By: Ellis S.B. No. 427
A BILL TO BE ENTITLED
AN ACT
1-1 relating to the duty of nonprofit, tax-exempt hospitals to provide
1-2 charity care; providing civil penalties.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 311.031, Health and Safety Code, is
1-5 amended to read as follows:
1-6 Sec. 311.031. DEFINITIONS. In this subchapter:
1-7 (1) "Board" means the Texas Board of Health.
1-8 (2) "Charity care" means the unreimbursed cost to a
1-9 hospital of:
1-10 (A) providing, funding, or otherwise financially
1-11 supporting health care services on an inpatient or outpatient basis
1-12 to a person classified by the hospital as "financially indigent" or
1-13 "medically indigent"; and/or
1-14 (B) providing, funding, or otherwise financially
1-15 supporting health care services provided to financially indigent
1-16 patients through other nonprofit or public outpatient clinics,
1-17 hospitals, or health care organizations.
1-18 (3) "Contractual allowances" means the difference
1-19 between revenue at established rates and amounts realizable from
1-20 third-party payors under contractual agreements.
1-21 (4) "Department" means the Texas Department of Health.
1-22 (5) "Donations" means the unreimbursed costs of
1-23 providing cash and in-kind services and gifts, including
1-24 facilities, equipment, personnel, and programs, to other nonprofit
2-1 or public outpatient clinics, hospitals, or health care
2-2 organizations.
2-3 (6) "Education-related costs" means the unreimbursed
2-4 cost to a hospital of providing, funding, or otherwise financially
2-5 supporting educational benefits, services, and programs including:
2-6 (A) education of physicians, nurses,
2-7 technicians, and other medical professionals and health care
2-8 providers;
2-9 (B) provision of scholarships and funding to
2-10 medical schools, colleges, and universities for health professions
2-11 education;
2-12 (C) education of patients concerning diseases
2-13 and home care in response to community needs; and
2-14 (D) community health education through
2-15 informational programs, publications, and outreach activities in
2-16 response to community needs.
2-17 (7) "Financially indigent" means an uninsured or
2-18 underinsured person who is accepted for care with no obligation or
2-19 a discounted obligation to pay for the services rendered based on
2-20 the hospital's eligibility system.
2-21 (8) "Government-sponsored indigent health care" means
2-22 the unreimbursed cost to a hospital of providing health care
2-23 services to recipients of Medicaid and other federal, state, or
2-24 local indigent health care programs, eligibility for which is based
2-25 on financial need.
2-26 (9) <(3)> "Hospital" means a general or special
2-27 hospital licensed under Chapter 241 (Texas Hospital Licensing Law).
3-1 (10) "Hospital eligibility system" means the financial
3-2 criteria and procedure used by a hospital to determine if a patient
3-3 is eligible for charity care. The system shall include income
3-4 levels and means testing indexed to the federal poverty guidelines;
3-5 provided, however, that a hospital may not establish an eligibility
3-6 system which sets the income level eligible for charity care lower
3-7 than that required by counties under Section 61.023 or higher, in
3-8 the case of the financially indigent, than 200 percent of the
3-9 federal poverty guidelines. A hospital may determine that a person
3-10 is financially or medically indigent pursuant to the hospital's
3-11 eligibility system after health care services are provided.
3-12 (11) "Medically indigent" means a person whose medical
3-13 or hospital bills after payment by third-party payors exceed a
3-14 specified percentage of the patient's annual gross income,
3-15 determined in accordance with the hospital's eligibility system,
3-16 and the person is financially unable to pay the remaining bill.
3-17 (12) "Research-related costs" means the unreimbursed
3-18 cost to a hospital of providing, funding, or otherwise financially
3-19 supporting facilities, equipment, and personnel for medical and
3-20 clinical research conducted in response to community needs.
3-21 (13) "Subsidized health services" means those services
3-22 provided by a hospital in response to community needs for which the
3-23 reimbursement is less than the hospital's cost for providing the
3-24 services and which must be subsidized by other hospital or
3-25 nonprofit supporting entity revenue sources. Subsidized health
3-26 services may include but are not limited to:
3-27 (A) emergency and trauma care;
4-1 (B) neonatal intensive care;
4-2 (C) free-standing community clinics; and
4-3 (D) collaborative efforts with local government
4-4 or private agencies in preventive medicine, such as immunization
4-5 programs.
4-6 (14) "Unreimbursed costs" means the costs a hospital
4-7 incurs for providing services after subtracting payments received
4-8 from any source for such services including but not limited to the
4-9 following: third-party insurance payments; Medicare payments;
4-10 Medicaid payments; Medicare education reimbursements; state
4-11 reimbursements for education; payments from drug companies to
4-12 pursue research; grant funds for research; and disproportionate
4-13 share payments. For purposes of this definition, the term "costs"
4-14 shall be calculated by applying the cost to charge ratios derived
4-15 from the hospital's Medicare cost report to billed charges. Prior
4-16 to January 1, 1996, for purposes of this definition, charitable
4-17 contributions and grants to a hospital, including transfers from
4-18 endowment or other funds controlled by the hospital or its
4-19 nonprofit supporting entities, shall not be subtracted from the
4-20 costs of providing services for purposes of determining
4-21 unreimbursed costs. After January 1, 1996, for purposes of this
4-22 definition, charitable contributions and grants to a hospital,
4-23 including transfers from endowment or other funds controlled by the
4-24 hospital or its nonprofit supporting entities, shall not be
4-25 subtracted from the costs of providing services for purposes of
4-26 determining the unreimbursed costs of charity care and
4-27 government-sponsored indigent health care.
