BILL ANALYSIS
S.B. 1190
By: Ellis (Maxey)
05-02-95
Committee Report (Unamended)
BACKGROUND
During the 73rd Session, S.B. 427 passed, establishing that non-profit hospitals are required to perform a certain amount of
charity care. Chapter 311 of the Health and Safety Code sets up the
definitions and public policy for the delivery of charity care. As
the legislation was implemented, several difficulties arose, and
this bill corrects those difficulties.
PURPOSE
S.B. 1190 would clarify several definitions in the previous
legislation, eliminate confusion regarding the implementation dates
of increased charity care in Chapter 311, Health and Safety Code,
define the exemptions from Chapter 311, and recognize a universal
standard of accounting to be used by hospitals in the calculation
of charity care costs and services.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not expressly
grant any additional rulemaking authority to a state officer,
department, agency, or institution.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Sec. 311.031, Health and Safety Code, as follows:
Amends Sec. 311.031(2)(B), by changing a reference from
"patients" to "persons" for continuity with previous sections,
and adds health care services
provided to an elementary or
secondary school in which at least
50 percent or more of the students
qualify under the federal program
for free or reduced-price school
lunches or meet an equivalent
economic index to the definition of
"charity care."
Amends Sec. 311.031(5), by adding an elementary or secondary
school in which at least 50 percent or more of the students
qualify under the federal program
for free or reduced-price school
lunches or meet an equivalent
economic index to the definition of
"donation."
Amends Sec. 311.031(9), by adding a definition of "health care
organization," and renumbering the subsequent sections
accordingly.
Amends Sec. 311.031 (12), by adding the definition of
"hospital system," and renumbers the subsequent sections
accordingly.
Amends Sec. 311.031(16), by establishing that generally
accepted accounting principles (GAAP), a universally
recognized industry standard,
may be used in calculating the
cost to charge ratios used in
the determination of "costs."
Requires the cost to charge
ratios to be based on the most
recently completed and audited
prior fiscal year of the
hospital.
SECTION 2. Adds Sec. 311.042(15), Health and Safety Code, to define
"hospital system."
SECTION 3. Amends Sec. 311.045, Health and Safety Code, as follows:
(a) Adds "or hospital system" to the statement that a
nonprofit hospital or hospital system shall satisfy the
charity care requirements of this subchapter and specified
sections of the Tax Code, and adds the reference to "hospital
system" accordingly to the subsequent text of this section.
Deletes the references to a single parent corporation that
controls a hospital, to conform with the addition of the
references to a hospital system.
(b)(1) Adds references to a hospital system to conform with
previous changes.
(b)(2) Prohibits a hospital or a hospital system from changing
its existing fiscal year, unless changing ownership or
corporate structure as a result of a sale or merger. The
remaining subsection is renumbered to reflect this added
provision.
(b)(3) Clarifies that a hospital that receives
disproportionate share funding shall be deemed in compliance
with the standards of this subsection if the fiscal year
corresponds to the receipt of the disproportionate share
funds. The exemption of a nonprofit hospital in a county with
a population under 100,000 from the standards of this
subsection, is deleted.
(c) Adds consideration of a hospital's volume of Medicaid and
Medicare patients to the prudent business judgment used as
guidelines for the provision of charity care by the hospital.
(d) States that for the purpose of this section, a hospital
that satisfies Subsection (b)(1)(A) or (b)(3) shall be
excluded in determining a hospital system's compliance with
the standards provided by Subsection (b)(1)(B), (b)(1)(C),
(b)(1)(D), or (b)(1)(E).
(e) Adds references to a hospital system to conform with
previous changes.
SECTION 4. Amends Sec. 11.18(d), Tax Code, to include a reference
to hospital system in all applicable sections, and the following:
(d)(1)(D) Amends the reference to the provision of reasonable
charity care of a nonprofit hospital designated as a
disproportionate share hospital to include the current year or
in either of the two previous fiscal years.
