A movement to transform Austin into an international mecca on the cutting edge of medical research took two giant steps forward with recent major funding pledges.

On May 3, The University of Texas Board of Regents committed up to $30 million annually for a new medical school in Austin just two weeks after Seton Healthcare Family pledged $250 million toward a teaching hospital to replace the outdated University Medical Center Brackenridge located downtown.

While there is a possibility the teaching hospital at UMCB would be the site of the future medical school, no decision has been made and UT will have the final say on the location.

Whether the medical school is located at UMCB or two separate facilities are built, the major goals of an initiative spearheaded by state Sen. Kirk Watson, D-Austin, aimed at improving health care in Central Texas within the decade would be met.

"Today's a big day in the history of Austin and Central Texas," the senator said in a May 3 statement. "That [UT's commitment] means we're closer than we've ever been to delivering this community a medical school and the wealth of health care and economic resources that come with it."

There has been talk of a medical school in Austin for several decades, but UT spokesman Gary Susswein credited the recent momentum to Watson.

In order to realize this goal, Watson has stressed the importance of public-private partnerships as a new "community-based" funding model. He noted Seton's pledge as a great example and huge step forward, igniting buzz of UMCB as a strong possibility for the new medical school's site.

Details of pledges

Seton's pledge of $250 million for a new teaching hospital to replace UMCB is part of a deal with Central Health—Travis County's health care taxing authority—which owns the land UMCB currently occupies.

While the $250 million would cover construction, Seton would also pay for facility upkeep and Central Health would work to secure federal dollars for future updates.

An April 3 study by Chicago-based Huron Consulting Group recommended replacing the building. The structure, built in 1970, is outdated and in need of major repairs.

Greg Hartman, president and chief executive officer of Seton Medical Center Austin, said the hospital does not even have a sufficient amount of electrical outlets, resulting in the use of external ventilators, which are both expensive and inadequate.

Additionally, he said the hospital needs more space to accommodate planned additional residencies and research programs.

"We can't do those things in that existing building," Hartman said.

The agreement is still pending approval by Ascension Health, which oversees Seton.

At an April 25 meeting hosted by the Urban Land Institute, Watson hinted at other locations including UT's campus—specifically, "the tennis courts behind the nursing school" [Penick-Allison Tennis Center]—and Waterloo Park.

UT's $30 million pledge specifically allocates $25 million in recurring funds, with an additional $5 million for eight years, for startup costs, although the funds are contingent on an annual average of $35 million match from other sources.

UT is using the Available University Fund, derived from the Permanent University Fund, a public endowment for the UT System and the Texas A&M University System based on West Texas land assets.

The UT Board of Regents manages the PUF and distributes money into the AUF, which consists of total returns on all of the PUF's investment assets—currently valued at about $12.9 billion.

Funding gaps

Watson said efforts will be made to use as much federal revenue as possible to fill in funding gaps before turning to taxpayers.

He said there is about $6 billion in available federal dollars for certain services, and he did not want to commit much taxpayer money unless at least partial private funding was available.

Furthermore, according to Central Health Chief Financial Officer John Stevens, Central Health is still analyzing costs and waiting on federal revenue before deciding whether an increase in taxes would be necessary.

As far as the annual $35 million match, Watson said it would likely be done through philanthropy, taxes and assessments.

"We can think of this new commitment of money as part of a larger and beneficial matching fund, because the investment of $35 million will draw down hundreds of millions of dollars in resources from the UT System, its institutions, Seton and other sources that have been identified to fund the medical school," he said.

In return for the investment, he said the new medical school is estimated to bring in 15,000 permanent jobs and close to $2 billion in economic activity.

Next steps

Susswein said the next step is to identify the final funding pieces, which will help dictate the medical school's site and the project's time frame.

Meanwhile, Watson said that Ascension could vote as early as September on Seton's pledge. If approved, construction on the teaching hospital would likely begin in early 2013 and take approximately three years.

Watson said between now and September will be a key time to make more progress on his plan.

"The progress since last fall is enormous," he said. "I foresee more over the summer."