5-1 SECTION 2. Subsection (a), Section 311.033, Health and
5-2 Safety Code, is amended to read as follows:
5-3 (a) A hospital shall submit to the department financial and
5-4 utilization data for that hospital, including data relating to the
5-5 hospital's:
5-6 (1) total gross revenue, including:
5-7 (A) Medicare gross revenue;
5-8 (B) Medicaid gross revenue;
5-9 (C) other revenue from state programs;
5-10 (D) revenue from local government programs;
5-11 (E) local tax support;
5-12 (F) charitable contributions;
5-13 (G) other third party payments;
5-14 (H) gross inpatient revenue; and
5-15 (I) gross outpatient revenue;
5-16 (2) total deductions from gross revenue, including:
5-17 (A) <charity care;>
5-18 <(B) bad debt;>
5-19 <(C)> contractual allowance; and
5-20 (B) <(D)> any other deductions;
5-21 (3) charity care;
5-22 (4) bad debt expense;
5-23 (5) total admissions, including:
5-24 (A) Medicare admissions;
5-25 (B) Medicaid admissions;
5-26 (C) admissions under a local government program;
5-27 (D) charity care admissions; and
6-1 (E) any other type of admission;
6-2 (6) <(4)> total discharges;
6-3 (7) <(5)> total patient days;
6-4 (8) <(6)> average length of stay;
6-5 (9) <(7)> total outpatient visits;
6-6 (10) <(8)> total assets;
6-7 (11) <(9)> total liabilities;
6-8 (12) estimates of unreimbursed costs of subsidized
6-9 health services reported separately in the following categories:
6-10 (A) emergency care and trauma care;
6-11 (B) neonatal intensive care;
6-12 (C) free-standing community clinics;
6-13 (D) collaborative efforts with local government
6-14 or private agencies in preventive medicine, such as immunization
6-15 programs; and
6-16 (E) other services that satisfy the definition
6-17 of "subsidized health services" contained in Section 311.031(13);
6-18 (13) donations;
6-19 (14) total cost of reimbursed and unreimbursed
6-20 research;
6-21 (15) <(10) total cost of reimbursed and unreimbursed
6-22 care for indigent patients; and>
6-23 <(11)> total cost of reimbursed and unreimbursed
6-24 <medical> education separated into the following categories:
6-25 (A) education of physicians, nurses,
6-26 technicians, and other medical professionals and health care
6-27 providers;
7-1 (B) scholarships and funding to medical schools,
7-2 colleges, and universities for health professions education;
7-3 (C) education of patients concerning diseases
7-4 and home care in response to community needs;
7-5 (D) community health education through
7-6 informational programs, publications, and outreach activities in
7-7 response to community needs; and
7-8 (E) other educational services that satisfy the
7-9 definition of "education-related costs" under Section 311.031(6).
7-10 SECTION 3. Section 311.037, Health and Safety Code, is
7-11 amended to read as follows:
7-12 Sec. 311.037. CONFIDENTIAL DATA; CRIMINAL PENALTY. (a) The
7-13 following data reported or submitted to the department under this
7-14 subchapter is confidential:
7-15 (1) data regarding a specific patient; or
7-16 (2) financial data regarding a provider or facility
7-17 submitted to the department before September 1, 1987. All
7-18 financial data regarding a provider or facility submitted after
7-19 September 1, 1987, are no longer confidential.
7-20 (b) Before the department may disclose confidential data
7-21 under this subchapter, the department must remove any information
7-22 that identifies a specific patient<, provider, or facility>.
7-23 (c) A person commits an offense if the person:
7-24 (1) discloses, distributes, or sells confidential data
7-25 obtained under this subchapter; or
7-26 (2) violates Subsection (b).
7-27 (d) An offense under Subsection (c) is a Class B
8-1 misdemeanor.
8-2 SECTION 4. Chapter 311, Health and Safety Code, is amended
8-3 by adding Subchapter D to read as follows:
8-4 SUBCHAPTER D. DUTIES OF NONPROFIT HOSPITALS
8-5 Sec. 311.041. POLICY STATEMENT. It is the purpose of this
8-6 subchapter to clarify and set forth the duties and responsibilities
8-7 of nonprofit hospitals for providing community benefits that
8-8 include charity care.
8-9 Sec. 311.042. DEFINITIONS. In this subchapter:
8-10 (1) "Charity care" means those amounts defined as
8-11 charity care in Section 311.031(2).
8-12 (2) "Community benefits" means the unreimbursed cost
8-13 to a hospital of providing charity care, government-sponsored
8-14 indigent health care, donations, education, government-sponsored
8-15 program services, research, and subsidized health services.
8-16 Community benefits does not include the cost to the hospital of
8-17 paying any taxes or other governmental assessments.
8-18 (3) "Contributions" means the dollar value of cash
8-19 donations and the fair market value at the time of donation of
8-20 in-kind donations to the hospital from individuals, organizations,
8-21 or other entities. Contributions does not include the value of a
8-22 donation designated or otherwise restricted by the donor for
8-23 purposes other than charity care.
8-24 (4) "Donations" means those amounts defined as
8-25 donations in Section 311.031(5).
8-26 (5) "Education-related costs" means those amounts
8-27 defined as education-related costs in Section 311.031(6).
9-1 (6) "Government-sponsored indigent health care" means
9-2 those amounts defined as government-sponsored indigent health care
9-3 in Section 311.031(8).
