1-1 By: Ellis S.B. No. 427
1-2 (In the Senate - Filed February 22, 1993; February 23, 1993,
1-3 read first time and referred to Committee on Health and Human
1-4 Services; April 13, 1993, reported adversely, with favorable
1-5 Committee Substitute by the following vote: Yeas 8, Nays 0;
1-6 April 13, 1993, sent to printer.)
1-7 COMMITTEE VOTE
1-8 Yea Nay PNV Absent
1-9 Zaffirini x
1-10 Ellis x
1-11 Madla x
1-12 Moncrief x
1-13 Nelson x
1-14 Patterson x
1-15 Shelley x
1-16 Truan x
1-17 Wentworth x
1-18 COMMITTEE SUBSTITUTE FOR S.B. No. 427 By: Ellis
1-19 A BILL TO BE ENTITLED
1-20 AN ACT
1-21 relating to the duty of nonprofit, tax-exempt hospitals to provide
1-22 charity care; providing civil penalties.
1-23 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-24 SECTION 1. Section 311.031, Health and Safety Code, is
1-25 amended to read as follows:
1-26 Sec. 311.031. DEFINITIONS. In this subchapter:
1-27 (1) "Board" means the Texas Board of Health.
1-28 (2) "Charity care" means the unreimbursed cost to a
1-29 hospital of:
1-30 (A) providing, funding, or otherwise financially
1-31 supporting health care services on an inpatient or outpatient basis
1-32 to a person classified by the hospital as "financially indigent" or
1-33 "medically indigent"; and
1-34 (B) providing, funding, or otherwise financially
1-35 supporting health care services provided to financially indigent
1-36 patients through other nonprofit or public outpatient clinics,
1-37 hospitals, or health care organizations.
1-38 (3) "Contractual allowances" means the difference
1-39 between revenue at established rates and amounts realizable from
1-40 third-party payors under contractual agreements.
1-41 (4) "Department" means the Texas Department of Health.
1-42 (5) "Donations" means the unreimbursed costs of
1-43 providing cash and in-kind services and gifts, including
1-44 facilities, equipment, personnel, and programs, to other nonprofit
1-45 or public outpatient clinics, hospitals, or health care
1-46 organizations.
1-47 (6) "Education-related costs" means the unreimbursed
1-48 cost to a hospital of providing, funding, or otherwise financially
1-49 supporting educational benefits, services, and programs including:
1-50 (A) education of physicians, nurses,
1-51 technicians, and other medical professionals and health care
1-52 providers;
1-53 (B) provision of scholarships and funding to
1-54 medical schools, colleges, and universities for health professions
1-55 education;
1-56 (C) education of patients concerning diseases
1-57 and home care in response to community needs; and
1-58 (D) community health education through
1-59 informational programs, publications, and outreach activities in
1-60 response to community needs.
1-61 (7) "Financially indigent" means an uninsured or
1-62 underinsured person who is accepted for care with no obligation or
1-63 a discounted obligation to pay for the services rendered based on
1-64 the hospital's eligibility system.
1-65 (8) "Government-sponsored indigent health care" means
1-66 the unreimbursed cost to a hospital of providing health care
1-67 services to recipients of Medicaid and other federal, state, or
1-68 local indigent health care programs, eligibility for which is based
2-1 on financial need.
2-2 (9) <(3)> "Hospital" means a general or special
2-3 hospital licensed under Chapter 241 (Texas Hospital Licensing Law).
2-4 (10) "Hospital eligibility system" means the financial
2-5 criteria and procedure used by a hospital to determine if a patient
2-6 is eligible for charity care. The system shall include income
2-7 levels and means testing indexed to the federal poverty guidelines;
2-8 provided, however, that a hospital may not establish an eligibility
2-9 system which sets the income level eligible for charity care lower
2-10 than that required by counties under Section 61.023 or higher, in
2-11 the case of the financially indigent, than 200 percent of the
2-12 federal poverty guidelines. A hospital may determine that a person
2-13 is financially or medically indigent pursuant to the hospital's
2-14 eligibility system after health care services are provided.
2-15 (11) "Medically indigent" means a person whose medical
2-16 or hospital bills after payment by third-party payors exceed a
2-17 specified percentage of the patient's annual gross income, in
2-18 accordance with the hospital's eligibility system, and the person
2-19 is financially unable to pay the remaining bill.
2-20 (12) "Research-related costs" means the unreimbursed
2-21 cost to a hospital of providing, funding, or otherwise financially
2-22 supporting facilities, equipment, and personnel for medical and
2-23 clinical research conducted in response to community needs.
2-24 (13) "Subsidized health services" means those services
2-25 provided by a hospital in response to community needs for which the
2-26 reimbursement is less than the hospital's cost for providing the
2-27 services and which must be subsidized by other hospital revenue
2-28 sources. Subsidized health services may include but are not
2-29 limited to:
2-30 (A) emergency and trauma care;
2-31 (B) neonatal intensive care;
2-32 (C) free-standing community clinics; and
2-33 (D) collaborative efforts with local government
2-34 or private agencies in preventive medicine, such as immunization
2-35 programs.
2-36 (14) "Unreimbursed costs" means the costs a hospital
2-37 incurs for providing services after subtracting payments received
2-38 from any source for such services including but not limited to the
2-39 following: third-party insurance payments; Medicare payments;
2-40 Medicaid payments; Medicare education reimbursements; state
2-41 reimbursements for education; payments from drug companies to
2-42 pursue research; grant funds for research; and disproportionate
2-43 share payments. For purposes of this definition, the term "costs"
2-44 shall be calculated by applying the cost to charge ratios derived
2-45 from the hospital's Medicare cost report to billed charges. For
2-46 purposes of this definition, charitable contributions and grants to
2-47 the hospital, including transfers from endowment or other funds
2-48 controlled by the hospital or its affiliates, shall not be
2-49 subtracted from the costs of providing services for purposes of
2-50 determining unreimbursed costs. This subdivision applies for
2-51 periods prior to January 1, 1996.
