high-quality health care for the patients it serves."

Lewis said these benefits, while positive, do not meet the standard for how a public hospital district is required to spend its money — and expressed skepticism of the "trickle-down" effect on poor residents O'Carroll argued existed.

"This entity has one express purpose: It is to establish a hospital system to provide health care to the indigent," Lewis said.

Judge Meachum said she would review both the plaintiff's request for judgment without a trial and Central Health's motion to dismiss.

The hospital district’s finances have garnered scrutiny outside of this lawsuit. During Travis County’s budget approval process last year, critics questioned the hundreds of millions of dollars kept in Central Health’s contingency reserves fund. Central Health leaders said they planned to draw on the funds to add new clinics and direct care services intended to fill local gaps in care, part of the organization’s Healthcare Equity Plan. Travis County also ordered an independent performance audit of Central Health last spring, which has not yet been completed.

Birch v. Travis County Healthcare District is one of two high-profile lawsuits in which Central Health is currently involved. Central Health and partner hospital system Ascension Texas sued each other in early 2023, with each accusing the other of violating their obligations under an agreement for Ascension to serve uninsured and low-income residents at Dell Seton Medical Center.

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