9-4 (7) "Government-sponsored program unreimbursed costs"
9-5 means the unreimbursed cost to the hospital of providing health
9-6 care services to the beneficiaries of Medicare, the Civilian Health
9-7 and Medical Program of the Uniformed Services, and other federal,
9-8 state, or local government health care programs.
9-9 (8) "Net patient revenue" is an accounting term and
9-10 shall be calculated in accordance with generally accepted
9-11 accounting principles for hospitals.
9-12 (9)(A) "Nonprofit hospital" means a hospital that is:
9-13 (i) eligible for tax-exempt bond
9-14 financing; or
9-15 (ii) exempt from state franchise, sales,
9-16 ad valorem, or other state or local taxes; and
9-17 (iii) organized as a nonprofit corporation
9-18 or a charitable trust under the laws of this state or any other
9-19 state or country.
9-20 (B) For purposes of this subchapter, a
9-21 "nonprofit hospital" shall not include a hospital that:
9-22 (i) is exempt from state franchise, sales,
9-23 ad valorem, or other state or local taxes;
9-24 (ii) does not receive payment for
9-25 providing health care services to any inpatients or outpatients
9-26 from any source including but not limited to the patient or any
9-27 person legally obligated to support the patient, third-party
10-1 payors, Medicare, Medicaid, or any other federal, state, or local
10-2 indigent care program; payment for providing health care services
10-3 does not include charitable donations, legacies, bequests, or
10-4 grants or payments for research; and
10-5 (iii) does not discriminate on the basis
10-6 of inability to pay, race, color, creed, religion, or gender in its
10-7 provision of services; or
10-8 (iv) is located in a county with a
10-9 population under 50,000 where the entire county or the population
10-10 of the entire county has been designated as a Health Professionals
10-11 Shortage Area.
10-12 (10) "Nonprofit supporting entities" means nonprofit
10-13 entities created by the hospital or its parent entity to further
10-14 the charitable purposes of the hospital and that are owned or
10-15 controlled by the hospital or its parent entity.
10-16 (11) "Research-related costs" means those amounts
10-17 defined as research-related costs in Section 311.031(12).
10-18 (12) "Tax-exempt benefits" means all of the following,
10-19 calculated in accordance with standard accounting principles for
10-20 hospitals for tax purposes using the applicable statutes, rules,
10-21 and regulations regarding the calculation of these taxes:
10-22 (A) the dollar amount of federal, state, and
10-23 local taxes foregone by a nonprofit hospital and its nonprofit
10-24 supporting entities. For purposes of this definition federal,
10-25 state, and local taxes include income, franchise, ad valorem, and
10-26 sales taxes;
10-27 (B) the dollar amount of contributions received
11-1 by a nonprofit hospital and its nonprofit supporting entities; and
11-2 (C) the value of tax-exempt bond financing
11-3 received by a nonprofit hospital and its nonprofit supporting
11-4 entities.
11-5 (13) "Subsidized health services" means those amounts
11-6 defined as subsidized health services in Section 311.031(13).
11-7 (14) "Unreimbursed costs" means costs as defined in
11-8 Section 311.031(14).
11-9 Sec. 311.043. DUTY OF NONPROFIT HOSPITALS TO PROVIDE
11-10 COMMUNITY BENEFITS. (a) A nonprofit hospital shall provide health
11-11 care services to the community and shall comply with all federal,
11-12 state, and local government requirements for tax exemption in order
11-13 to maintain such exemption. These health care services to the
11-14 community shall include charity care and government-sponsored
11-15 indigent health care and may include other components of community
11-16 benefits as both terms are defined in Sections 311.031 and 311.042.
11-17 (b) In order to qualify as a charitable organization under
11-18 Sections 11.18(d)(1), 151.310(a)(2) and (e), and 171.063(a)(1), Tax
11-19 Code, and to satisfy the requirements of this subchapter, a
11-20 nonprofit hospital shall provide community benefits, which include
11-21 charity care and government-sponsored indigent health care, in an
11-22 amount that satisfies the requirements of Section 311.045. A
11-23 determination of the amount of charity care and
11-24 government-sponsored indigent health care provided by a hospital
11-25 shall be based on the most recently completed and audited prior
11-26 fiscal year of the hospital.
11-27 (c) Reductions in the amount of community benefits, which
12-1 includes charity care and government-sponsored indigent health
12-2 care, provided by a nonprofit hospital shall be considered
12-3 reasonable when the financial reserves of the hospital are reduced
12-4 to such a level that the hospital would be in violation of any
12-5 applicable bond covenants, when necessary to prevent the hospital
12-6 from endangering its ability to continue operations, or if the
12-7 hospital, as a result of a natural or other disaster, is required
12-8 substantially to curtail its operations.
12-9 (d) A hospital's admissions policy must provide for the
12-10 admission of financially indigent and medically indigent persons
12-11 pursuant to its charity care requirements as set forth in this
12-12 subchapter.
12-13 Sec. 311.044. COMMUNITY BENEFITS PLANNING BY NONPROFIT
12-14 HOSPITALS. (a) A nonprofit hospital shall develop:
12-15 (1) an organizational mission statement that
12-16 identifies the hospital's commitment to serving the health care
12-17 needs of the community; and
12-18 (2) a community benefits plan defined as an
12-19 operational plan for serving the community's health care needs that
12-20 sets out goals and objectives for providing community benefits that
12-21 include charity care and government-sponsored indigent health care,
12-22 as the terms community benefits, charity care, and
12-23 government-sponsored indigent health care are defined by Sections
12-24 311.031 and 311.042, and that identifies the populations and
12-25 communities served by the hospital.