2-52 (15) "Unreimbursed costs" means the costs the hospital
2-53 incurs for providing services after subtracting payments received
2-54 from any source for such services including but not limited to the
2-55 following: third-party insurance payments; Medicare payments;
2-56 Medicaid payments; Medicare education reimbursements; state
2-57 reimbursements for education; payments from drug companies to
2-58 pursue research; grant funds for research; and disproportionate
2-59 share payments. For purposes of this definition, the term "costs"
2-60 shall be calculated by applying the cost to charge ratios derived
2-61 from the hospital's Medicare cost report to billed charges. For
2-62 purposes of this definition, charitable contributions and grants to
2-63 the hospital for providing charity care, including transfers from
2-64 endowment or other funds controlled by the hospital or its
2-65 affiliates, shall not be subtracted from the costs of providing
2-66 services for purposes of determining unreimbursed costs. This
2-67 subdivision applies for periods on or after January 1, 1996.
2-68 SECTION 2. Subsection (a), Section 311.033, Health and
2-69 Safety Code, is amended to read as follows:
2-70 (a) A hospital shall submit to the department financial and
3-1 utilization data for that hospital, including data relating to the
3-2 hospital's:
3-3 (1) total gross revenue, including:
3-4 (A) Medicare gross revenue;
3-5 (B) Medicaid gross revenue;
3-6 (C) other revenue from state programs;
3-7 (D) revenue from local government programs;
3-8 (E) local tax support;
3-9 (F) charitable contributions;
3-10 (G) other third party payments;
3-11 (H) gross inpatient revenue; and
3-12 (I) gross outpatient revenue;
3-13 (2) total deductions from gross revenue, including:
3-14 (A) <charity care;>
3-15 <(B) bad debt;>
3-16 <(C)> contractual allowance; and
3-17 (B) <(D)> any other deductions;
3-18 (3) charity care;
3-19 (4) bad debt expense;
3-20 (5) total admissions, including:
3-21 (A) Medicare admissions;
3-22 (B) Medicaid admissions;
3-23 (C) admissions under a local government program;
3-24 (D) charity care admissions; and
3-25 (E) any other type of admission;
3-26 (6) <(4)> total discharges;
3-27 (7) <(5)> total patient days;
3-28 (8) <(6)> average length of stay;
3-29 (9) <(7)> total outpatient visits;
3-30 (10) <(8)> total assets;
3-31 (11) <(9)> total liabilities;
3-32 (12) estimates of unreimbursed costs of subsidized
3-33 health services reported separately in the following categories:
3-34 (A) emergency care and trauma care;
3-35 (B) neonatal intensive care;
3-36 (C) free-standing community clinics;
3-37 (D) collaborative efforts with local government
3-38 or private agencies in preventive medicine, such as immunization
3-39 programs; and
3-40 (E) other services that satisfy the definition
3-41 of "subsidized health services" contained in Section 311.031(7);
3-42 (13) donations;
3-43 (14) total cost of reimbursed and unreimbursed
3-44 research;
3-45 (15) <(10) total cost of reimbursed and unreimbursed
3-46 care for indigent patients; and>
3-47 <(11)> total cost of reimbursed and unreimbursed
3-48 <medical> education separated into the following categories:
3-49 (A) education of physicians, nurses,
3-50 technicians, and other medical professionals and health care
3-51 providers;
3-52 (B) scholarships and funding to medical schools,
3-53 colleges, and universities for health professions education;
3-54 (C) education of patients concerning diseases
3-55 and home care;
3-56 (D) community health education through
3-57 informational programs, publications, and outreach activities; and
3-58 (E) other educational services that satisfy the
3-59 definition of "education-related costs" under Section 311.031(6).
3-60 SECTION 3. Section 311.037, Health and Safety Code, is
3-61 amended to read as follows:
3-62 Sec. 311.037. CONFIDENTIAL DATA; CRIMINAL PENALTY. (a) The
3-63 following data reported or submitted to the department after
3-64 September 1, 1993, under this subchapter is confidential:
3-65 <(1)> data regarding a specific patient<; or>
3-66 <(2) financial data regarding a provider or facility>.
3-67 (b) Before the department may disclose confidential data
3-68 under this subchapter, the department must remove any information
3-69 that identifies a specific patient<, provider, or facility>.
3-70 (c) A person commits an offense if the person:
4-1 (1) discloses, distributes, or sells confidential data
4-2 obtained under this subchapter; or
4-3 (2) violates Subsection (b).
4-4 (d) An offense under Subsection (c) is a Class B
4-5 misdemeanor.
4-6 SECTION 4. Chapter 311, Health and Safety Code, is amended
4-7 by adding Subchapter D to read as follows:
4-8 SUBCHAPTER D. DUTIES OF NONPROFIT, TAX-EXEMPT HOSPITALS
4-9 Sec. 311.041. POLICY STATEMENT. It is the purpose of this
4-10 subchapter to clarify and set forth the duties and responsibilities
4-11 of nonprofit hospitals for providing community benefits that
4-12 include charity care.
4-13 Sec. 311.042. DEFINITIONS. In this subchapter:
4-14 (1) "Charity care" means those amounts defined as
4-15 charity care in Section 311.031(2).
4-16 (2) "Community benefits" means the unreimbursed cost
4-17 to a hospital of providing charity care, government-sponsored
4-18 indigent health care, donations, education, government-sponsored
4-19 program services, research, and subsidized health services.
4-20 Community benefits does not include the cost to the hospital of
4-21 paying any taxes or other governmental assessments.
4-22 (3) "Contributions" means the dollar value of cash
4-23 donations and the fair market value at the time of donation of
4-24 in-kind donations to the hospital from individuals, organizations,
4-25 or other entities. Contributions does not include the value of a
4-26 donation designated or otherwise restricted by the donor for
4-27 purposes other than charity care.
4-28 (4) "Donations" means those amounts defined as
4-29 donations in Section 311.031(5).
4-30 (5) "Education-related costs" means those amounts
4-31 defined as education-related costs in Section 311.031(6).
4-32 (6) "Government-sponsored indigent health care" means
4-33 those amounts defined as government-sponsored indigent health care
4-34 in Section 311.031(8).
