74R11186 E
By Maxey H.B. No. 3009
Substitute the following for H.B. No. 3009:
By Rodriguez C.S.H.B. No. 3009
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the duty of nonprofit, tax-exempt hospitals to provide
1-3 charity care.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 311.031, Health and Safety Code, is
1-6 amended to read as follows:
1-7 Sec. 311.031. Definitions. In this subchapter:
1-8 (1) "Board" means the Texas Board of Health.
1-9 (2) "Charity care" means the unreimbursed cost to a
1-10 hospital of:
1-11 (A) providing, funding, or otherwise financially
1-12 supporting health care services on an inpatient or outpatient basis
1-13 to a person classified by the hospital as "financially indigent" or
1-14 "medically indigent"; and/or
1-15 (B) providing, funding, or otherwise financially
1-16 supporting health care services provided to financially indigent
1-17 persons <patients> through other nonprofit or public outpatient
1-18 clinics, hospitals, or health care organizations or an elementary
1-19 or secondary school in which at least 50 percent or more of the
1-20 students qualify under the federal program for free or
1-21 reduced-price school lunches or meet an equivalent economic index.
1-22 (3) "Contractual allowances" means the difference
1-23 between revenue at established rates and amounts realizable from
2-1 third-party payors under contractual agreements.
2-2 (4) "Department" means the Texas Department of Health.
2-3 (5) "Donations" means the unreimbursed costs of
2-4 providing cash and in-kind services and gifts, including
2-5 facilities, equipment, personnel, and programs, to other nonprofit
2-6 or public outpatient clinics, hospitals, <or> health care
2-7 organizations, or schools.
2-8 (6) "Education-related costs" means the unreimbursed
2-9 cost to a hospital of providing, funding, or otherwise financially
2-10 supporting educational benefits, services, and programs including:
2-11 (A) education of physicians, nurses,
2-12 technicians, and other medical professionals and health care
2-13 providers;
2-14 (B) provision of scholarships and funding to
2-15 medical schools, colleges, and universities for health professions
2-16 education;
2-17 (C) education of patients concerning diseases
2-18 and home care in response to community needs; and
2-19 (D) community health education through
2-20 informational programs, publications, and outreach activities in
2-21 response to community needs.
2-22 (7) "Financially indigent" means an uninsured or
2-23 underinsured person who is accepted for care with no obligation or
2-24 a discounted obligation to pay for the services rendered based on
2-25 the hospital's eligibility system.
3-1 (8) "Government-sponsored indigent health care" means
3-2 the unreimbursed cost to a hospital of providing health care
3-3 services to recipients of Medicaid and other federal, state, or
3-4 local indigent health care programs, eligibility for which is based
3-5 on financial need.
3-6 (9) "Health care organization" means a nonprofit or
3-7 public organization that provides, funds, or otherwise financially
3-8 supports health care services provided to financially indigent
3-9 persons.
3-10 (10) <(9)> "Hospital" means:
3-11 (A) a general or special hospital licensed under
3-12 Chapter 241;
3-13 (B) a private mental hospital licensed under
3-14 Chapter 577; and
3-15 (C) a treatment facility licensed under Chapter
3-16 464.
3-17 (11) <(10)> "Hospital eligibility system" means the
3-18 financial criteria and procedure used by a hospital to determine if
3-19 a patient is eligible for charity care. The system shall include
3-20 income levels and means testing indexed to the federal poverty
3-21 guidelines; provided, however, that a hospital may not establish an
3-22 eligibility system which sets the income level eligible for charity
3-23 care lower than that required by counties under Section 61.023 or
3-24 higher, in the case of the financially indigent, than 200 percent
3-25 of the federal poverty guidelines. A hospital may determine that a
4-1 person is financially or medically indigent pursuant to the
4-2 hospital's eligibility system after health care services are
4-3 provided.
4-4 (12) "Hospital system" means a system of local
4-5 nonprofit hospitals under the common governance of a single
4-6 corporate parent that are located within a radius of not more than
4-7 125 linear miles from the corporate parent.
4-8 (13) <(11)> "Medically indigent" means a person whose
4-9 medical or hospital bills after payment by third-party payors
4-10 exceed a specified percentage of the patient's annual gross income,
4-11 determined in accordance with the hospital's eligibility system,
4-12 and the person is financially unable to pay the remaining bill.
4-13 (14) <(12)> "Research-related costs" means the
4-14 unreimbursed cost to a hospital of providing, funding, or otherwise
4-15 financially supporting facilities, equipment, and personnel for
4-16 medical and clinical research conducted in response to community
4-17 needs.
