S.B. No. 1190
AN ACT
1-1 relating to the duty of nonprofit, tax-exempt hospitals to provide
1-2 charity care.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 311.031, Health and Safety Code, is
1-5 amended to read as follows:
1-6 Sec. 311.031. Definitions. In this subchapter:
1-7 (1) "Board" means the Texas Board of Health.
1-8 (2) "Charity care" means the unreimbursed cost to a
1-9 hospital of:
1-10 (A) providing, funding, or otherwise financially
1-11 supporting health care services on an inpatient or outpatient basis
1-12 to a person classified by the hospital as "financially indigent" or
1-13 "medically indigent"; and/or
1-14 (B) providing, funding, or otherwise financially
1-15 supporting health care services provided to financially indigent
1-16 persons <patients> through other nonprofit or public outpatient
1-17 clinics, hospitals, or health care organizations.
1-18 (3) "Contractual allowances" means the difference
1-19 between revenue at established rates and amounts realizable from
1-20 third-party payors under contractual agreements.
1-21 (4) "Department" means the Texas Department of Health.
1-22 (5) "Donations" means the unreimbursed costs of
1-23 providing cash and in-kind services and gifts, including
2-1 facilities, equipment, personnel, and programs, to other nonprofit
2-2 or public outpatient clinics, hospitals, or health care
2-3 organizations.
2-4 (6) "Education-related costs" means the unreimbursed
2-5 cost to a hospital of providing, funding, or otherwise financially
2-6 supporting educational benefits, services, and programs including:
2-7 (A) education of physicians, nurses,
2-8 technicians, and other medical professionals and health care
2-9 providers;
2-10 (B) provision of scholarships and funding to
2-11 medical schools, colleges, and universities for health professions
2-12 education;
2-13 (C) education of patients concerning diseases
2-14 and home care in response to community needs; and
2-15 (D) community health education through
2-16 informational programs, publications, and outreach activities in
2-17 response to community needs.
2-18 (7) "Financially indigent" means an uninsured or
2-19 underinsured person who is accepted for care with no obligation or
2-20 a discounted obligation to pay for the services rendered based on
2-21 the hospital's eligibility system.
2-22 (8) "Government-sponsored indigent health care" means
2-23 the unreimbursed cost to a hospital of providing health care
2-24 services to recipients of Medicaid and other federal, state, or
2-25 local indigent health care programs, eligibility for which is based
3-1 on financial need.
3-2 (9) "Health care organization" means a nonprofit or
3-3 public organization that provides, funds, or otherwise financially
3-4 supports health care services provided to financially indigent
3-5 persons.
3-6 (10) "Hospital" means:
3-7 (A) a general or special hospital licensed under
3-8 Chapter 241;
3-9 (B) a private mental hospital licensed under
3-10 Chapter 577; and
3-11 (C) a treatment facility licensed under Chapter
3-12 464.
3-13 (11) <(10)> "Hospital eligibility system" means the
3-14 financial criteria and procedure used by a hospital to determine if
3-15 a patient is eligible for charity care. The system shall include
3-16 income levels and means testing indexed to the federal poverty
3-17 guidelines; provided, however, that a hospital may not establish an
3-18 eligibility system which sets the income level eligible for charity
3-19 care lower than that required by counties under Section 61.023 or
3-20 higher, in the case of the financially indigent, than 200 percent
3-21 of the federal poverty guidelines. A hospital may determine that a
3-22 person is financially or medically indigent pursuant to the
3-23 hospital's eligibility system after health care services are
3-24 provided.
3-25 (12) "Hospital system" means a system of local
4-1 nonprofit hospitals under the common governance of a single
4-2 corporate parent that are located within a radius of not more than
4-3 125 linear miles of the corporate parent.
4-4 (13) <(11)> "Medically indigent" means a person whose
4-5 medical or hospital bills after payment by third-party payors
4-6 exceed a specified percentage of the patient's annual gross income,
4-7 determined in accordance with the hospital's eligibility system,
4-8 and the person is financially unable to pay the remaining bill.
4-9 (14) <(12)> "Research-related costs" means the
4-10 unreimbursed cost to a hospital of providing, funding, or otherwise
4-11 financially supporting facilities, equipment, and personnel for
4-12 medical and clinical research conducted in response to community
4-13 needs.
4-14 (15) <(13)> "Subsidized health services" means those
4-15 services provided by a hospital in response to community needs for
4-16 which the reimbursement is less than the hospital's cost for
4-17 providing the services and which must be subsidized by other
4-18 hospital or nonprofit supporting entity revenue sources.
4-19 Subsidized health services may include but are not limited to:
4-20 (A) emergency and trauma care;
4-21 (B) neonatal intensive care;
4-22 (C) free-standing community clinics; and
4-23 (D) collaborative efforts with local government
4-24 or private agencies in preventive medicine, such as immunization
4-25 programs.