4-35 (7) "Government-sponsored program unreimbursed costs"
4-36 means the unreimbursed cost to the hospital of providing health
4-37 care services to the beneficiaries of Medicare, the Civilian Health
4-38 and Medical Program of the Uniformed Services, and other federal,
4-39 state, or local government health care programs.
4-40 (8) "Net patient revenue" is an accounting term and
4-41 shall be calculated in accordance with generally accepted
4-42 accounting principles for hospitals.
4-43 (9)(A) "Nonprofit hospital" means a hospital that is:
4-44 (i) eligible for tax-exempt bond
4-45 financing;
4-46 (ii) exempt from state franchise, sales,
4-47 ad valorem, or other state or local taxes; and
4-48 (iii) organized as a nonprofit corporation
4-49 or other legal entity under the laws of this state or any other
4-50 state or country.
4-51 (B) For purposes of this subchapter, a
4-52 "nonprofit hospital" shall not include a hospital that:
4-53 (i) is exempt from state franchise, sales,
4-54 ad valorem, or other state or local taxes;
4-55 (ii) does not receive payment for
4-56 providing health care services to any inpatients or outpatients
4-57 from any source including but not limited to the patient or any
4-58 person legally obligated to support the patient, third-party
4-59 payors, Medicare, Medicaid, or any other federal, state, or local
4-60 indigent care program; payment for providing health care services
4-61 does not include charitable donations, legacies, bequests, or
4-62 grants or payments for research; and
4-63 (iii) does not discriminate on the basis
4-64 of inability to pay, race, color, creed, religion, or gender in its
4-65 provision of services.
4-66 (10) "Nonprofit supporting entities" means nonprofit
4-67 entities created by the hospital or its parent entity to further
4-68 the charitable purposes of the hospital and that are owned or
4-69 controlled by the hospital or its parent entity.
4-70 (11) "Research-related costs" means those amounts
5-1 defined as research-related costs in Section 311.031(11).
5-2 (12) "Tax-exempt benefits" means all of the following,
5-3 calculated in accordance with standard accounting principles and
5-4 practices for hospitals for tax purposes:
5-5 (A) the dollar amount of federal, state, and
5-6 local taxes foregone by a nonprofit hospital and its nonprofit
5-7 supporting entities. For purposes of this definition federal,
5-8 state, and local taxes include income, franchise, ad valorem, and
5-9 sales taxes;
5-10 (B) the dollar amount of contributions received
5-11 by a nonprofit hospital and its nonprofit supporting entities; and
5-12 (C) the value of tax-exempt bond financing
5-13 received by a nonprofit hospital and its nonprofit supporting
5-14 entities.
5-15 (13) "Subsidized health services" means those amounts
5-16 defined as subsidized health services in Section 311.031(13).
5-17 (14) "Unreimbursed costs" means costs as defined in
5-18 Section 311.031(14) or (15).
5-19 Sec. 311.043. DUTY OF NONPROFIT HOSPITALS TO PROVIDE
5-20 COMMUNITY BENEFITS. (a) A nonprofit hospital shall provide health
5-21 care services to the community and shall comply with all federal,
5-22 state, and local government requirements for tax exemption. These
5-23 health care services to the community shall include charity care
5-24 and may include other components of community benefits as both
5-25 terms are defined in Section 311.042.
5-26 (b) In order to qualify as a charitable organization under
5-27 Sections 11.18(d)(1), 151.310(a)(2) and (e), and 171.063(a)(1), Tax
5-28 Code, and to satisfy the requirements of this subchapter, a
5-29 nonprofit hospital shall provide community benefits, which include
5-30 charity care, in an amount that satisfies the requirements of
5-31 Section 311.045. A determination of the amount of charity care
5-32 provided by a hospital shall be based on the most recently
5-33 completed and audited prior fiscal year of the hospital.
5-34 (c) Reductions in the amount of community benefits, which
5-35 includes charity care, provided by a nonprofit hospital shall be
5-36 considered reasonable when the financial reserves of the hospital
5-37 are reduced to such a level that the hospital would be in violation
5-38 of any applicable bond requirements, when necessary to prevent the
5-39 hospital from endangering its ability to continue operations, or if
5-40 the hospital, as a result of a natural or other disaster, is
5-41 required substantially to curtail its operations.
5-42 (d) A hospital's admissions policy must provide for the
5-43 admission of financially indigent and medically indigent persons
5-44 pursuant to its charity care requirements as set forth in this
5-45 subchapter.
5-46 Sec. 311.044. COMMUNITY BENEFITS PLANNING BY NONPROFIT
5-47 HOSPITALS. (a) A nonprofit hospital shall develop:
5-48 (1) an organizational mission statement that
5-49 identifies the hospital's commitment to serving the health care
5-50 needs of the community; and
5-51 (2) a community benefits plan defined as an
5-52 operational plan for serving the community's health care needs that
5-53 sets out goals and objectives for providing community benefits that
5-54 include charity care, as both the terms community benefits and
5-55 charity care are defined by Section 311.042, and that identifies
5-56 the populations and communities served by the hospital.
5-57 (b) When developing the community benefits plan, the
5-58 hospital shall consider the health care needs of the community as
5-59 determined by community-wide needs assessments. For purposes of
5-60 this subsection, "community" means the primary geographic area and
5-61 patient categories for which the hospital provides health care
5-62 services; provided, however, that the primary geographic area shall
5-63 at least encompass the entire county in which the hospital is
5-64 located.
5-65 (c) The hospital shall include at least the following
5-66 elements in the community benefits plan:
5-67 (1) mechanisms to evaluate the plan's effectiveness,
5-68 including but not limited to a method for soliciting the views of
5-69 the communities served by the hospital;
5-70 (2) measurable objectives to be achieved within a
6-1 specified time frame; and
6-2 (3) a budget for the plan.