12-26 (b) When developing the community benefits plan, the
12-27 hospital shall consider the health care needs of the community as
13-1 determined by community-wide needs assessments. For purposes of
13-2 this subsection, "community" means the primary geographic area and
13-3 patient categories for which the hospital provides health care
13-4 services; provided, however, that the primary geographic area shall
13-5 at least encompass the entire county in which the hospital is
13-6 located.
13-7 (c) The hospital shall include at least the following
13-8 elements in the community benefits plan:
13-9 (1) mechanisms to evaluate the plan's effectiveness,
13-10 including but not limited to a method for soliciting the views of
13-11 the communities served by the hospital;
13-12 (2) measurable objectives to be achieved within a
13-13 specified time frame; and
13-14 (3) a budget for the plan.
13-15 Sec. 311.045. COMMUNITY BENEFITS AND CHARITY CARE
13-16 REQUIREMENTS. (a) A nonprofit hospital shall annually satisfy the
13-17 requirements of this subchapter and of Sections 11.18(d)(1),
13-18 151.310(a)(2) and (e), and 171.063(a)(1), Tax Code, to provide
13-19 community benefits which include charity care and
13-20 government-sponsored indigent health care by complying with one or
13-21 more of the standards set forth in Subsection (b). The hospital
13-22 shall file a statement with the Bureau of State Health Data and
13-23 Policy Analysis at the department, with the chief appraiser of the
13-24 local appraisal district, and with the comptroller's office no
13-25 later than the 120th day after the hospital's fiscal year ends,
13-26 stating which of the standards in Subsection (b) have been
13-27 satisfied, provided, however, that the first report shall be filed
14-1 no later than the 120th day after the end of the hospital's fiscal
14-2 year ending during 1994. For hospitals under the common control of
14-3 a single parent corporation, the corporate parent may elect to
14-4 satisfy the charity care requirements of this subchapter on a
14-5 consolidated basis; however, each hospital controlled by the parent
14-6 corporation shall satisfy the requirements of Sections 11.18(d)(1),
14-7 151.310(a), (c), (d), and (e), and 171.063(a)(1), Tax Code, and
14-8 provide community benefits which include charity care and
14-9 government-sponsored indigent health care.
14-10 (b)(1) A nonprofit hospital may elect to provide community
14-11 benefits, which include charity care and government-sponsored
14-12 indigent health care, according to any of the following standards:
14-13 (A) charity care and government-sponsored
14-14 indigent health care are provided at a level which is reasonable in
14-15 relation to the community needs, as determined through the
14-16 community needs assessment, the available resources of the
14-17 hospital, and the tax-exempt benefits received by the hospital;
14-18 (B) charity care and government-sponsored
14-19 indigent health care are provided in an amount equal to at least
14-20 four percent of the hospital's net patient revenue;
14-21 (C) charity care and government-sponsored
14-22 indigent health care are provided in an amount equal to at least
14-23 100 percent of the hospital's tax-exempt benefits, excluding
14-24 federal income tax;
14-25 (D) prior to January 1, 1996, charity care and
14-26 community benefits are provided in a combined amount equal to at
14-27 least five percent of the hospital's net patient revenue, provided
15-1 that charity care and government-sponsored indigent health care are
15-2 provided in an amount equal to at least three percent of net
15-3 patient revenue; or
15-4 (E) after December 31, 1995, charity care and
15-5 community benefits are provided in a combined amount equal to at
15-6 least five percent of the hospital's net patient revenue, provided
15-7 that charity care and government-sponsored indigent health care are
15-8 provided in an amount equal to at least four percent of net patient
15-9 revenue.
15-10 (2) A nonprofit hospital that has been designated as a
15-11 disproportionate share hospital under the state Medicaid program in
15-12 either of the previous two fiscal years shall be considered to have
15-13 provided a reasonable amount of charity care and
15-14 government-sponsored indigent health care and shall be deemed in
15-15 compliance with the standards in this subsection.
15-16 (c) The providing of charity care and government-sponsored
15-17 indigent health care in accordance with Subsection (b)(1)(A) shall
15-18 be guided by the prudent business judgment of the hospital which
15-19 will ultimately determine the appropriate level of charity care and
15-20 government-sponsored indigent health care based on the community
15-21 needs, the available resources of the hospital, the tax-exempt
15-22 benefits received by the hospital, and other factors that may be
15-23 unique to the hospital. These criteria shall not be determinative
15-24 factors, but shall be guidelines contributing to the hospital's
15-25 decision, along with other factors which may be unique to the
15-26 hospital. The standards set forth in Subsections (b)(1)(B),
15-27 (b)(1)(C), (b)(1)(D), and (b)(1)(E) shall also not be considered
16-1 determinative of the amount of charity care and
16-2 government-sponsored indigent health care that will be considered
16-3 reasonable under Subsection (b)(1)(A).
16-4 (d) In any fiscal year that a hospital, through unintended
16-5 miscalculation, fails to meet any of the standards in Subsection
16-6 (b), the hospital shall not lose its tax-exempt status without the
16-7 opportunity to cure the miscalculation in the fiscal year following
16-8 the fiscal year the failure is discovered by both meeting one of
16-9 the standards and providing an additional amount of charity care
16-10 and government-sponsored indigent health care that is equal to the
16-11 shortfall from the previous fiscal year. A hospital may apply this
16-12 provision only once every five years.
16-13 Sec. 311.046. ANNUAL REPORT OF COMMUNITY BENEFITS PLAN.