5-1 (16) <(14)> "Unreimbursed costs" means the costs a
5-2 hospital incurs for providing services after subtracting payments
5-3 received from any source for such services including but not
5-4 limited to the following: third-party insurance payments; Medicare
5-5 payments; Medicaid payments; Medicare education reimbursements;
5-6 state reimbursements for education; payments from drug companies to
5-7 pursue research; grant funds for research; and disproportionate
5-8 share payments. For purposes of this definition, the term "costs"
5-9 shall be calculated by applying the cost to charge ratios derived
5-10 in accordance with generally accepted accounting principles for
5-11 hospitals <from the hospital's Medicare cost report> to billed
5-12 charges. The calculation of the cost to charge ratios shall be
5-13 based on the most recently completed and audited prior fiscal year
5-14 of the hospital or hospital system. Prior to January 1, 1996, for
5-15 purposes of this definition, charitable contributions and grants to
5-16 a hospital, including transfers from endowment or other funds
5-17 controlled by the hospital or its nonprofit supporting entities,
5-18 shall not be subtracted from the costs of providing services for
5-19 purposes of determining unreimbursed costs. After January 1, 1996,
5-20 for purposes of this definition, charitable contributions and
5-21 grants to a hospital, including transfers from endowment or other
5-22 funds controlled by the hospital or its nonprofit supporting
5-23 entities, shall not be subtracted from the costs of providing
5-24 services for purposes of determining the unreimbursed costs of
5-25 charity care and government-sponsored indigent health care.
6-1 SECTION 2. Section 311.042, Health and Safety Code, is
6-2 amended by adding Subdivision (15) to read as follows:
6-3 (15) "Hospital system" means a system of local
6-4 nonprofit hospitals under the common governance of a single
6-5 corporate parent that are located within a radius of not more than
6-6 125 linear miles of the corporate parent.
6-7 SECTION 3. Section 311.045, Health and Safety Code, is
6-8 amended to read as follows:
6-9 Sec. 311.045. Community Benefits and Charity Care
6-10 Requirements. (a) A nonprofit hospital or hospital system shall
6-11 annually satisfy the requirements of this subchapter and of
6-12 Sections 11.18(d)(1), 151.310(a)(2) and (e), and 171.063(a)(1), Tax
6-13 Code, to provide community benefits which include charity care and
6-14 government-sponsored indigent health care by complying with one or
6-15 more of the standards set forth in Subsection (b). The hospital or
6-16 hospital system shall file a statement with the Bureau of State
6-17 Health Data and Policy Analysis at the department, with the chief
6-18 appraiser of the local appraisal district, and with the
6-19 comptroller's office no later than the 120th day after the
6-20 hospital's or hospital system's fiscal year ends, stating which of
6-21 the standards in Subsection (b) have been satisfied, provided,
6-22 however, that the first report shall be filed no later than the
6-23 120th day after the end of the hospital's or hospital system's
6-24 fiscal year ending during 1994. For hospitals in a hospital system
6-25 <under the common control of a single parent corporation>, the
7-1 corporate parent may elect to satisfy the charity care requirements
7-2 of this subchapter for each of the hospitals within the system on a
7-3 consolidated basis<; however, each hospital controlled by the
7-4 parent corporation shall satisfy the requirements of Sections
7-5 11.18(d)(1), 151.310(a), (c), (d), and (e), and 171.063(a)(1), Tax
7-6 Code, and provide community benefits which include charity care and
7-7 government-sponsored indigent health care>.
7-8 (b)(1) A nonprofit hospital or hospital system may elect to
7-9 provide community benefits, which include charity care and
7-10 government-sponsored indigent health care, according to any of the
7-11 following standards:
7-12 (A) charity care and government-sponsored
7-13 indigent health care are provided at a level which is reasonable in
7-14 relation to the community needs, as determined through the
7-15 community needs assessment, the available resources of the hospital
7-16 or hospital system, and the tax-exempt benefits received by the
7-17 hospital or hospital system;
7-18 (B) charity care and government-sponsored
7-19 indigent health care are provided in an amount equal to at least
7-20 four percent of the hospital's or hospital system's net patient
7-21 revenue;
7-22 (C) charity care and government-sponsored
7-23 indigent health care are provided in an amount equal to at least
7-24 100 percent of the hospital's or hospital system's tax-exempt
7-25 benefits, excluding federal income tax;
8-1 (D) prior to January 1, 1996, charity care and
8-2 community benefits are provided in a combined amount equal to at
8-3 least five percent of the hospital's or hospital system's net
8-4 patient revenue, provided that charity care and
8-5 government-sponsored indigent health care are provided in an amount
8-6 equal to at least three percent of net patient revenue; or
8-7 (E) beginning with the hospital's or hospital
8-8 system's fiscal year starting after December 31, 1995, charity care
8-9 and community benefits are provided in a combined amount equal to
8-10 at least five percent of the hospital's or hospital system's net
8-11 patient revenue, provided that charity care and
8-12 government-sponsored indigent health care are provided in an amount
8-13 equal to at least four percent of net patient revenue.
8-14 (2) For purposes of satisfying Subdivision (1)(E), a
8-15 hospital or hospital system may not change its existing fiscal year
8-16 unless the hospital or hospital system changes its ownership or
8-17 corporate structure as a result of a sale or merger.