(d)(1)(F) Amends one of the definitions of a charitable
organization to clarify that a charitably organization is one
in which charity care and community benefits are provided in
a combined amount equal to at least 5 percent of the hospital
or hospital system's net patient revenue (with a
qualification), beginning with the entity's tax year starting
after 1995, instead of "for tax years" after 1995.
(d)(1)(G) Exempts small rural hospitals already in Chapter
311, Health and Safety Code, into the Tax Code for clarity and
reference.
(d)(1)(H) Provides language being removed from Section
11.18(d)(18) to bring all of the exemptions together in the
Code. This language exempts hospitals that do not receive
payment for any of their services.
(d)(18) Deletes language that a charitable organization is one
that provides health care services (in the case of a nonprofit
hospital) without receiving any payment for those services
from any source, as specified. Adds language that prohibits a
hospital from changing its existing fiscal year to delay
implementation of Section 11.18(d)(1)(F), unless in the case
of a sale or merger of the hospital. Adds language that
prevents an entire system of hospitals from becoming exempt
from this section if one hospital is exempt due to the
provisions of (d)(1)(A), (d)(1)(D), (d)(1)(G), or (d)(1)(H).
SECTION 5. Amends Sections 151.310(a) and (e), Tax Code, as
follows:
(a)(1) Strikes language that exempts hospitals that do not
collect payments for services, and places the language in
151.310(e)(8) for clarity in the Tax Code.
(e) Adds the appropriate references to hospital system
throughout this section and adding references to new Sections
(7) and (8).
(e)(4) Strikes language exempting hospitals that receive
disproportionate share funds from this section and places
the language in
151.310(e)(6) for clarity
in the Tax Code. (e)(4)
and (e)(5) allow the
increased charity care
requirement to be
effective in the fiscal
year after the increased
charity requirement is
implemented.
(e)(6) Adds the language removed from 151.310(e)(4) to provide
clarity in the Tax Code.
(e)(7) Adds an exemption for rural hospitals, as it already
exits in Chapter 311 of the Health and Safety Code, to the Tax
Code.
(e)(8) Adds the language removed from 151.310(a)(1) to provide
clarity in the Tax Code.
SECTION 6. Amends Sec. 171.063(a), Tax Code, by adding the
reference to hospital system throughout this section, and the
following:
(a)(1) Adds the reference to a new subsection (G).
(a)(1)(D) Strikes the language that refers to a hospital that
receives disproportionate share funds and moves this section
to Section 171.063(a)(1)(F), and reletters the remaining
subsections to reflect the deletion.
(a)(1)(D) and (a)(1)(F) are amended to allow the increased
charity care requirement to be effective in the fiscal year
after the increased charity requirement is implemented.
(a)(1)(F) Adds the language removed from 151.310(a)(1)(D) to
provide clarity in the Tax Code.
(a)(1)(G) Adds an exemption for rural hospitals, as it already
exits in Chapter 311 of the Health and Safety Code, to the Tax
Code.
(a)(4) Removes a reference to a nonprofit hospital that is
superfluous to that section. Adds transitional language that
prohibits a hospital from changing its existing fiscal year to
delay implementation of Section 311.045(b)(1)(e), Health and
Safety Code, unless in the case of a sale or merger of the
hospital; and by adding language that prevents an entire
system of hospitals from becoming exempt from this section if
one hospital is exempt due to the provisions of (a)(1)(A),
(a)(1)(F), (a)(1)(G). Adds references to health care
organization and hospital system, as defined in Chapter 311 of
the Health and Safety Code, to the transitional language on
this section, and adds the volume of Medicare and Medicaid to
the criteria that a hospital may use to determine prudent
business judgment.
SECTION 7. Effective date: September 1, 1995.
SECTION 8. Emergency clause.
SUMMARY OF COMMITTEE ACTION
S.B. 1190 was considered by the Public Health Committee in a public
hearing on May 2, 1995. The bill was reported favorably without
amendment, with the recommendation that it do pass and printed, by
a record vote of 6 ayes, 0 nays, 0 pnv, and 3 absent.