16-14 (a) A nonprofit hospital shall prepare an annual report of the
16-15 community benefits plan and shall include in the report at least
16-16 the following information:
16-17 (1) the hospital's mission statement;
16-18 (2) a disclosure of the health care needs of the
16-19 community that were considered in developing the hospital's
16-20 community benefits plan pursuant to Section 311.044(b); and
16-21 (3) a disclosure of the amount and types of community
16-22 benefits, including charity care, actually provided. Charity care
16-23 shall be reported as a separate item from other community benefits.
16-24 (b) A nonprofit hospital shall file the annual report of the
16-25 community benefits plan with the Bureau of State Health Data and
16-26 Policy Analysis at the department. The report shall be filed no
16-27 later than 120 days after the end of the hospital's fiscal year;
17-1 provided, however, that the first report shall be filed no later
17-2 than 120 days after the end of the hospital's fiscal year ending
17-3 during 1994.
17-4 (c) A nonprofit hospital shall prepare a statement that
17-5 notifies the public that the annual report of the community
17-6 benefits plan is public information; that it is filed with the
17-7 department; and that it is available to the public on request from
17-8 the department. The statement shall be posted in prominent places
17-9 throughout the hospital, including but not limited to the emergency
17-10 room waiting area and the admissions office waiting area. The
17-11 statement shall also be printed in the hospital patient guide or
17-12 other material that provides the patient with information about the
17-13 admissions criteria of the hospital.
17-14 (d) Each hospital shall provide, to each person who seeks
17-15 any health care service at the hospital, notice, in appropriate
17-16 languages, if possible, about the charity care program and how to
17-17 apply for charity care. Such notice shall also be conspicuously
17-18 posted in the general waiting area, the waiting area for emergency
17-19 services, in the business office, and in such other locations as
17-20 the hospital deems likely to give notice of the charity care
17-21 program.
17-22 Sec. 311.047. PENALTIES. The department may assess a civil
17-23 penalty against a nonprofit hospital that fails to make a report of
17-24 the community benefits plan as required under this subchapter. The
17-25 penalty may not exceed $1,000 for each day a report is delinquent
17-26 after the date on which the report is due. No penalty may be
17-27 assessed against a hospital under this subsection until 10 business
18-1 days have elapsed after written notification to the hospital of its
18-2 failure to file a report.
18-3 Sec. 311.048. RIGHTS AND REMEDIES. The rights and remedies
18-4 provided for in this subchapter shall not limit, affect, change, or
18-5 repeal any other statutory or common-law rights or remedies
18-6 available to the state or a nonprofit hospital.
18-7 SECTION 5. Subsection (d), Section 11.18, Tax Code, is
18-8 amended to read as follows:
18-9 (d) A charitable organization must be organized exclusively
18-10 to perform religious, charitable, scientific, literary, or
18-11 educational purposes and, except as permitted by Subsection (h) of
18-12 this section, engage exclusively in performing one or more of the
18-13 following charitable functions:
18-14 (1) providing medical care without regard to the
18-15 beneficiaries' ability to pay, which in the case of a nonprofit
18-16 hospital means providing charity care and community benefits as set
18-17 forth in Paragraph (A), (B), (C), (D), (E), or (F):
18-18 (A) charity care and government-sponsored
18-19 indigent health care are provided at a level which is reasonable in
18-20 relation to the community needs, as determined through the
18-21 community needs assessment, the available resources of the
18-22 hospital, and the tax-exempt benefits received by the hospital;
18-23 (B) charity care and government-sponsored
18-24 indigent health care are provided in an amount equal to at least
18-25 four percent of the hospital's net patient revenue;
18-26 (C) charity care and government-sponsored
18-27 indigent health care are provided in an amount equal to at least
19-1 100 percent of the hospital's tax-exempt benefits, excluding
19-2 federal income tax;
19-3 (D) a nonprofit hospital that has been
19-4 designated as a disproportionate share hospital under the state
19-5 Medicaid program in either of the previous two fiscal years shall
19-6 be considered to have provided a reasonable amount of charity care
19-7 and government-sponsored indigent health care and shall be deemed
19-8 in compliance with the standards in this subsection;
19-9 (E) for tax years before 1996, charity care and
19-10 community benefits are provided in a combined amount equal to at
19-11 least five percent of the hospital's net patient revenue, provided
19-12 that charity care and government-sponsored indigent health care are
19-13 provided in an amount equal to at least three percent of net
19-14 patient revenue; or
19-15 (F) for tax years after 1995, charity care and
19-16 community benefits are provided in a combined amount equal to at
19-17 least five percent of the hospital's net patient revenue, provided
19-18 that charity care and government-sponsored indigent health care are
19-19 provided in an amount equal to at least four percent of net patient
19-20 revenue;
19-21 (2) providing support or relief to orphans,
19-22 delinquent, dependent, or handicapped children in need of
19-23 residential care, abused or battered spouses or children in need of
19-24 temporary shelter, the impoverished, or victims of natural disaster
19-25 without regard to the beneficiaries' ability to pay;
19-26 (3) providing support to elderly persons or the
19-27 handicapped without regard to the beneficiaries' ability to pay;
20-1 (4) preserving a historical landmark or site;
20-2 (5) promoting or operating a museum, zoo, library,