4-18 (15) <(13)> "Subsidized health services" means those
4-19 services provided by a hospital in response to community needs for
4-20 which the reimbursement is less than the hospital's cost for
4-21 providing the services and which must be subsidized by other
4-22 hospital or nonprofit supporting entity revenue sources.
4-23 Subsidized health services may include but are not limited to:
4-24 (A) emergency and trauma care;
4-25 (B) neonatal intensive care;
5-1 (C) free-standing community clinics; and
5-2 (D) collaborative efforts with local government
5-3 or private agencies in preventive medicine, such as immunization
5-4 programs.
5-5 (16) <(14)> "Unreimbursed costs" means the costs a
5-6 hospital incurs for providing services after subtracting payments
5-7 received from any source for such services including but not
5-8 limited to the following: third-party insurance payments; Medicare
5-9 payments; Medicaid payments; Medicare education reimbursements;
5-10 state reimbursements for education; payments from drug companies to
5-11 pursue research; grant funds for research; and disproportionate
5-12 share payments. For purposes of this definition, the term "costs"
5-13 shall be calculated by applying the cost to charge ratios derived
5-14 in accordance with generally accepted accounting principles for
5-15 hospitals <from the hospital's Medicare cost report> to billed
5-16 charges. The calculation of the cost to charge ratios shall be
5-17 based on the most recently completed and audited prior fiscal year
5-18 of the hospital or hospital system. Prior to January 1, 1996, for
5-19 purposes of this definition, charitable contributions and grants to
5-20 a hospital, including transfers from endowment or other funds
5-21 controlled by the hospital or its nonprofit supporting entities,
5-22 shall not be subtracted from the costs of providing services for
5-23 purposes of determining unreimbursed costs. After January 1, 1996,
5-24 for purposes of this definition, charitable contributions and
5-25 grants to a hospital, including transfers from endowment or other
6-1 funds controlled by the hospital or its nonprofit supporting
6-2 entities, shall not be subtracted from the costs of providing
6-3 services for purposes of determining the unreimbursed costs of
6-4 charity care and government-sponsored indigent health care.
6-5 SECTION 2. Section 311.045, Health and Safety Code, is
6-6 amended to read as follows:
6-7 Sec. 311.045. Community Benefits and Charity Care
6-8 Requirements. (a) A nonprofit hospital or hospital system shall
6-9 annually satisfy the requirements of this subchapter and of
6-10 Sections 11.18(d)(1), 151.310(a)(2) and (e), and 171.063(a)(1), Tax
6-11 Code, to provide community benefits which include charity care and
6-12 government-sponsored indigent health care by complying with one or
6-13 more of the standards set forth in Subsection (b). The hospital or
6-14 hospital system shall file a statement with the Bureau of State
6-15 Health Data and Policy Analysis at the department, with the chief
6-16 appraiser of the local appraisal district, and with the
6-17 comptroller's office no later than the 120th day after the
6-18 hospital's or hospital system's fiscal year ends, stating which of
6-19 the standards in Subsection (b) have been satisfied, provided,
6-20 however, that the first report shall be filed no later than the
6-21 120th day after the end of the hospital's or hospital system's
6-22 fiscal year ending during 1994. For hospitals in a hospital system
6-23 <under the common control of a single parent corporation>, the
6-24 corporate parent may elect to satisfy the charity care requirements
6-25 of this subchapter for each of the hospitals within the system on a
7-1 consolidated basis<; however, each hospital controlled by the
7-2 parent corporation shall satisfy the requirements of Sections
7-3 11.18(d)(1), 151.310(a), (c), (d), and (e), and 171.063(a)(1), Tax
7-4 Code, and provide community benefits which include charity care and
7-5 government-sponsored indigent health care>.
7-6 (b)(1) A nonprofit hospital or hospital system may elect to
7-7 provide community benefits, which include charity care and
7-8 government-sponsored indigent health care, according to any of the
7-9 following standards:
7-10 (A) charity care and government-sponsored
7-11 indigent health care are provided at a level which is reasonable in
7-12 relation to the community needs, as determined through the
7-13 community needs assessment, the available resources of the hospital
7-14 or hospital system, and the tax-exempt benefits received by the
7-15 hospital or hospital system;
7-16 (B) charity care and government-sponsored
7-17 indigent health care are provided in an amount equal to at least
7-18 four percent of the hospital's or hospital system's net patient
7-19 revenue;
7-20 (C) charity care and government-sponsored
7-21 indigent health care are provided in an amount equal to at least
7-22 100 percent of the hospital's or hospital system's tax-exempt
7-23 benefits, excluding federal income tax;
7-24 (D) prior to January 1, 1996, charity care and
7-25 community benefits are provided in a combined amount equal to at
8-1 least five percent of the hospital's or hospital system's net
8-2 patient revenue, provided that charity care and
8-3 government-sponsored indigent health care are provided in an amount
8-4 equal to at least three percent of net patient revenue; or
8-5 (E) beginning with the hospital's or hospital
8-6 system's fiscal year starting after December 31, 1995, charity care
8-7 and community benefits are provided in a combined amount equal to
8-8 at least five percent of the hospital's or hospital system's net
8-9 patient revenue, provided that charity care and
8-10 government-sponsored indigent health care are provided in an amount
8-11 equal to at least four percent of net patient revenue.