6-3 Sec. 311.045. COMMUNITY BENEFITS AND CHARITY CARE
6-4 REQUIREMENTS. (a) A nonprofit hospital shall annually satisfy the
6-5 requirements of this subchapter and of Sections 11.18(d)(1),
6-6 151.310(a)(2) and (e), and 171.063(a)(1), Tax Code, to provide
6-7 community benefits which include charity care and
6-8 government-sponsored indigent health care by complying with one or
6-9 more of the standards set forth in Subsection (b). The hospital
6-10 shall file a statement with the Bureau of State Health Data and
6-11 Policy Analysis at the department, with the chief appraiser of the
6-12 local appraisal district, and with the comptroller's office no
6-13 later than the 90th day after the hospital's fiscal year ends,
6-14 stating which of the standards in Subsection (b) have been
6-15 satisfied. For hospitals under the common control of a single
6-16 parent corporation, the corporate parent may elect to satisfy the
6-17 charity care requirements of this subchapter on a consolidated
6-18 basis; however, each hospital controlled by the parent corporation
6-19 shall satisfy the requirements of Sections 11.18(d)(1), 151.310(a),
6-20 (c), (d), and (e), and 171.063(a)(1), Tax Code, and provide
6-21 community benefits which include charity care.
6-22 (b)(1) A nonprofit hospital may elect to provide community
6-23 benefits, which include charity care and government-sponsored
6-24 indigent health care, according to any of the following standards:
6-25 (A) charity care and government-sponsored
6-26 indigent health care are provided at a level which is reasonable in
6-27 relation to the community needs, as determined through the
6-28 community needs assessment, the available resources of the
6-29 hospital, and the tax-exempt benefits received by the hospital;
6-30 (B) charity care and government-sponsored
6-31 indigent health care are provided in an amount equal to at least
6-32 four percent of the hospital's net patient revenue;
6-33 (C) charity care and government-sponsored
6-34 indigent health care are provided in an amount equal to at least
6-35 100 percent of the hospital's tax-exempt benefits, excluding
6-36 federal income tax;
6-37 (D) prior to January 1, 1996, charity care and
6-38 community benefits are provided in a combined amount equal to at
6-39 least five percent of the hospital's net patient revenue, provided
6-40 that charity care and government-sponsored indigent health care are
6-41 provided in an amount equal to at least three percent of net
6-42 patient revenue; or
6-43 (E) after December 31, 1995, charity care and
6-44 community benefits are provided in a combined amount equal to at
6-45 least five percent of the hospital's net patient revenue, provided
6-46 that charity care and government-sponsored indigent health care are
6-47 provided in an amount equal to at least four percent of net patient
6-48 revenue.
6-49 (2) A nonprofit hospital that has been designated as a
6-50 disproportionate share hospital under the state Medicaid program in
6-51 either of the previous two fiscal years shall be considered to have
6-52 provided a reasonable amount of charity care and
6-53 government-sponsored indigent health care and shall be deemed in
6-54 compliance with the standards in this subsection.
6-55 (c) The providing of charity care and government-sponsored
6-56 indigent health care in accordance with Subsection (b)(1)(A) shall
6-57 be guided by the prudent business judgment of the hospital who will
6-58 ultimately determine the appropriate level of charity care and
6-59 government-sponsored indigent health care based on the community
6-60 needs, the available resources of the hospital, the tax-exempt
6-61 benefits received by the hospital, and other factors that may be
6-62 unique to the hospital. These criteria shall not be determinative
6-63 factors, but shall be guidelines contributing to the hospital's
6-64 decision, along with other factors which may be unique to the
6-65 hospital. The standards set forth in Subsections (b)(1)(B),
6-66 (b)(1)(C), (b)(1)(D), and (b)(1)(E) shall also not be considered
6-67 determinative of the amount of charity care and
6-68 government-sponsored indigent health care that will be considered
6-69 reasonable under Subsection (b)(1)(A).
6-70 (d) In any fiscal year that a hospital, through unintended
7-1 miscalculation, fails to meet any of the standards in Subsection
7-2 (b), the hospital shall not lose its tax-exempt status without the
7-3 opportunity to cure the miscalculation in the fiscal year following
7-4 the fiscal year the failure is discovered by both meeting one of
7-5 the standards and providing an additional amount of charity care
7-6 and government-sponsored indigent health care that is equal to the
7-7 shortfall from the previous fiscal year. A hospital may apply this
7-8 provision only once every five years.
7-9 Sec. 311.046. ANNUAL REPORT OF COMMUNITY BENEFITS PLAN.
7-10 (a) A nonprofit hospital shall prepare an annual report of the
7-11 community benefits plan and shall include in the report at least
7-12 the following information:
7-13 (1) the hospital's mission statement;
7-14 (2) a disclosure of the health care needs of the
7-15 community that were considered in developing the hospital's
7-16 community benefits plan pursuant to Section 311.044(b); and
7-17 (3) a disclosure of the amount and types of community
7-18 benefits, including charity care, actually provided. Charity care
7-19 shall be reported as a separate item from other community benefits.
7-20 (b) A nonprofit hospital shall file the annual report of the
7-21 community benefits plan with the Bureau of State Health Data and
7-22 Policy Analysis at the department. The report shall be filed no
7-23 later than 120 days after the end of the hospital's fiscal year;
7-24 provided, however, that the first report shall be filed no later
7-25 than March 30, 1995.
7-26 (c) A nonprofit hospital shall prepare a statement that
7-27 notifies the public that the annual report of the community
7-28 benefits plan is public information; that it is filed with the
7-29 department; and that it is available to the public on request from
7-30 the department. The statement shall be posted in prominent places
7-31 throughout the hospital, including but not limited to the emergency
7-32 room waiting area and the admissions office waiting area. The
7-33 statement shall also be printed in the hospital patient guide or
7-34 other material that provides the patient with information about the
7-35 admissions criteria of the hospital.
7-36 (d) Each hospital shall provide, to each person who seeks
7-37 any health care service at the hospital, notice, in appropriate
7-38 languages, if possible, about the charity care program and how to
7-39 apply for charity care. Such notice shall also be conspicuously
7-40 posted in the general waiting area, the waiting area for emergency
7-41 services, in the business office, and in such other locations as
7-42 the hospital deems likely to give notice of the charity care
7-43 program.
7-44 Sec. 311.047. PENALTIES. The department may assess a civil
7-45 penalty against a nonprofit hospital that fails to make a report of
7-46 the community benefits plan as required under this subchapter. The
7-47 penalty may not exceed $1,000 for each day a report is delinquent
7-48 after the date on which the report is due. No penalty may be
7-49 assessed against a hospital under this subsection until 10 business
7-50 days have elapsed after written notification to the hospital of its
7-51 failure to file a report.