20-3 theater of the dramatic arts, or symphony orchestra or choir;
20-4 (6) promoting or providing humane treatment of
20-5 animals;
20-6 (7) acquiring, storing, transporting, selling, or
20-7 distributing water for public use;
20-8 (8) answering fire alarms and extinguishing fires with
20-9 no compensation or only nominal compensation to the members of the
20-10 organization;
20-11 (9) promoting the athletic development of boys or
20-12 girls under the age of 18 years;
20-13 (10) preserving or conserving wildlife;
20-14 (11) promoting educational development through loans
20-15 or scholarships to students;
20-16 (12) providing halfway house services pursuant to a
20-17 certification as a halfway house by the Board of Pardons and
20-18 Paroles;
20-19 (13) providing permanent housing and related social,
20-20 health care, and educational facilities for persons who are 62
20-21 years of age or older without regard to the residents' ability to
20-22 pay;
20-23 (14) promoting or operating an art gallery, museum, or
20-24 collection, in a permanent location or on tour, that is open to the
20-25 public;
20-26 (15) providing for the organized solicitation and
20-27 collection for distributions through gifts, grants, and agreements
21-1 to nonprofit charitable, education, religious, and youth
21-2 organizations that provide direct human, health, and welfare
21-3 services;
21-4 (16) performing biomedical or scientific research or
21-5 biomedical or scientific education for the benefit of the public;
21-6 <or>
21-7 (17) operating a television station that produces or
21-8 broadcasts educational, cultural, or other public interest
21-9 programming and that receives grants from the Corporation for
21-10 Public Broadcasting under 47 U.S.C. Section 396; or
21-11 (18) in the case of a nonprofit hospital, providing
21-12 health care services without receiving any payment for providing
21-13 those services to inpatients or outpatients from any source
21-14 including but not limited to the patient or person legally
21-15 obligated to support the patient, third-party payors, Medicare,
21-16 Medicaid, or any other state or local indigent care program.
21-17 Payment for providing health care services does not include
21-18 charitable donations, legacies, bequests, or grants or payment for
21-19 research.
21-20 For purposes of this subsection, the terms "charity care,"
21-21 "government-sponsored indigent health care," "net patient revenue,"
21-22 "nonprofit hospital," and "tax-exempt benefits" have the meanings
21-23 set forth in Sections 311.031 and 311.042, Health and Safety Code.
21-24 A determination of the amount of community benefits and charity
21-25 care and government-sponsored indigent health care provided by a
21-26 hospital and the hospital's compliance with the requirements of
21-27 Section 311.045, Health and Safety Code, shall be based on the most
22-1 recently completed and audited prior fiscal year of the hospital.
22-2 The providing of charity care and government-sponsored
22-3 indigent health care in accordance with Paragraph (A) of
22-4 Subdivision (1) shall be guided by the prudent business judgment of
22-5 the hospital which will ultimately determine the appropriate level
22-6 of charity care and government-sponsored indigent health care based
22-7 on the community needs, the available resources of the hospital,
22-8 the tax-exempt benefits received by the hospital, and other factors
22-9 that may be unique to the hospital. These criteria shall not be
22-10 determinative factors, but shall be guidelines contributing to the
22-11 hospital's decision along with other factors which may be unique to
22-12 the hospital. The formulas contained in Paragraphs (B), (C), (E),
22-13 and (F) of Subdivision (1) shall also not be considered
22-14 determinative of a reasonable amount of charity care and
22-15 government-sponsored indigent health care.
22-16 The requirements of this subsection shall not apply to the
22-17 extent a hospital demonstrates that reductions in the amount of
22-18 community benefits, charity care, and government-sponsored indigent
22-19 health care are necessary to maintain financial reserves at a level
22-20 required by a bond covenant, are necessary to prevent the hospital
22-21 from endangering its ability to continue operations, or if the
22-22 hospital, as a result of a natural or other disaster, is required
22-23 substantially to curtail its operations.
22-24 In any fiscal year that a hospital, through unintended
22-25 miscalculation, fails to meet any of the standards in Subdivision
22-26 (1), the hospital shall not lose its tax-exempt status without the
22-27 opportunity to cure the miscalculation in the fiscal year following
23-1 the fiscal year the failure is discovered by both meeting one of
23-2 the standards and providing an additional amount of charity care
23-3 and government-sponsored indigent health care that is equal to the
23-4 shortfall from the previous fiscal year. A hospital may apply this
23-5 provision only once every five years.
23-6 SECTION 6. Section 151.310, Tax Code, is amended by amending
23-7 Subsection (a) and adding Subsection (e) to read as follows:
23-8 (a) A taxable item sold, leased, or rented to, or stored,
23-9 used, or consumed by, any of the following organizations is
23-10 exempted from the taxes imposed by this chapter:
23-11 (1) an organization created for religious,
23-12 educational, or charitable purposes if no part of the net earnings
23-13 of the organization benefits a private shareholder or individual
23-14 and the items purchased, leased, or rented are related to the
23-15 purpose of the organization, and in the case of a nonprofit
23-16 hospital, the hospital does not receive any payment for providing
23-17 health care services to inpatients or outpatients from any source
23-18 including but not limited to the patient or person legally
23-19 obligated to support the patient, third-party payors, Medicare,
23-20 Medicaid, or any other state or local indigent care program.