8-12 (2) For purposes of satisfying Subsection (b)(1)(E), a
8-13 hospital or hospital system may not change its existing fiscal year
8-14 unless the hospital or hospital system changes its ownership or
8-15 corporate structure as a result of a sale or merger.
8-16 (3) <(2)> A nonprofit hospital that has been
8-17 designated as a disproportionate share hospital under the state
8-18 Medicaid program in the current fiscal year or in either of the
8-19 previous two fiscal years shall be considered to have provided a
8-20 reasonable amount of charity care and government-sponsored indigent
8-21 health care and shall be deemed in compliance with the standards in
8-22 this subsection.
8-23 <(3) A nonprofit hospital that is located in a county
8-24 with a population under 100,000 which has a hospital district
8-25 created pursuant to Article IX, Section 5, of the Texas
9-1 Constitution and Chapter 136, Acts of the 55th Legislature, Regular
9-2 Session, 1957, shall not be required to comply with one or more of
9-3 the standards set forth in this subsection.>
9-4 (c) The providing of charity care and government-sponsored
9-5 indigent health care in accordance with Subsection (b)(1)(A) shall
9-6 be guided by the prudent business judgment of the hospital which
9-7 will ultimately determine the appropriate level of charity care and
9-8 government-sponsored indigent health care based on the community
9-9 needs, the available resources of the hospital, the tax-exempt
9-10 benefits received by the hospital, and other factors that may be
9-11 unique to the hospital, such as the hospital's volume of Medicare
9-12 and Medicaid patients. These criteria shall not be determinative
9-13 factors, but shall be guidelines contributing to the hospital's
9-14 decision, along with other factors which may be unique to the
9-15 hospital. The standards set forth in Subsections (b)(1)(B),
9-16 (b)(1)(C), (b)(1)(D), and (b)(1)(E) shall also not be considered
9-17 determinative of the amount of charity care and
9-18 government-sponsored indigent health care that will be considered
9-19 reasonable under Subsection (b)(1)(A).
9-20 (d) For purposes of this section, a hospital that satisfies
9-21 Subsection (b)(1)(A) or (b)(3) shall be excluded in determining a
9-22 hospital system's compliance with the standards provided by
9-23 Subsection (b)(1)(B), (b)(1)(C), (b)(1)(D), or (b)(1)(E).
9-24 (e) <(d)> In any fiscal year that a hospital or hospital
9-25 system, through unintended miscalculation, fails to meet any of the
10-1 standards in Subsection (b), the hospital or hospital system shall
10-2 not lose its tax-exempt status without the opportunity to cure the
10-3 miscalculation in the fiscal year following the fiscal year the
10-4 failure is discovered by both meeting one of the standards and
10-5 providing an additional amount of charity care and
10-6 government-sponsored indigent health care that is equal to the
10-7 shortfall from the previous fiscal year. A hospital or hospital
10-8 system may apply this provision only once every five years.
