Central Health is suing Ascension Seton for breach of contract

Central Health, the hospital district for Travis County, has filed a breach-of-contract lawsuit against Ascension Seton, saying the health system “failed to keep promises” in operating the safety net hospital for Travis County.

The dispute is over the number of patients Ascension Seton cares for each year through Central Health’s insurance program, as well as the number of people Ascension Seton covers under “charity care,” meaning people who do not have any insurance and cannot afford care, Central Health said on Tuesday.

Ascension Seton owns Dell Seton Medical Center at the University of Texas, which is the emergency hospital for the county, meaning it is designed to care for all people, including those who do not have insurance and cannot afford insurance.

Central Health is asking a judge to allow Central Health to terminate its 2013 contract with Ascension Seton, which runs through 2038, and allow Central Health to purchase Dell Seton Medical Center, the lawsuit says.

More ▼:Why fighting Central Health isn’t Ascension Seton’s only problem

The lawsuit states, “In exchange for its promises to care for the people in Travis County who need it most, Ascension received not only hundreds of millions of dollars, but also the right to use and operate Dell Seton Medical Center at the University of Texas (“teaching hospital”). Although Ascension has benefited greatly from its contracts with Central Health, it has failed to deliver on the promises made in the contracts.”

“Ascension’s right to use and operate the teaching hospital is based on Ascension keeping its promises to care for our local safety net population. Ascension has waived that right,” the lawsuit says.

Central Health says the hospital needs to care for more people to meet the level of need. Ascension Seton claims it should be paid more for the care it provides and has said it serves more patients than it is contractually obligated to serve. The two healthcare organizations have been in discussions since 2018 over contract disagreements, including months of mediation followed by months of dispute resolution.

“We’re out of options,” said Mike Geeslin, president and CEO of Central Health. “Ascension’s continued failures to honor its contractual obligations left Central Health with no choice but to file a lawsuit to hold Ascension accountable for failing to provide adequate, equitable health care services to low-income people in Travis County.” Their practices have caused real harm to the people we serve.”

Ascension Seton did not immediately respond to a request for comment on the lawsuit.

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The story of Central Health and Ascension Seton’s partnership

Before Central Health was created by voters in 2004, the city of Austin owned Brackenridge Hospital, the city’s safety net hospital that Seton had been contracted to operate since 1995.

When Central Health was formed, it took ownership of the hospital, but Seaton still manages it. Central Health became the only hospital district in Texas that does not operate a hospital. In addition, she has not managed clinics up to this point. Instead, CommUnity Care took over the city and county clinics.

Although it doesn’t operate hospitals and clinics, Central Health uses taxpayer money it collects through a property tax of 9.864 cents per $100 valuation to fund its MAP insurance programs for people who can’t afford other plans.

MAP covers people in Travis County who are not eligible for Medicare or Medicaid but are below 200% of the federal poverty level. Central Health has MAP, the extension known as MAP Basic and its Sendero Health Plan, a community-based insurance plan through the Affordable Care Act’s federal marketplace.

When Ascension Seton decided to open Dell Seton Medical Center at the University of Texas in 2017 to replace Brackenridge, it did so without money from Central Health. Ascension Seton now owns the public safety hospital building and land, rather than simply operating the hospital.

Central Health still owns the Brackenridge block, which houses some Ascension Seton offices, as well as the parking garage for Dell Seton Medical Center.

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What are Ascension Seton and Central Health fighting for?

The contract, which took effect in 2013 and is binding through 2038, requires Ascension Seton to serve an annual average of no more than 25,000 unique MAP participants. It will also provide charity care to no more than 28,000 unique charity care patients per year.

Ascension Seton said it cares for more than that number and no longer gets paid. Central Health said Ascension Seton never cared about the number of patients in the contract. Central Health said, using Ascension Seton’s own numbers, Ascension Seton served 8,000 fewer individual patients with MAP or charity care in 2022 at the hospital compared to 2013, and 31,000 fewer patient encounters than patients with MAP or charity care in 2022 compared to 2013.

According to numbers shared by Central Health, Ascension Seton saw 30,665 MAP and charity patients in 2022, compared to 38,638 in 2013. The highest number of MAP patients was 18,239 in 2019 and 24,070 patients with charities also in 2019.