23-21 Payment for providing health care services does not include
23-22 charitable donations, legacies, bequests, or grants or payments for
23-23 research;
23-24 (2) an organization qualifying for an exemption from
23-25 federal income taxes under Section 501(c)(3), (4), (8), (10), or
23-26 (19), Internal Revenue Code, of the item sold, leased, rented,
23-27 stored, used, or consumed relates to the purpose of the exempted
24-1 organization and the item is not used for the personal benefit of a
24-2 private stockholder or individual;
24-3 (3) a nonprofit organization engaged exclusively in
24-4 providing athletic competition among persons under 19 years old if
24-5 no financial benefit goes to an individual or shareholder;
24-6 (4) a company, department, or association organized
24-7 for the purpose of answering fire alarms and extinguishing fires or
24-8 for the purpose of answering fire alarms, extinguishing fires, and
24-9 providing emergency medical services, the members of which receive
24-10 no compensation or only nominal compensation for their services
24-11 rendered, if the taxable item is used exclusively by the company,
24-12 department, or association; or
24-13 (5) a chamber of commerce or a convention and tourist
24-14 promotional agency representing at least one Texas city or county
24-15 if the chamber of commerce or the agency is not organized for
24-16 profit and no part of its net earnings inures to a private
24-17 shareholder or other individual.
24-18 (e) A nonprofit hospital that qualifies for an exemption
24-19 under Subsection (a)(2) shall provide charity care and community
24-20 benefits as set forth in Subdivision (1), (2), (3), (4), (5), or
24-21 (6) below:
24-22 (1) charity care and government-sponsored indigent
24-23 health care are provided at a level which is reasonable in relation
24-24 to the community needs, as determined through the community needs
24-25 assessment, the available resources of the hospital, and the
24-26 tax-exempt benefits received by the hospital;
24-27 (2) charity care and government-sponsored indigent
25-1 health care are provided in an amount equal to at least four
25-2 percent of the hospital's net patient revenue;
25-3 (3) charity care and government-sponsored health care
25-4 are provided in an amount equal to at least 100 percent of the
25-5 hospital's tax-exempt benefits, excluding federal income tax; or
25-6 (4) a nonprofit hospital that has been designated as a
25-7 disproportionate share hospital under the state Medicaid program in
25-8 either of the previous two fiscal years shall be considered to have
25-9 provided a reasonable amount of charity care and
25-10 government-sponsored indigent health care and shall be deemed in
25-11 compliance with the standards in this subsection;
25-12 (5) for tax periods ending before 1996, charity care
25-13 and community benefits are provided in a combined amount equal to
25-14 at least five percent of the hospital's net patient revenue,
25-15 provided that charity care and government-sponsored indigent health
25-16 care are provided in an amount equal to at least three percent of
25-17 net patient revenue; or
25-18 (6) for tax periods ending after 1995, charity care
25-19 and community benefits are provided in a combined amount equal to
25-20 at least five percent of the hospital's net patient revenue,
25-21 provided that charity care and government-sponsored indigent health
25-22 care are provided in an amount equal to at least four percent of
25-23 net patient revenue.
25-24 For purposes of this subsection, the terms "charity care,"
25-25 "government-sponsored indigent health care," "net patient revenue,"
25-26 "nonprofit hospital," and "tax-exempt benefits" have the meanings
25-27 set forth in Sections 311.031 and 311.042, Health and Safety Code.
26-1 A determination of the amount of community benefits and charity
26-2 care and government-sponsored indigent health care provided by a
26-3 hospital and the hospital's compliance with the requirements of
26-4 this subsection and Section 311.045, Health and Safety Code, shall
26-5 be based on the most recently completed and audited prior fiscal
26-6 year of the hospital.
26-7 The providing of charity care and government-sponsored
26-8 indigent health care in accordance with Subdivision (1) shall be
26-9 guided by the prudent business judgment of the hospital which will
26-10 ultimately determine the appropriate level of charity care and
26-11 government-sponsored indigent health care based on the community
26-12 needs, the available resources of the hospital, the tax-exempt
26-13 benefits received by the hospital, and other factors that may be
26-14 unique to the hospital. These criteria shall not be determinative
26-15 factors, but shall be guidelines contributing to the hospital's
26-16 decision along with other factors which may be unique to the
26-17 hospital. The formulas contained in Subdivisions (2), (3), (5),
26-18 and (6) shall also not be considered determinative of a reasonable
26-19 amount of charity care and government-sponsored indigent health
26-20 care.
26-21 The requirements of this subsection shall not apply to the
26-22 extent a hospital demonstrates that reductions in the amount of
26-23 community benefits, charity care, and government-sponsored indigent
26-24 health care are necessary to maintain financial reserves at a level
26-25 required by a bond covenant, are necessary to prevent the hospital
26-26 from endangering its ability to continue operations, or if the
26-27 hospital, as a result of a natural or other disaster, is required
27-1 substantially to curtail its operations.
27-2 In any fiscal year that a hospital, through unintended
27-3 miscalculation, fails to meet any of the standards in this
27-4 subsection, the hospital shall not lose its tax-exempt status
27-5 without the opportunity to cure the miscalculation in the fiscal
27-6 year following the fiscal year the failure is discovered by both
27-7 meeting one of the standards and providing an additional amount of
27-8 charity care and government-sponsored indigent health care that is
27-9 equal to the shortfall from the previous fiscal year. A hospital
27-10 may apply this provision only once every five years.