10-9 SECTION 3. Section 11.18(d), Tax Code, is amended to read as
10-10 follows:
10-11 (d) A charitable organization must be organized exclusively
10-12 to perform religious, charitable, scientific, literary, or
10-13 educational purposes and, except as permitted by Subsection (h) of
10-14 this section, engage exclusively in performing one or more of the
10-15 following charitable functions:
10-16 (1) providing medical care without regard to the
10-17 beneficiaries' ability to pay, which in the case of a nonprofit
10-18 hospital or hospital system means providing charity care and
10-19 community benefits as set forth in Paragraph (A), (B), (C), (D),
10-20 (E), <or> (F), (G), or (H):
10-21 (A) charity care and government-sponsored
10-22 indigent health care are provided at a level which is reasonable in
10-23 relation to the community needs, as determined through the
10-24 community needs assessment, the available resources of the hospital
10-25 or hospital system, and the tax-exempt benefits received by the
11-1 hospital or hospital system;
11-2 (B) charity care and government-sponsored
11-3 indigent health care are provided in an amount equal to at least
11-4 four percent of the hospital's or hospital system's net patient
11-5 revenue;
11-6 (C) charity care and government-sponsored
11-7 indigent health care are provided in an amount equal to at least
11-8 100 percent of the hospital's or hospital system's tax-exempt
11-9 benefits, excluding federal income tax;
11-10 (D) a nonprofit hospital that has been
11-11 designated as a disproportionate share hospital under the state
11-12 Medicaid program in the current year or in either of the previous
11-13 two fiscal years shall be considered to have provided a reasonable
11-14 amount of charity care and government-sponsored indigent health
11-15 care and shall be deemed in compliance with the standards in this
11-16 subsection;
11-17 (E) 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 or hospital system's net
11-20 patient revenue, provided that charity care and
11-21 government-sponsored indigent health care are provided in an amount
11-22 equal to at least three percent of net patient revenue; <or>
11-23 (F) beginning with the hospital's or hospital
11-24 system's tax year starting <for tax years> after 1995, charity care
11-25 and community benefits are provided in a combined amount equal to
12-1 at least five percent of the hospital's or hospital system's net
12-2 patient revenue, provided that charity care and
12-3 government-sponsored indigent health care are provided in an amount
12-4 equal to at least four percent of net patient revenue;
12-5 (G) a hospital operated on a nonprofit basis
12-6 that is located in a county with a population of less than 50,000
12-7 and in which the entire county or the population of the entire
12-8 county has been designated as a health professionals shortage area
12-9 is considered to be in compliance with the standards provided by
12-10 this subsection; or
12-11 (H) a hospital providing health care services to
12-12 inpatients or outpatients without receiving any payment for
12-13 providing those services from any source, including the patient or
12-14 person legally obligated to support the patient, third-party
12-15 payors, Medicare, Medicaid, or any other state or local indigent
12-16 care program but excluding charitable donations, legacies,
12-17 bequests, or grants or payments for research, is considered to be
12-18 in compliance with the standards provided by this subsection;
12-19 (2) providing support or relief to orphans,
12-20 delinquent, dependent, or handicapped children in need of
12-21 residential care, abused or battered spouses or children in need of
12-22 temporary shelter, the impoverished, or victims of natural disaster
12-23 without regard to the beneficiaries' ability to pay;
12-24 (3) providing support to elderly persons or the
12-25 handicapped without regard to the beneficiaries' ability to pay;
13-1 (4) preserving a historical landmark or site;
13-2 (5) promoting or operating a museum, zoo, library,
13-3 theater of the dramatic arts, or symphony orchestra or choir;
13-4 (6) promoting or providing humane treatment of
13-5 animals;
13-6 (7) acquiring, storing, transporting, selling, or
13-7 distributing water for public use;
13-8 (8) answering fire alarms and extinguishing fires with
13-9 no compensation or only nominal compensation to the members of the
13-10 organization;
13-11 (9) promoting the athletic development of boys or
13-12 girls under the age of 18 years;
13-13 (10) preserving or conserving wildlife;
13-14 (11) promoting educational development through loans
13-15 or scholarships to students;
13-16 (12) providing halfway house services pursuant to a
13-17 certification as a halfway house by the Board of Pardons and
13-18 Paroles;
13-19 (13) providing permanent housing and related social,
13-20 health care, and educational facilities for persons who are 62
13-21 years of age or older without regard to the residents' ability to
13-22 pay;
13-23 (14) promoting or operating an art gallery, museum, or
13-24 collection, in a permanent location or on tour, that is open to the
13-25 public;
14-1 (15) providing for the organized solicitation and
14-2 collection for distributions through gifts, grants, and agreements
14-3 to nonprofit charitable, education, religious, and youth
14-4 organizations that provide direct human, health, and welfare
14-5 services;
14-6 (16) performing biomedical or scientific research or
14-7 biomedical or scientific education for the benefit of the public;
14-8 or
14-9 (17) operating a television station that produces or
14-10 broadcasts educational, cultural, or other public interest
14-11 programming and that receives grants from the Corporation for
14-12 Public Broadcasting under 47 U.S.C. Section 396<; or>
14-13 <(18) in the case of a nonprofit hospital, providing
14-14 health care services without receiving any payment for providing
14-15 those services to inpatients or outpatients from any source
14-16 including but not limited to the patient or person legally
14-17 obligated to support the patient, third-party payors, Medicare,
14-18 Medicaid, or any other state or local indigent care program.
14-19 Payment for providing health care services does not include
14-20 charitable donations, legacies, bequests, or grants or payment for
14-21 research>.
14-22 For purposes of satisfying Subsection (d)(1)(F), a hospital
14-23 or hospital system may not change its existing fiscal year unless
14-24 the hospital or hospital system changes its ownership or corporate
14-25 structure as a result of a sale or merger.