7-52 Sec. 311.048. RIGHTS AND REMEDIES. The rights and remedies
7-53 provided for in this subchapter shall not limit, affect, change, or
7-54 repeal any other statutory or common-law rights or remedies
7-55 available to the state or a nonprofit hospital.
7-56 SECTION 5. Subsection (d), Section 11.18, Tax Code, is
7-57 amended to read as follows:
7-58 (d) A charitable organization must be organized exclusively
7-59 to perform religious, charitable, scientific, literary, or
7-60 educational purposes and, except as permitted by Subsection (h) of
7-61 this section, engage exclusively in performing one or more of the
7-62 following charitable functions:
7-63 (1) providing medical care without regard to the
7-64 beneficiaries' ability to pay, which in the case of a nonprofit
7-65 hospital means providing charity care and community benefits as set
7-66 forth in Paragraph (A), (B), (C), (D), or (E):
7-67 (A) charity care is provided at a level which is
7-68 reasonable in relation to the community needs, as determined
7-69 through the community needs assessment, the available resources of
7-70 the hospital, and the tax-exempt benefits received by the hospital;
8-1 (B) charity care is provided in an amount equal
8-2 to at least four percent of the hospital's net patient revenue;
8-3 (C) charity care is provided in an amount equal
8-4 to at least 100 percent of the hospital's tax-exempt benefits,
8-5 excluding federal income tax;
8-6 (D) for tax years before 1996, charity care and
8-7 community benefits are provided in a combined amount equal to at
8-8 least five percent of the hospital's net patient revenue, provided
8-9 that charity care and government-sponsored indigent health care are
8-10 provided in an amount equal to at least three percent of net
8-11 patient revenue; or
8-12 (E) for tax years after 1995, charity care and
8-13 community benefits are provided in a combined amount equal to at
8-14 least five percent of the hospital's net patient revenue, provided
8-15 that charity care and government-sponsored indigent health care are
8-16 provided in an amount equal to at least four percent of net patient
8-17 revenue;
8-18 (2) providing support or relief to orphans,
8-19 delinquent, dependent, or handicapped children in need of
8-20 residential care, abused or battered spouses or children in need of
8-21 temporary shelter, the impoverished, or victims of natural disaster
8-22 without regard to the beneficiaries' ability to pay;
8-23 (3) providing support to elderly persons or the
8-24 handicapped without regard to the beneficiaries' ability to pay;
8-25 (4) preserving a historical landmark or site;
8-26 (5) promoting or operating a museum, zoo, library,
8-27 theater of the dramatic arts, or symphony orchestra or choir;
8-28 (6) promoting or providing humane treatment of
8-29 animals;
8-30 (7) acquiring, storing, transporting, selling, or
8-31 distributing water for public use;
8-32 (8) answering fire alarms and extinguishing fires with
8-33 no compensation or only nominal compensation to the members of the
8-34 organization;
8-35 (9) promoting the athletic development of boys or
8-36 girls under the age of 18 years;
8-37 (10) preserving or conserving wildlife;
8-38 (11) promoting educational development through loans
8-39 or scholarships to students;
8-40 (12) providing halfway house services pursuant to a
8-41 certification as a halfway house by the Board of Pardons and
8-42 Paroles;
8-43 (13) providing permanent housing and related social,
8-44 health care, and educational facilities for persons who are 62
8-45 years of age or older without regard to the residents' ability to
8-46 pay;
8-47 (14) promoting or operating an art gallery, museum, or
8-48 collection, in a permanent location or on tour, that is open to the
8-49 public;
8-50 (15) providing for the organized solicitation and
8-51 collection for distributions through gifts, grants, and agreements
8-52 to nonprofit charitable, education, religious, and youth
8-53 organizations that provide direct human, health, and welfare
8-54 services;
8-55 (16) performing biomedical or scientific research or
8-56 biomedical or scientific education for the benefit of the public;
8-57 <or>
8-58 (17) operating a television station that produces or
8-59 broadcasts educational, cultural, or other public interest
8-60 programming and that receives grants from the Corporation for
8-61 Public Broadcasting under 47 U.S.C. Section 396; or
8-62 (18) in the case of a nonprofit hospital, providing
8-63 health care services without receiving any payment for providing
8-64 those services to inpatients or outpatients from any source
8-65 including but not limited to the patient or person legally
8-66 obligated to support the patient, third-party payors, Medicare,
8-67 Medicaid, or any other state or local indigent care program.
8-68 Payment for providing health care services does not include
8-69 charitable donations, legacies, bequests, or grants or payment for
8-70 research.
9-1 For purposes of this subsection, the terms "charity care,"
9-2 "net patient revenue," "nonprofit hospital," and "tax-exempt
9-3 benefits" have the meanings set forth in Sections 311.031 and
9-4 311.042, Health and Safety Code. A determination of the amount of
9-5 community benefits and charity care provided by a hospital and the
9-6 hospital's compliance with the requirements of Section 311.045,
9-7 Health and Safety Code, shall be based on the most recently
9-8 completed and audited prior fiscal year of the hospital.
9-9 The providing of charity care in accordance with Paragraph
9-10 (A) of Subdivision (1) shall be guided by the prudent business
9-11 judgment of the hospital who will ultimately determine the
9-12 appropriate level of charity care based on the community needs, the
9-13 available resources of the hospital, the tax-exempt benefits
9-14 received by the hospital, and other factors that may be unique to
9-15 the hospital. These criteria shall not be determinative factors,
9-16 but shall be guidelines contributing to the hospital's decision
9-17 along with other factors which may be unique to the hospital. The
9-18 formulas contained in Paragraphs (B), (C), (D), and (E) of
9-19 Subdivision (1) shall also not be considered determinative of a
9-20 reasonable amount of charity care.
9-21 The requirements of this subsection shall not apply to the
9-22 extent a hospital demonstrates that reductions in the amount of
9-23 community benefits or charity care are necessary to maintain
9-24 financial reserves at a level required by a bond covenant, are
9-25 necessary to prevent the hospital from endangering its ability to
9-26 continue operations, or if the hospital, as a result of a natural
9-27 or other disaster, is required substantially to curtail its
9-28 operations.