“Over the years, Ascension has cared for fewer and fewer patients, and that is neither acceptable nor contractually permissible,” said Dr. Charles Bell, chairman of Central Health’s board. We hoped it would never come to this.”

Central Health also said that MAP patients and charity cases also do not have the same levels of care in specialty areas such as general surgery, mammography, radiation oncology, orthopedics, otolaryngology, podiatry, plastic surgery, pulmonology and rheumatology.

The contract also states that Seton agrees to serve MAP enrollees and charity cases without discrimination. It has agreed to provide service level reports and reports on clinical quality and patient satisfaction. Central Health agreed to report who was enrolled in its MAP program.

Central Health says Ascension Seton is in breach of contract in four areas:

  • Failure to provide contracted health services to low-income residents of Travis County, both generally and in relation to several specialty areas.
  • Failure to provide health services to MAP patients and charity care on a non-discriminatory basis.
  • Improper billing of charity care patients for health care services.
  • Fails to provide required reporting that Central Health must monitor Ascension’s compliance with performance standards.

Find out more: Central Health at Dell Medical School: Where is our $35 million going?

A complex arrangement

That 2013 agreement is actually between Central Health, the Seton Family of Hospitals, which is now Ascension Seton, and the Community Care Collaborative, a nonprofit partnership between Central Health and Ascension Seton to use money from a federal program known as the incentive payment for delivery system reform.

The Delivery System Reform Payment Incentive Program is a pool of money from the federal Medicaid 1115 waiver program of 2012, created to help states improve access to Medicaid and health care.

The federal program provided $500.6 million, which was matched by $208.3 million from Ascension Seton and $137.3 million from Central Health. That money went through the Community Care Collaborative and helped provide $35 million in annual funding to Dell Medical School. That federal program ended last year, but Ascension Seton, Central Health and the Community Care Collaborative are still in partnership and bound by the 2013 agreement.

Further complicating matters was a lawsuit filed in 2017 by community members against Central Health for using taxpayer money to fund the medical school rather than direct patient care. Central Health also asked Dell Medical School for better accounting of where that $35 million a year in taxpayer funds goes. That $35 million was approved by voters in 2012 when they agreed to open a medical school in Austin.

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What about Central Health’s money?

Central Health was created to provide health care for people who cannot afford it in Travis County. Each year, Central Health’s budget must be approved by the Travis County Commissioners Court because, under Texas law, Central Health cannot impose a tax rate because its board is appointed, not elected.

In late September, commissioners approved Central Health’s budget, but not before drawing criticism from groups including LULAC and the NAACP, as well as Travis County Commissioner Margaret Gomez. A performance audit is underway this year, overseen by members of the Travis Commissioners Court.

His spokesmen say Central Health does not provide direct care but outsources care to others such as Ascension Seton, CommUnity Care and UT Health Austin, the Dell Medical School clinic.

Central Health will open its own clinics in Hornsby Bend and Del Valle this year and hire its own clinical staff. It will also update the Rosewood-Zaragosa Health Center to create a specialty care clinic.

Critics, including Ascension Seton, have questioned why Central Health has $327.7 million in contingency reserves in the 2023 budget and $38.7 million in emergency reserves.

Central Health expects that by 2030, about half of the emergency reserves will be spent with the current programs it runs and the new programs outlined in the health equity plan, which launched last year.

“In order to make these commitments, we need to make sure we have a very strong fiscal sustainability program,” Central Health CEO Mike Geeslin said as the budget was being debated.

Central Health plans to spend $339,000 on legal fees this fiscal year.

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How can the dispute be resolved?

There are many ways to do this. Ascension Seton may agree to treat more MAP and charity care patients at an updated rate funded by Central Health.

The two may separate. Dell Seton could become a hospital without a safety net, and Central Health could build its own hospital to run. Central Health may find another partner to operate a secured network hospital. Central Health could create a hospital within a hospital by taking over a floor of an existing hospital specifically for the patients it is assigned to care for—people whose incomes are 200 percent or below the poverty level. Or Central Health could become the owner and operator of Dell Seton by purchasing the hospital or leasing it from Ascension Seton.

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