BILL ANALYSIS
C.S.S.B. 1190
By: Ellis
Health and Human Services
4-28-95
Committee Report (Substituted)
BACKGROUND
The 73rd Legislature passed S.B. 427, relating to the charitable
obligation of nonprofit hospitals. The legislation established new
reporting requirements, and required that nonprofit hospitals
provide charity care in an amount reasonably related to the value
of their tax exemptions.
Changes in the health care industry have necessitated changes in
some of the reporting procedures for hospitals. Hospitals have
requested other minor adjustments in the statute to streamline the
accounting and reporting procedures, and to provide hospitals with
the flexibility needed to comply with the statute.
PURPOSE
As proposed, C.S.S.B. 1190 requires a system of nonprofit hospitals
under the common control of a single corporate parent to provide
community benefits which include charity care and government-sponsored indigent health care under certain conditions.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not grant any
additional rulemaking authority to a state officer, institution, or
agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 311.031, Health and Safety Code, to
define "health care organization" and "hospital system." Redefines
"charity care," "donations," and "unreimbursed costs."
SECTION 2. Amends Sections 311.045, Health and Safety Code, as
follows:
(a) Requires a nonprofit hospital or hospital system to
annually satisfy the requirements of this subchapter and
certain provisions of the Tax Code to provide community
benefits, including charity care and government-sponsored
indigent care. Authorizes the corporate parent, for hospitals
in a hospital system, to elect to satisfy the charity care
requirements of this subchapter for each of the hospitals
within the system on a consolidated basis. Makes conforming
and nonsubstantive changes.
(b) Authorizes a nonprofit hospital or hospital system to
elect to provide community benefits when such benefits are
provided in a certain combined amount beginning with the
fiscal year starting after December 31, 1995. Prohibits a
hospital or hospital system from changing its existing fiscal
year unless the hospital or hospital system changes its
ownership or corporate structure as a result of a sale or
merger. Deems a nonprofit hospital to be in compliance with
this subsection if designated as a disproportionate share
hospital under the state Medicaid program in the current
fiscal year. Deletes a provision concerning a nonprofit
hospital located in a county with a population under 100,000.
Makes conforming changes.
(c) Requires the providing of charity care and government-sponsored indigent care under Subsection (b)(1)(A) to be
guided by the business judgment of the hospital which will
ultimately determine the appropriate level of charity care
based, among other factors, on the hospital's volume of
Medicare and Medicaid patients.
(d) Requires a hospital that satisfies Subsection (b)(1)(A) or
(b)(3) to 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) Makes conforming changes.
SECTION 3. Amends Section 11.18(d), Tax Code, as follows:
(1) Requires a charitable organization to engage exclusively
in at least, among other functions, providing medical care
without regard to the beneficiaries' ability to pay, which in
the case of a nonprofit hospital or hospital system means
providing charity care and community benefits, beginning with
the hospital or hospital system's tax year starting after
1995, in a combined amount equal to at least five percent of
the hospital's or hospital system's net patient revenue.
Provides that a hospital operated on a nonprofit basis,
located in a county with a population of less than 50,000 and
in which the entire county or the county's population has been
designated as a health professionals shortage area is
considered to be in compliance with the standards provided by
this subsection. Provides that a hospital providing health
care services to inpatients or outpatients without receiving
any payment for providing those services from any source is
considered to be in compliance with the standards provided by
this subsection. Prohibits a hospital or hospital system, for
purposes of satisfying Subsection (d)(1)(F), from changing its
existing fiscal year unless the hospital or hospital system
changes ownership or corporate structure as a result of a sale
or merger. Requires a hospital that satisfies Subsection
(d)(1)(A), (d)(1)(D), (d)(1)(G), or (d)(1)(H) to be excluded
in determining compliance with Subsection (d)(1)(B),
(d)(1)(C), (d)(1)(E), or (d)(1)(F). Defines "health care
organization" and "hospital system." Makes conforming
changes.
SECTION 4. Amends Sections 151.310(a) and (e), Tax Code, as
follows:
(a) Deletes a provision regarding a nonprofit hospital.
(e) Requires a nonprofit hospital or hospital system that
qualifies for an exemption under Subsection (a)(2) to provide
charity care and community benefits, for tax periods beginning
before January 1, 1996, in a combined amount equal to at least
five percent of the hospital's or hospital system's net
patient revenue; or for tax periods beginning after December
31, 1995, in a combined amount equal to at least five percent
of the hospital or hospital system's net patient revenue.
Provides that a nonprofit hospital that has been designated as
a disproportionate share hospital under the state Medicaid
program in the current year or in either of the two previous
fiscal years is considered to have provided a reasonable
amount of charity care and government-sponsored indigent
health care and is considered in compliance with the standards
provided by this subsection. Provides that a hospital
operated on a nonprofit basis, located in a county with a
population of less than 50,000 and in which the entire county
or the county's population has been designated as a health
professionals shortage area is considered to be in compliance
with the standards provided by this subsection. Provides that
a hospital providing health care services to inpatients or
outpatients without receiving any payment for providing those
services from any source is considered to be in compliance
with the standards provided by this subsection. Prohibits a
hospital or hospital system, for purposes of satisfying
Subsection (e)(5), from changing its existing fiscal year
unless the hospital or hospital system changes ownership or
corporate structure as a result of a sale or merger. Requires
a hospital that satisfies Subsection (e)(1), (e)(6), (e)(7),
or (e)(8) to be excluded in determining compliance with
Subsection (e)(2), (e)(3, (e)(4), or (e)(5). Defines "health
care organization" and "hospital system." Makes conforming
changes.
SECTION 5. Amends Section 171.063(a), Tax Code, to declare that a
corporation that provides charity care and community benefits, for
tax periods beginning before January 1, 1996, in a combined amount
equal to at least five percent of the hospital's net patient
revenue is exempt from the franchise tax. Declares that a
corporation that provides charity care and community benefits, for
tax periods beginning after December 31, 1995, in a combined amount
equal to at least five percent of the hospital or hospital system's
net patient revenue. Provides that a nonprofit hospital that has
been designated as a disproportionate share hospital under the
state Medicaid program in the current year or in either of the two
previous fiscal years is considered to have provided a reasonable
amount of charity care and government-sponsored indigent health
care and is considered in compliance with the standards provided by
this subsection. Provides that a hospital operated on a nonprofit
basis, located in a county with a population of less than 50,000
and in which the entire county or the county's population has been
designated as a health professionals shortage area is considered to
be in compliance with the standards provided by this subsection.
Prohibits a hospital or hospital system, for purposes of satisfying
Subsection (a)(1)(E), from changing its existing fiscal year unless
the hospital or hospital system changes ownership or corporate
structure as a result of a sale or merger. Requires a hospital
that satisfies Subsection (a)(1)(A), (a)(1)(F), or (a)(1)(G) to be
excluded in determining compliance with Subsection (a)(1)(B),
(a)(1)(C), (a)(1)(D), or (a)(1)(E). Defines "health care
organization" and "hospital system." Makes conforming changes.
SECTION 6. Effective date: September 1, 1995.
SECTION 7. Emergency clause.