15-1 For purposes of this subsection, a hospital that satisfies
15-2 Subsection (d)(1)(A), (d)(1)(D), (d)(1)(G), or (d)(1)(H) shall be
15-3 excluded in determining a hospital system's compliance with the
15-4 standards provided by Subsection (d)(1)(B), (d)(1)(C), (d)(1)(E),
15-5 or (d)(1)(F).
15-6 For purposes of this subsection, the terms "charity care,"
15-7 "government-sponsored indigent health care," "health care
15-8 organization," "hospital system," "net patient revenue," "nonprofit
15-9 hospital," and "tax-exempt benefits" have the meanings set forth in
15-10 Sections 311.031 and 311.042, Health and Safety Code. A
15-11 determination of the amount of community benefits and charity care
15-12 and government-sponsored indigent health care provided by a
15-13 hospital or hospital system and the hospital's or hospital system's
15-14 compliance with the requirements of Section 311.045, Health and
15-15 Safety Code, shall be based on the most recently completed and
15-16 audited prior fiscal year of the hospital or hospital system.
15-17 The providing of charity care and government-sponsored
15-18 indigent health care in accordance with Paragraph (A) of
15-19 Subdivision (1) shall be guided by the prudent business judgment of
15-20 the hospital which will ultimately determine the appropriate level
15-21 of charity care and government-sponsored indigent health care based
15-22 on the community needs, the available resources of the hospital,
15-23 the tax-exempt benefits received by the hospital, and other factors
15-24 that may be unique to the hospital, such as the hospital's volume
15-25 of Medicare and Medicaid patients. These criteria shall not be
16-1 determinative factors, but shall be guidelines contributing to the
16-2 hospital's decision along with other factors which may be unique to
16-3 the hospital. The formulas contained in Paragraphs (B), (C), (E),
16-4 and (F) of Subdivision (1) shall also not be considered
16-5 determinative of a reasonable amount of charity care and
16-6 government-sponsored indigent health care.
16-7 The requirements of this subsection shall not apply to the
16-8 extent a hospital or hospital system demonstrates that reductions
16-9 in the amount of community benefits, charity care, and
16-10 government-sponsored indigent health care are necessary to maintain
16-11 financial reserves at a level required by a bond covenant, are
16-12 necessary to prevent the hospital or hospital system from
16-13 endangering its ability to continue operations, or if the hospital
16-14 or hospital system, as a result of a natural or other disaster, is
16-15 required substantially to curtail its operations.
16-16 In any fiscal year that a hospital or hospital system,
16-17 through unintended miscalculation, fails to meet any of the
16-18 standards in Subdivision (1), the hospital or hospital system shall
16-19 not lose its tax-exempt status without the opportunity to cure the
16-20 miscalculation in the fiscal year following the fiscal year the
16-21 failure is discovered by both meeting one of the standards and
16-22 providing an additional amount of charity care and
16-23 government-sponsored indigent health care that is equal to the
16-24 shortfall from the previous fiscal year. A hospital or hospital
16-25 system may apply this provision only once every five years.
17-1 SECTION 4. Sections 151.310(a) and (e), Tax Code, are
17-2 amended to read as follows:
17-3 (a) A taxable item sold, leased, or rented to, or stored,
17-4 used, or consumed by, any of the following organizations is
17-5 exempted from the taxes imposed by this chapter:
17-6 (1) an organization created for religious,
17-7 educational, or charitable purposes if no part of the net earnings
17-8 of the organization benefits a private shareholder or individual
17-9 and the items purchased, leased, or rented are related to the
17-10 purpose of the organization<, and in the case of a nonprofit
17-11 hospital, the hospital does not receive any payment for providing
17-12 health care services to inpatients or outpatients from any source
17-13 including but not limited to the patient or person legally
17-14 obligated to support the patient, third-party payors, Medicare,
17-15 Medicaid, or any other state or local indigent care program.
17-16 Payment for providing health care services does not include
17-17 charitable donations, legacies, bequests, or grants or payments for
17-18 research>;
17-19 (2) an organization qualifying for an exemption from
17-20 federal income taxes under Section 501(c)(3), (4), (8), (10), or
17-21 (19), Internal Revenue Code, of the item sold, leased, rented,
17-22 stored, used, or consumed relates to the purpose of the exempted
17-23 organization and the item is not used for the personal benefit of a
17-24 private stockholder or individual;
17-25 (3) a nonprofit organization engaged exclusively in
18-1 providing athletic competition among persons under 19 years old if
18-2 no financial benefit goes to an individual or shareholder;
18-3 (4) a company, department, or association organized
18-4 for the purpose of answering fire alarms and extinguishing fires or
18-5 for the purpose of answering fire alarms, extinguishing fires, and
18-6 providing emergency medical services, the members of which receive
18-7 no compensation or only nominal compensation for their services
18-8 rendered, if the taxable item is used exclusively by the company,
18-9 department, or association; or
18-10 (5) a chamber of commerce or a convention and tourist
18-11 promotional agency representing at least one Texas city or county
18-12 if the chamber of commerce or the agency is not organized for
18-13 profit and no part of its net earnings inures to a private
18-14 shareholder or other individual.
