Central Health audit reveals no laws broken, but operational improvements needed

AUSTIN (KXAN) — An independent audit conducted on Travis County's public hospital district, Central Health, found the district's operations didn't violate the law — but did note areas for improvement in its governance, oversight, record-keeping and communications with the public.

County voters approved the creation of Central Health back in 2004, with the goal of providing healthcare services to people who are lower-income, uninsured or otherwise lack medical access. Unlike some hospital districts, Central Health doesn't oversee a hospital but instead partners with third-party providers via contracts with hospitals or community-based organizations.

Why did Travis County call for an audit on Central Health?

The Travis County Commissioners Court voted in July 2022 to order an independent performance audit of Central Health. That audit approval came after members of NAACP-Austin and Texas LULAC District VII shared concerns about how taxpayer funding was being used.

In April 2023, commissioners approved spending more than $845,000 on the third-party performance audit. Mazars USA, LLP conducted the audit between April 19, 2023 and June 27, 2024.

What were some of the key findings from the audit?

The independent audit didn't find any violations of the law as part of its assessment, but it did flag improvement recommendations within the hospital district's public communications, record documentation practices and oversight and governance practices.

"The Mazars report does highlight areas for improvement that Central Health will pursue – refining how the district measures healthcare quality, responds to the rapidly changing demographics in many parts of Travis County, and documents its internal processes and controls," Central Health officials said in a release Tuesday.

The audit's review found Central Health's work to build up a high-performing healthcare system is progressing but noted the hospital district needed to assess the totality of services provided to best ensure it was meeting the needs of Travis County's low-income residents.

Other recommendations included suggestions for Central Health to create a flexible framework for health equity assessments to best adjust to any health challenges or changing demographics, as well as that Central Health should create a financial monitoring system with standard policies and procedures to monitor funding expenditures from Central Health and its third-party providers.

One part of the analysis focused on an annual $35 million allocation to The University of Texas at Austin's Dell Medical School, with findings noting the current funding operations are compliant with the terms of the agreement and are aiding "a comprehensive range of services."

That funding came as part of an Affiliation Agreement between Central Health, UT Austin and the Community Care Collaborative (an entity comprising Central Health and Seton Healthcare). The agreement was created in 2014 and, initially, the Community Care Collaborative paid $35 million each year from fiscal years 2014 to 2022.

Due to changes in funding availability for the Community Care Collaborative, Central Health became responsible for the $35 million annual funding in fiscal year 2023. However, under the Affiliation Agreement, Central Health doesn't currently have direct oversight over how Dell Medical School spends the money and reports its use of the funding. The audit recommended creating "direct governance" of the $35 million payment and shifting oversight to Central Health.

"We appreciate Central Health's recognition of Mazars’ independent validation that the commitment of funds to Dell Medical School is consistent with the affiliation agreement terms," UT Austin's Dell Medical School said in a statement. "We look forward to continuing our strong partnership with Central Health and our shared mission to expand access to high-quality, person-centered care for the people of Travis County."

The entire audit is shared in the PDF below.

Changes being made at Central Health

In its Tuesday release, Central Health officials said the hospital district is working on implementations for the district's Healthcare Equity Plan — a seven-year, $800 million endeavor to "close gaps in Travis County safety-net healthcare system."

Within the first year of that plan's implementation, Central Health leaders said the district has opened three specialty care clinical sites in east Austin, created almost 20 clinical and diagnostic service lines and offered direct care via nearly 4,000 patient visits.

Dr. Patrick T. Lee, president and CEO of Central Health, told commissioners Tuesday "the hard work of many people over many years" led to district improvements.

Travis County Commissioner Jeff Travillion said Lee inherited a wealth of problems when taking over at Central Health, but added he is confident in Lee's commitment to the community and expertise as a clinic specialist leading at the helm.

Travillion stressed the importance of creating an ecosystem to best serve residents most reliant on the county and Central Health for services, adding the audit revealed areas of improvement in how third-party agreements are structured and clearly defined who is served through those partnerships.

Commissioner Brigid Shea shared concerns about how the agreement between Central Health and the Dell Medical School was written, while noting Central Health has made commendable progress in recent years and has begun an "inspiring commitment to provide healthcare to the poor."