9-29 In any fiscal year that a hospital, through unintended
9-30 miscalculation, fails to meet any of the standards in Subdivision
9-31 (1), the hospital shall not lose its tax-exempt status without the
9-32 opportunity to cure the miscalculation in the fiscal year following
9-33 the fiscal year the failure is discovered by both meeting one of
9-34 the standards and providing an additional amount of charity care
9-35 and government-sponsored indigent health care that is equal to the
9-36 shortfall from the previous fiscal year. A hospital may apply this
9-37 provision only once every five years.
9-38 SECTION 6. Section 151.310, Tax Code, is amended by amending
9-39 Subsection (a) and adding Subsection (e) to read as follows:
9-40 (a) A taxable item sold, leased, or rented to, or stored,
9-41 used, or consumed by, any of the following organizations is
9-42 exempted from the taxes imposed by this chapter:
9-43 (1) an organization created for religious,
9-44 educational, or charitable purposes if no part of the net earnings
9-45 of the organization benefits a private shareholder or individual
9-46 and the items purchased, leased, or rented are related to the
9-47 purpose of the organization, and in the case of a nonprofit
9-48 hospital, the hospital does not receive any payment for providing
9-49 health care services to inpatients or outpatients from any source
9-50 including but not limited to the patient or person legally
9-51 obligated to support the patient, third-party payors, Medicare,
9-52 Medicaid, or any other state or local indigent care program.
9-53 Payment for providing health care services does not include
9-54 charitable donations, legacies, bequests, or grants or payments for
9-55 research;
9-56 (2) an organization qualifying for an exemption from
9-57 federal income taxes under Section 501(c)(3), (4), (8), (10), or
9-58 (19), Internal Revenue Code, of the item sold, leased, rented,
9-59 stored, used, or consumed relates to the purpose of the exempted
9-60 organization and the item is not used for the personal benefit of a
9-61 private stockholder or individual;
9-62 (3) a nonprofit organization engaged exclusively in
9-63 providing athletic competition among persons under 19 years old if
9-64 no financial benefit goes to an individual or shareholder;
9-65 (4) a company, department, or association organized
9-66 for the purpose of answering fire alarms and extinguishing fires or
9-67 for the purpose of answering fire alarms, extinguishing fires, and
9-68 providing emergency medical services, the members of which receive
9-69 no compensation or only nominal compensation for their services
9-70 rendered, if the taxable item is used exclusively by the company,
10-1 department, or association; or
10-2 (5) a chamber of commerce or a convention and tourist
10-3 promotional agency representing at least one Texas city or county
10-4 if the chamber of commerce or the agency is not organized for
10-5 profit and no part of its net earnings inures to a private
10-6 shareholder or other individual.
10-7 (e) A nonprofit hospital that qualifies for an exemption
10-8 under Subsection (a)(2) shall provide charity care and community
10-9 benefits as set forth in Subdivision (1), (2), (3), (4), or (5)
10-10 below:
10-11 (1) charity care is provided at a level which is
10-12 reasonable in relation to the community needs, as determined
10-13 through the community needs assessment, the available resources of
10-14 the hospital, and the tax-exempt benefits received by the hospital;
10-15 (2) charity care is provided in an amount equal to at
10-16 least four percent of the hospital's net patient revenue;
10-17 (3) charity care is provided in an amount equal to at
10-18 least 100 percent of the hospital's tax-exempt benefits, excluding
10-19 federal income tax; or
10-20 (4) for tax years before 1996, charity care and
10-21 community benefits are provided in a combined amount equal to at
10-22 least five percent of the hospital's net patient revenue, provided
10-23 that charity care and government-sponsored indigent health care are
10-24 provided in an amount equal to at least three percent of net
10-25 patient revenue; or
10-26 (5) for tax years after 1995, charity care and
10-27 community benefits are provided in a combined amount equal to at
10-28 least five percent of the hospital's net patient revenue, provided
10-29 that charity care and government-sponsored indigent health care are
10-30 provided in an amount equal to at least four percent of net patient
10-31 revenue.
10-32 For purposes of this subsection, the terms "charity care,"
10-33 "net patient revenue," "nonprofit hospital," and "tax-exempt
10-34 benefits" have the meanings set forth in Sections 311.031 and
10-35 311.042, Health and Safety Code. A determination of the amount of
10-36 community benefits and charity care provided by a hospital and the
10-37 hospital's compliance with the requirements of this subsection and
10-38 Section 311.045, Health and Safety Code, shall be based on the most
10-39 recently completed and audited prior fiscal year of the hospital.
10-40 The providing of charity care in accordance with Subdivision
10-41 (1) shall be guided by the prudent business judgment of the
10-42 hospital who will ultimately determine the appropriate level of
10-43 charity care based on the community needs, the available resources
10-44 of the hospital, the tax-exempt benefits received by the hospital,
10-45 and other factors that may be unique to the hospital. These
10-46 criteria shall not be determinative factors, but shall be
10-47 guidelines contributing to the hospital's decision along with other
10-48 factors which may be unique to the hospital. The formulas
10-49 contained in Subdivisions (2), (3), (4), and (5) shall also not be
10-50 considered determinative of a reasonable amount of charity care.
10-51 The requirements of this subsection shall not apply to the
10-52 extent a hospital demonstrates that reductions in the amount of
10-53 community benefits or charity care are necessary to maintain
10-54 financial reserves at a level required by a bond covenant, are
10-55 necessary to prevent the hospital from endangering its ability to
10-56 continue operations, or if the hospital, as a result of a natural
10-57 or other disaster, is required substantially to curtail its
10-58 operations.
10-59 In any fiscal year that a hospital, through unintended
10-60 miscalculation, fails to meet any of the standards in this
10-61 subsection, the hospital shall not lose its tax-exempt status
10-62 without the opportunity to cure the miscalculation in the fiscal
10-63 year following the fiscal year the failure is discovered by both
10-64 meeting one of the standards and providing an additional amount of
10-65 charity care and government-sponsored indigent health care that is
10-66 equal to the shortfall from the previous fiscal year. A hospital
10-67 may apply this provision only once every five years.