18-15 (e) A nonprofit hospital or hospital system that qualifies
18-16 for an exemption under Subsection (a)(2) shall provide charity care
18-17 and community benefits as set forth in Subdivision (1), (2), (3),
18-18 (4), (5), <or> (6), (7), or (8) below:
18-19 (1) charity care and government-sponsored indigent
18-20 health care are provided at a level which is reasonable in relation
18-21 to the community needs, as determined through the community needs
18-22 assessment, the available resources of the hospital or hospital
18-23 system, and the tax-exempt benefits received by the hospital or
18-24 hospital system;
18-25 (2) charity care and government-sponsored indigent
19-1 health care are provided in an amount equal to at least four
19-2 percent of the hospital's or hospital system's net patient revenue;
19-3 (3) charity care and government-sponsored indigent
19-4 health care are provided in an amount equal to at least 100 percent
19-5 of the hospital's or hospital system's tax-exempt benefits,
19-6 excluding federal income tax; <or>
19-7 <(4) a nonprofit hospital that has been designated as
19-8 a disproportionate share hospital under the state Medicaid program
19-9 in either of the previous two fiscal years shall be considered to
19-10 have provided a reasonable amount of charity care and
19-11 government-sponsored indigent health care and shall be deemed in
19-12 compliance with the standards in this subsection;>
19-13 (4) <(5)> for tax periods beginning <ending> before
19-14 January 1, 1996, charity care and community benefits are provided
19-15 in a combined amount equal to at least five percent of the
19-16 hospital's or hospital system's net patient revenue, provided that
19-17 charity care and government-sponsored indigent health care are
19-18 provided in an amount equal to at least three percent of net
19-19 patient revenue; <or>
19-20 (5) <(6)> for tax periods beginning <ending> after
19-21 December 31, 1995, charity care and community benefits are provided
19-22 in a combined amount equal to at least five percent of the
19-23 hospital's or hospital system's net patient revenue, provided that
19-24 charity care and government-sponsored indigent health care are
19-25 provided in an amount equal to at least four percent of net patient
20-1 revenue;
20-2 (6) a nonprofit hospital that has been designated as a
20-3 disproportionate share hospital under the state Medicaid program in
20-4 the current year or in either of the previous two fiscal years is
20-5 considered to have provided a reasonable amount of charity care and
20-6 government-sponsored indigent health care and is considered in
20-7 compliance with the standards provided by this subsection;
20-8 (7) a hospital operated on a nonprofit basis that is
20-9 located in a county with a population of less than 50,000 and in
20-10 which the entire county or the population of the entire county has
20-11 been designated as a health professionals shortage area is
20-12 considered to be in compliance with the standards provided by this
20-13 subsection; or
20-14 (8) a hospital providing health care services to
20-15 inpatients or outpatients without receiving any payment for
20-16 providing those services from any source, including the patient or
20-17 person legally obligated to support the patient, third-party
20-18 payors, Medicare, Medicaid, or any other state or local indigent
20-19 care program but excluding charitable donations, legacies,
20-20 bequests, or grants or payments for research, is considered to be
20-21 in compliance with the standards provided by this subsection.
20-22 For purposes of satisfying Subsection (e)(5), a hospital or
20-23 hospital system may not change its existing fiscal year unless the
20-24 hospital or hospital system changes its ownership or corporate
20-25 structure as a result of a sale or merger.
21-1 For purposes of this subsection, a hospital that satisfies
21-2 Subsection (e)(1), (e)(6), (e)(7), or (e)(8) shall be excluded in
21-3 determining a hospital system's compliance with the standards
21-4 provided by Subsection (e)(2), (e)(3), (e)(4), or (e)(5).
21-5 For purposes of this subsection, the terms "charity care,"
21-6 "government-sponsored indigent health care," "health care
21-7 organization," "hospital system," "net patient revenue," "nonprofit
21-8 hospital," and "tax-exempt benefits" have the meanings set forth in
21-9 Sections 311.031 and 311.042, Health and Safety Code. A
21-10 determination of the amount of community benefits and charity care
21-11 and government-sponsored indigent health care provided by a
21-12 hospital or hospital system and the hospital's or hospital system's
21-13 compliance with the requirements of this subsection and Section
21-14 311.045, Health and Safety Code, shall be based on the most
21-15 recently completed and audited prior fiscal year of the hospital or
21-16 hospital system.