27-11 SECTION 7. Subsection (a), Section 171.063, Tax Code, is
27-12 amended to read as follows:
27-13 (a) The following corporations are exempt from the franchise
27-14 tax:
27-15 (1) a nonprofit corporation exempted from the federal
27-16 income tax under Section 501(c)(3), (4), (5), (6), or (7) of the
27-17 Internal Revenue Code of 1954, as it existed on January 1, 1975;
27-18 which in the case of a nonprofit hospital means a hospital
27-19 providing charity care and community benefits as set forth in
27-20 Paragraph (A), (B), (C), (D), (E), or (F):
27-21 (A) charity care and government-sponsored
27-22 indigent health care are provided at a level which is reasonable in
27-23 relation to the community needs, as determined through the
27-24 community needs assessment, the available resources of the
27-25 hospital, and the tax-exempt benefits received by the hospital;
27-26 (B) charity care and government-sponsored
27-27 indigent health care are provided in an amount equal to at least
28-1 four percent of the hospital's net patient revenue;
28-2 (C) charity care and government-sponsored
28-3 indigent health care are provided in an amount equal to at least
28-4 100 percent of the hospital's tax-exempt benefits, excluding
28-5 federal income tax; or
28-6 (D) a nonprofit hospital that has been
28-7 designated as a disproportionate share hospital under the state
28-8 Medicaid program in either of the previous two fiscal years shall
28-9 be considered to have provided a reasonable amount of charity care
28-10 and government-sponsored indigent health care and shall be deemed
28-11 in compliance with the standards in this subsection;
28-12 (E) for tax periods ending before 1996, charity
28-13 care and community benefits are provided in a combined amount equal
28-14 to at least five percent of the hospital's net patient revenue,
28-15 provided that charity care and government-sponsored indigent health
28-16 care are provided in an amount equal to at least three percent of
28-17 net patient revenue; or
28-18 (F) for tax periods ending after 1995, charity
28-19 care and community benefits are provided in a combined amount equal
28-20 to at least five percent of the hospital's net patient revenue,
28-21 provided that charity care and government-sponsored indigent health
28-22 care are provided in an amount equal to at least four percent of
28-23 net patient revenue; or
28-24 (2) a corporation exempted under Section 501(c)(2) or
28-25 (25) of the Internal Revenue Code of 1986, if the corporation or
28-26 corporations for which it holds title to property is either exempt
28-27 from or not subject to the franchise tax; <and>
29-1 (3) a corporation exempted from federal income tax
29-2 under Section 501(c)(16), Internal Revenue Code of 1986; and
29-3 (4) a nonprofit corporation exempted from the federal
29-4 income tax under Section 501(c)(3) of the Internal Revenue Code of
29-5 1986, that is a nonprofit hospital and does not receive any payment
29-6 for providing health care services to inpatients or outpatients
29-7 from any source including but not limited to the patient or person
29-8 legally obligated to support the patient, third-party payors,
29-9 Medicare, Medicaid, or any other state or local indigent care
29-10 program. Payment for providing health care services does not
29-11 include charitable donations, legacies, bequests, or grants or
29-12 payments for research.
29-13 For purposes of this subsection, the terms "charity care,"
29-14 "government-sponsored indigent health care," "net patient revenue,"
29-15 "nonprofit hospital," and "tax-exempt benefits" have the meanings
29-16 set forth in Sections 311.031 and 311.042, Health and Safety Code.
29-17 A determination of the amount of community benefits and charity
29-18 care and government-sponsored indigent health care provided by a
29-19 hospital and the hospital's compliance with the requirements of
29-20 Section 311.045, Health and Safety Code, shall be based on the most
29-21 recently completed and audited prior fiscal year of the hospital.
29-22 The providing of charity care and government-sponsored
29-23 indigent health care in accordance with Paragraph (A) of
29-24 Subdivision (1) shall be guided by the prudent business judgment of
29-25 the hospital which will ultimately determine the appropriate level
29-26 of charity care and government-sponsored indigent health care based
29-27 on the community needs, the available resources of the hospital,
30-1 the tax-exempt benefits received by the hospital, and other factors
30-2 that may be unique to the hospital. These criteria shall not be
30-3 determinative factors, but shall be guidelines contributing to the
30-4 hospital's decision along with other factors which may be unique to
30-5 the hospital. The formulas contained in Paragraphs (B), (C), (E),
30-6 and (F) of Subdivision (1) shall also not be considered
30-7 determinative of a reasonable amount of charity care and
30-8 government-sponsored indigent health care.
30-9 The requirements of this subsection shall not apply to the
30-10 extent a hospital demonstrates that reductions in the amount of
30-11 community benefits, charity care, and government-sponsored indigent
30-12 health care are necessary to maintain financial reserves at a level
30-13 required by a bond covenant, are necessary to prevent the hospital
30-14 from endangering its ability to continue operations, or if the
30-15 hospital, as a result of a natural or other disaster, is required
30-16 substantially to curtail its operations.
30-17 In any fiscal year that a hospital, through unintended
30-18 miscalculation, fails to meet any of the standards in Subdivision
30-19 (1), the hospital shall not lose its tax-exempt status without the
30-20 opportunity to cure the miscalculation in the fiscal year following
30-21 the fiscal year the failure is discovered by both meeting one of
30-22 the standards and providing an additional amount of charity care
30-23 and government-sponsored indigent health care that is equal to the
30-24 shortfall from the previous fiscal year. A hospital may apply this
30-25 provision only once every five years.
30-26 SECTION 8. If any provision of the amendments made to
30-27 Chapter 311, Health and Safety Code, are or become invalid,
31-1 illegal, or unenforceable in any respect, the remaining provisions
31-2 shall not be in any way affected or impaired.
31-3 SECTION 9. This Act takes effect September 1, 1993.
31-4 SECTION 10. The importance of this legislation and the
31-5 crowded condition of the calendars in both houses create an
31-6 emergency and an imperative public necessity that the
31-7 constitutional rule requiring bills to be read on three several
31-8 days in each house be suspended, and this rule is hereby suspended.