10-68 SECTION 7. Subsection (a), Section 171.063, Tax Code, is
10-69 amended to read as follows:
10-70 (a) The following corporations are exempt from the franchise
11-1 tax:
11-2 (1) a nonprofit corporation exempted from the federal
11-3 income tax under Section 501(c)(3), (4), (5), (6), or (7) of the
11-4 Internal Revenue Code of 1954, as it existed on January 1, 1975;
11-5 which in the case of a nonprofit hospital means a hospital
11-6 providing charity care and community benefits as set forth in
11-7 Paragraph (A), (B), (C), (D), or (E):
11-8 (A) charity care is provided at a level which is
11-9 reasonable in relation to the community needs, as determined
11-10 through the community needs assessment, the available resources of
11-11 the hospital, and the tax-exempt benefits received by the hospital;
11-12 (B) charity care is provided in an amount equal
11-13 to at least four percent of the hospital's net patient revenue;
11-14 (C) charity care is provided in an amount equal
11-15 to at least 100 percent of the hospital's tax-exempt benefits,
11-16 excluding federal income tax; or
11-17 (D) for tax years before 1996, charity care and
11-18 community benefits are provided in a combined amount equal to at
11-19 least five percent of the hospital's net patient revenue, provided
11-20 that charity care and government-sponsored indigent health care are
11-21 provided in an amount equal to at least three percent of net
11-22 patient revenue; or
11-23 (E) for tax years after 1995, charity care and
11-24 community benefits are provided in a combined amount equal to at
11-25 least five percent of the hospital's net patient revenue, provided
11-26 that charity care and government-sponsored indigent health care are
11-27 provided in an amount equal to at least four percent of net patient
11-28 revenue; or
11-29 (2) a corporation exempted under Section 501(c)(2) or
11-30 (25) of the Internal Revenue Code of 1986, if the corporation or
11-31 corporations for which it holds title to property is either exempt
11-32 from or not subject to the franchise tax; <and>
11-33 (3) a corporation exempted from federal income tax
11-34 under Section 501(c)(16), Internal Revenue Code of 1986; and
11-35 (4) a nonprofit corporation exempted from the federal
11-36 income tax under Section 501(c)(3) of the Internal Revenue Code of
11-37 1986, that is a nonprofit hospital and does not receive any payment
11-38 for providing health care services to inpatients or outpatients
11-39 from any source including but not limited to the patient or person
11-40 legally obligated to support the patient, third-party payors,
11-41 Medicare, Medicaid, or any other state or local indigent care
11-42 program. Payment for providing health care services does not
11-43 include charitable donations, legacies, bequests, or grants or
11-44 payments for research.
11-45 For purposes of this subsection, the terms "charity care,"
11-46 "net patient revenue," "nonprofit hospital," and "tax-exempt
11-47 benefits" have the meanings set forth in Sections 311.031 and
11-48 311.042, Health and Safety Code. A determination of the amount of
11-49 community benefits and charity care provided by a hospital and the
11-50 hospital's compliance with the requirements of Section 311.045,
11-51 Health and Safety Code, shall be based on the most recently
11-52 completed and audited prior fiscal year of the hospital.
11-53 The providing of charity care in accordance with Paragraph
11-54 (A) of Subdivision (1) shall be guided by the prudent business
11-55 judgment of the hospital who will ultimately determine the
11-56 appropriate level of charity care based on the community needs, the
11-57 available resources of the hospital, the tax-exempt benefits
11-58 received by the hospital, and other factors that may be unique to
11-59 the hospital. These criteria shall not be determinative factors,
11-60 but shall be guidelines contributing to the hospital's decision
11-61 along with other factors which may be unique to the hospital. The
11-62 formulas contained in Paragraphs (B), (C), (D), and (E) of
11-63 Subdivision (1) shall also not be considered determinative of a
11-64 reasonable amount of charity care.
11-65 The requirements of this subsection shall not apply to the
11-66 extent a hospital demonstrates that reductions in the amount of
11-67 community benefits or charity care are necessary to maintain
11-68 financial reserves at a level required by a bond covenant, are
11-69 necessary to prevent the hospital from endangering its ability to
11-70 continue operations, or if the hospital, as a result of a natural
12-1 or other disaster, is required substantially to curtail its
12-2 operations.
12-3 In any fiscal year that a hospital, through unintended
12-4 miscalculation, fails to meet any of the standards in Subdivision
12-5 (1), the hospital shall not lose its tax-exempt status without the
12-6 opportunity to cure the miscalculation in the fiscal year following
12-7 the fiscal year the failure is discovered by both meeting one of
12-8 the standards and providing an additional amount of charity care
12-9 and government-sponsored indigent health care that is equal to the
12-10 shortfall from the previous fiscal year. A hospital may apply this
12-11 provision only once every five years.
12-12 SECTION 8. If any provision of the amendments made to
12-13 Subchapter C or D, Chapter 311, Health and Safety Code, are or
12-14 become invalid, illegal, or unenforceable in any respect, the
12-15 remaining provisions shall not be in any way affected or impaired.
12-16 SECTION 9. This Act takes effect September 1, 1993.
12-17 SECTION 10. The importance of this legislation and the
12-18 crowded condition of the calendars in both houses create an
12-19 emergency and an imperative public necessity that the
12-20 constitutional rule requiring bills to be read on three several
12-21 days in each house be suspended, and this rule is hereby suspended.
12-22 * * * * *
12-23 Austin,
12-24 Texas
12-25 April 13, 1993
12-26 Hon. Bob Bullock
12-27 President of the Senate
12-28 Sir:
12-29 We, your Committee on Health and Human Services to which was
12-30 referred S.B. No. 427, have had the same under consideration, and I
12-31 am instructed to report it back to the Senate with the
12-32 recommendation that it do not pass, but that the Committee
12-33 Substitute adopted in lieu thereof do pass and be printed.