21-17 The providing of charity care and government-sponsored
21-18 indigent health care in accordance with Subdivision (1) shall be
21-19 guided by the prudent business judgment of the hospital which will
21-20 ultimately determine the appropriate level of charity care and
21-21 government-sponsored indigent health care based on the community
21-22 needs, the available resources of the hospital, the tax-exempt
21-23 benefits received by the hospital, and other factors that may be
21-24 unique to the hospital, such as the hospital's volume of Medicare
21-25 and Medicaid patients. These criteria shall not be determinative
22-1 factors, but shall be guidelines contributing to the hospital's
22-2 decision along with other factors which may be unique to the
22-3 hospital. The formulas contained in Subdivisions (2), (3), (4),
22-4 and (5)<, and (6)> shall also not be considered determinative of a
22-5 reasonable amount of charity care and government-sponsored indigent
22-6 health care.
22-7 The requirements of this subsection shall not apply to the
22-8 extent a hospital or hospital system demonstrates that reductions
22-9 in the amount of community benefits, charity care, and
22-10 government-sponsored indigent health care are necessary to maintain
22-11 financial reserves at a level required by a bond covenant, are
22-12 necessary to prevent the hospital or hospital system from
22-13 endangering its ability to continue operations, or if the hospital
22-14 or hospital system, as a result of a natural or other disaster, is
22-15 required substantially to curtail its operations.
22-16 In any fiscal year that a hospital or hospital system,
22-17 through unintended miscalculation, fails to meet any of the
22-18 standards in this subsection, the hospital or hospital system shall
22-19 not lose its tax-exempt status without the opportunity to cure the
22-20 miscalculation in the fiscal year following the fiscal year the
22-21 failure is discovered by both meeting one of the standards and
22-22 providing an additional amount of charity care and
22-23 government-sponsored indigent health care that is equal to the
22-24 shortfall from the previous fiscal year. A hospital or hospital
22-25 system may apply this provision only once every five years.
23-1 SECTION 5. Section 171.063(a), Tax Code, is amended to read
23-2 as follows:
23-3 (a) The following corporations are exempt from the franchise
23-4 tax:
23-5 (1) a nonprofit corporation exempted from the federal
23-6 income tax under Section 501(c)(3), (4), (5), (6), or (7) of the
23-7 Internal Revenue Code of 1954, as it existed on January 1, 1975;
23-8 which in the case of a nonprofit hospital means a hospital
23-9 providing charity care and community benefits as set forth in
23-10 Paragraph (A), (B), (C), (D), (E), <or> (F), or (G):
23-11 (A) charity care and government-sponsored
23-12 indigent health care are provided at a level which is reasonable in
23-13 relation to the community needs, as determined through the
23-14 community needs assessment, the available resources of the hospital
23-15 or hospital system, and the tax-exempt benefits received by the
23-16 hospital or hospital system;
23-17 (B) charity care and government-sponsored
23-18 indigent health care are provided in an amount equal to at least
23-19 four percent of the hospital's or hospital system's net patient
23-20 revenue;
23-21 (C) charity care and government-sponsored
23-22 indigent health care are provided in an amount equal to at least
23-23 100 percent of the hospital's or hospital system's tax-exempt
23-24 benefits, excluding federal income tax; <or>
23-25 <(D) a nonprofit hospital that has been
24-1 designated as a disproportionate share hospital under the state
24-2 Medicaid program in either of the previous two fiscal years shall
24-3 be considered to have provided a reasonable amount of charity care
24-4 and government-sponsored indigent health care and shall be deemed
24-5 in compliance with the standards in this subsection;>
24-6 (D) <(E)> for tax periods beginning <ending>
24-7 before January 1, 1996, charity care and community benefits are
24-8 provided in a combined amount equal to at least five percent of the
24-9 hospital's net patient revenue, provided that charity care and
24-10 government-sponsored indigent health care are provided in an amount
24-11 equal to at least three percent of net patient revenue; <or>
24-12 (E) <(F)> for tax periods beginning <ending>
24-13 after December 31, 1995, charity care and community benefits are
24-14 provided in a combined amount equal to at least five percent of the
24-15 hospital's or hospital system's net patient revenue, provided that
24-16 charity care and government-sponsored indigent health care are
24-17 provided in an amount equal to at least four percent of net patient
24-18 revenue; <or>
24-19 (F) a nonprofit hospital that has been
24-20 designated as a disproportionate share hospital under the state
24-21 Medicaid program in the current year or in either of the previous
24-22 two fiscal years is considered to have provided a reasonable amount
24-23 of charity care and government-sponsored indigent health care and
24-24 is considered in compliance with the standards provided by this
24-25 subsection; or
25-1 (G) a hospital operated on a nonprofit basis
25-2 that is located in a county with a population of less than 50,000
25-3 and in which the entire county or the population of the entire
25-4 county has been designated as a health professionals shortage area
25-5 is considered in compliance with the standards provided by this
25-6 subsection;
25-7 (2) a corporation exempted under Section 501(c)(2) or
25-8 (25) of the Internal Revenue Code of 1986, if the corporation or
25-9 corporations for which it holds title to property is either exempt
25-10 from or not subject to the franchise tax;
25-11 (3) a corporation exempted from federal income tax
25-12 under Section 501(c)(16), Internal Revenue Code of 1986; and
25-13 (4) a nonprofit corporation exempted from the federal
25-14 income tax under Section 501(c)(3) of the Internal Revenue Code of
25-15 1986, that <is a nonprofit hospital and> does not receive any
25-16 payment for providing health care services to inpatients or
25-17 outpatients from any source including but not limited to the
25-18 patient or person legally obligated to support the patient,
25-19 third-party payors, Medicare, Medicaid, or any other state or local
25-20 indigent care program. Payment for providing health care services
25-21 does not include charitable donations, legacies, bequests, or
25-22 grants or payments for research.