12-34 Zaffirini,
12-35 Chair
12-36 * * * * *
12-37 WITNESSES
12-38 FOR AGAINST ON
12-39 ___________________________________________________________________
12-40 Name: Cliff Berman x
12-41 Representing: CareMark Prescription Services
12-42 City: Lincolnshire
12-43 -------------------------------------------------------------------
12-44 Name: Susan Bartlemay x
12-45 Representing: Texas Pharmaceutical Assn
12-46 City: Allen
12-47 -------------------------------------------------------------------
12-48 Name: Thomas D. Guidry x
12-49 Representing: Tx Pharmaceutical Assn
12-50 City: San Antonio
12-51 -------------------------------------------------------------------
12-52 Name: Richard Beck x
12-53 Representing: Tx Pharmaceutical Assn
12-54 City: Austin
12-55 -------------------------------------------------------------------
12-56 Name: Tony Dasher x
12-57 Representing: Tx Pharmaceutical Assn
12-58 City: San Antonio
12-59 -------------------------------------------------------------------
12-60 Name: Cathy Stella x
12-61 Representing: Tx State Board of Pharmacy
12-62 City: Austin
12-63 -------------------------------------------------------------------
12-64 Name: Fred S. Brinkley, Jr. x
12-65 Representing: Tx Board of Pharmacy
12-66 City: Austin
12-67 -------------------------------------------------------------------
12-68 Name: Gay Dodson x
12-69 Representing: Tx Board of Pharmacy
12-70 City: Austin
13-1 -------------------------------------------------------------------
13-2 Name: Chuck Courtney x
13-3 Representing: Tx Retailers Assn
13-4 City: Austin
13-5 -------------------------------------------------------------------
13-6 Name: Teri L. Bair x
13-7 Representing: Tx Society of Hosp. Pharmacis
13-8 City: Dallas
13-9 -------------------------------------------------------------------
13-10 Name: Brad Shields x
13-11 Representing: Tx Society of Hosp Pharm
13-12 City: Austin
13-13 -------------------------------------------------------------------
13-14 Name: Kitty Allen x
13-15 Representing: Hermann Hospital
13-16 City: Austin
13-17 -------------------------------------------------------------------
13-18 FOR AGAINST ON
13-19 ___________________________________________________________________
13-20 Name: Carol Daniels x
13-21 Representing: Tx Dept. of Health
13-22 City: Austin
13-23 -------------------------------------------------------------------
13-24 Name: John Vasquez x
13-25 Representing: Self
13-26 City: Austin
13-27 -------------------------------------------------------------------
13-28 Name: King Hillier x
13-29 Representing: Harris County Hospital
13-30 City: Houston
13-31 -------------------------------------------------------------------
13-32 Name: John Hildreth x
13-33 Representing: SW Office of Consumers Union
13-34 City: Austin
13-35 -------------------------------------------------------------------
13-36 Name: Jasper Taylor III x
13-37 Representing: Self
13-38 City: Houston
13-39 -------------------------------------------------------------------
13-40 Name: Bruce Bower x
13-41 Representing: Houston Welfare Rights Org
13-42 City: Austin
13-43 -------------------------------------------------------------------
13-44 Name: Susan Finkelstein x
13-45 Representing: Leticia & Eduardo Balboa
13-46 City: San Antonio
13-47 -------------------------------------------------------------------
13-48 Name: T. Lane Scott x
13-49 Representing: Self
13-50 City: Bedford
13-51 -------------------------------------------------------------------
13-52 Name: Carl Siegenthaler x
13-53 Representing: Citizens Health Care Network
13-54 City: Austin
13-55 -------------------------------------------------------------------
13-56 Name: David S. Lopez x
13-57 Representing: Public & Non-Profit Hospitals
13-58 City: Corpus Christi
13-59 -------------------------------------------------------------------
13-60 Name: Mary Cheney x
13-61 Representing: Catholic Health Facilities
13-62 City: Austin
13-63 -------------------------------------------------------------------
13-64 Name: Tim Smith x
13-65 Representing: Public Citizen, Inc
13-66 City: Austin
13-67 -------------------------------------------------------------------
13-68 Name: Harry W. Wallingford x
13-69 Representing: Tx Business Group on Health
13-70 City: Austin
14-1 -------------------------------------------------------------------
14-2 Name: Barbara L. Watkins x
14-3 Representing: Ron Anderson, M.D.
14-4 City: Dallas
14-5 -------------------------------------------------------------------
14-6 Name: Dr. Pamela M. Berger x
14-7 Representing: Gov Health Policy Task Force
14-8 City: Austin
14-9 -------------------------------------------------------------------
14-10 Name: Ann Kirhen x
14-11 Representing: Tx Attorney General
14-12 City: Austin
14-13 -------------------------------------------------------------------
14-14 Name: Joe DaSilva x x
14-15 Representing: Tx Hospital Assoc.
14-16 City: Austin
14-17 -------------------------------------------------------------------
14-18 FOR AGAINST ON
14-19 ___________________________________________________________________
14-20 Name: Mark Wallace x
14-21 Representing: Tx Children's Hospital
14-22 City: Houston
14-23 -------------------------------------------------------------------
14-24 Name: Ralph D. Feigin x
14-25 Representing: Tx Children's Hospital
14-26 City: Houston
14-27 -------------------------------------------------------------------
14-28 Name: Denton Arthur Cooley x
14-29 Representing: St Lukes Episcopal Hosp
14-30 City: Houston
14-31 -------------------------------------------------------------------
14-32 Name: M. James Henderson x
14-33 Representing: The Methodist Hospital
14-34 City: Houston
14-35 -------------------------------------------------------------------
14-36 Name: Kathleen DeSilva x
14-37 Representing: Inst for Rehab and Research
14-38 City: Houston
14-39 -------------------------------------------------------------------
14-40 Name: Michael Jhin x
14-41 Representing: St. Luke's Episcopal Hosp
14-42 City: Houston
14-43 -------------------------------------------------------------------
14-44 Name: Glen Rosenbarry x
14-45 Representing: Self
14-46 City: Houston
14-47 -------------------------------------------------------------------
14-48 Name: William L. Broussard x
14-49 Representing: Catholic Health Facilities
14-50 City: Austin
14-51 -------------------------------------------------------------------