25-23 For purposes of satisfying Subsection (a)(1)(E), a hospital
25-24 or hospital system may not change its existing fiscal year unless
25-25 the hospital or hospital system changes its ownership or corporate
26-1 structure as a result of a sale or merger.
26-2 For purposes of this subsection, a hospital that satisfies
26-3 Subsection (a)(1)(A), (a)(1)(F), or (a)(1)(G) shall be excluded in
26-4 determining a hospital system's compliance with the standards
26-5 provided by Subsection (a)(1)(B), (a)(1)(C), (a)(1)(D), or
26-6 (a)(1)(E).
26-7 For purposes of this subsection, the terms "charity care,"
26-8 "government-sponsored indigent health care," "health care
26-9 organization," "hospital system," "net patient revenue," "nonprofit
26-10 hospital," and "tax-exempt benefits" have the meanings set forth in
26-11 Sections 311.031 and 311.042, Health and Safety Code. A
26-12 determination of the amount of community benefits and charity care
26-13 and government-sponsored indigent health care provided by a
26-14 hospital or hospital system and the hospital's or hospital system's
26-15 compliance with the requirements of Section 311.045, Health and
26-16 Safety Code, shall be based on the most recently completed and
26-17 audited prior fiscal year of the hospital or hospital system.
26-18 The providing of charity care and government-sponsored
26-19 indigent health care in accordance with Paragraph (A) of
26-20 Subdivision (1) shall be guided by the prudent business judgment of
26-21 the hospital which will ultimately determine the appropriate level
26-22 of charity care and government-sponsored indigent health care based
26-23 on the community needs, the available resources of the hospital,
26-24 the tax-exempt benefits received by the hospital, and other factors
26-25 that may be unique to the hospital, such as the hospital's volume
27-1 of Medicare and Medicaid patients. These criteria shall not be
27-2 determinative factors, but shall be guidelines contributing to the
27-3 hospital's decision along with other factors which may be unique to
27-4 the hospital. The formulas contained in Paragraphs (B), (C), (D),
27-5 and (E)<, and (F)> of Subdivision (1) shall also not be considered
27-6 determinative of a reasonable amount of charity care and
27-7 government-sponsored indigent health care.
27-8 The requirements of this subsection shall not apply to the
27-9 extent a hospital or hospital system demonstrates that reductions
27-10 in the amount of community benefits, charity care, and
27-11 government-sponsored indigent health care are necessary to maintain
27-12 financial reserves at a level required by a bond covenant, are
27-13 necessary to prevent the hospital or hospital system from
27-14 endangering its ability to continue operations, or if the hospital,
27-15 as a result of a natural or other disaster, is required
27-16 substantially to curtail its operations.
27-17 In any fiscal year that a hospital or hospital system,
27-18 through unintended miscalculation, fails to meet any of the
27-19 standards in Subdivision (1), the hospital or hospital system
27-20 shall not lose its tax-exempt status without the opportunity to
27-21 cure the miscalculation in the fiscal year following the fiscal
27-22 year the failure is discovered by both meeting one of the standards
27-23 and providing an additional amount of charity care and
27-24 government-sponsored indigent health care that is equal to the
27-25 shortfall from the previous fiscal year. A hospital or hospital
28-1 system may apply this provision only once every five years.
28-2 SECTION 6. This Act takes effect September 1, 1995.
28-3 SECTION 7. The importance of this legislation and the
28-4 crowded condition of the calendars in both houses create an
28-5 emergency and an imperative public necessity that the
28-6 constitutional rule requiring bills to be read on three several
28-7 days in each house be suspended, and this rule is hereby suspended.