8-18 (3) A nonprofit hospital that has been designated as a
8-19 disproportionate share hospital under the state Medicaid program in
8-20 the current fiscal year or in either of the previous two fiscal
8-21 years shall be considered to have provided a reasonable amount of
8-22 charity care and government-sponsored indigent health care and
8-23 shall be deemed in compliance with the standards in this
8-24 subsection.
8-25 (4) <(3)> A nonprofit hospital that is located in a
9-1 county with a population under 110,000 <100,000> which has a
9-2 hospital district created pursuant to Section 5, Article IX,
9-3 <Section 5 of the> Texas Constitution, and Chapter 136, Acts of the
9-4 55th Legislature, Regular Session, 1957, shall not be required to
9-5 comply with one or more of the standards set forth in this
9-6 subsection. This subdivision expires September 1, 1996.
9-7 (c) The providing of charity care and government-sponsored
9-8 indigent health care in accordance with Subsection (b)(1)(A) shall
9-9 be guided by the prudent business judgment of the hospital which
9-10 will ultimately determine the appropriate level of charity care and
9-11 government-sponsored indigent health care based on the community
9-12 needs, the available resources of the hospital, the tax-exempt
9-13 benefits received by the hospital, and other factors that may be
9-14 unique to the hospital, such as the hospital's volume of Medicare
9-15 and Medicaid patients. These criteria shall not be determinative
9-16 factors, but shall be guidelines contributing to the hospital's
9-17 decision, along with other factors which may be unique to the
9-18 hospital. The standards set forth in Subsections (b)(1)(B),
9-19 (b)(1)(C), (b)(1)(D), and (b)(1)(E) shall also not be considered
9-20 determinative of the amount of charity care and
9-21 government-sponsored indigent health care that will be considered
9-22 reasonable under Subsection (b)(1)(A).
9-23 (d) For purposes of this section, a hospital that satisfies
9-24 Subsection (b)(1)(A) or (b)(3) shall be excluded in determining a
9-25 hospital system's compliance with the standards provided by
10-1 Subsection (b)(1)(B), (b)(1)(C), (b)(1)(D), or (b)(1)(E).
10-2 (e) In any fiscal year that a hospital or hospital system,
10-3 through unintended miscalculation, fails to meet any of the
10-4 standards in Subsection (b), the hospital or hospital system shall
10-5 not lose its tax-exempt status without the opportunity to cure the
10-6 miscalculation in the fiscal year following the fiscal year the
10-7 failure is discovered by both meeting one of the standards and
10-8 providing an additional amount of charity care and
10-9 government-sponsored indigent health care that is equal to the
10-10 shortfall from the previous fiscal year. A hospital or hospital
10-11 system may apply this provision only once every five years.
10-12 SECTION 4. Subsection (d), Section 11.18, Tax Code, is
10-13 amended to read as follows:
10-14 (d) A charitable organization must be organized exclusively
10-15 to perform religious, charitable, scientific, literary, or
10-16 educational purposes and, except as permitted by Subsection (h) of
10-17 this section, engage exclusively in performing one or more of the
10-18 following charitable functions:
10-19 (1) providing medical care without regard to the
10-20 beneficiaries' ability to pay, which in the case of a nonprofit
10-21 hospital or hospital system means providing charity care and
10-22 community benefits as set forth in Paragraph (A), (B), (C), (D),
10-23 (E), <or> (F), (G), or (H):
10-24 (A) charity care and government-sponsored
10-25 indigent health care are provided at a level which is reasonable in
11-1 relation to the community needs, as determined through the
11-2 community needs assessment, the available resources of the hospital
11-3 or hospital system, and the tax-exempt benefits received by the
11-4 hospital or hospital system;
11-5 (B) charity care and government-sponsored
11-6 indigent health care are provided in an amount equal to at least
11-7 four percent of the hospital's or hospital system's net patient
11-8 revenue;
11-9 (C) charity care and government-sponsored
11-10 indigent health care are provided in an amount equal to at least
11-11 100 percent of the hospital's or hospital system's tax-exempt
11-12 benefits, excluding federal income tax;
11-13 (D) a nonprofit hospital that has been
11-14 designated as a disproportionate share hospital under the state
11-15 Medicaid program in the current year or in either of the previous
11-16 two fiscal years shall be considered to have provided a reasonable
11-17 amount of charity care and government-sponsored indigent health
11-18 care and shall be deemed in compliance with the standards in this
11-19 subsection;
11-20 (E) for tax years before 1996, charity care and
11-21 community benefits are provided in a combined amount equal to at
11-22 least five percent of the hospital's or hospital system's net
11-23 patient revenue, provided that charity care and
11-24 government-sponsored indigent health care are provided in an amount
11-25 equal to at least three percent of net patient revenue; <or>
12-1 (F) beginning with the hospital's or hospital
12-2 system's tax year starting <for tax years> after 1995, charity care
12-3 and community benefits are provided in a combined amount equal to
12-4 at least five percent of the hospital's or hospital system's net
12-5 patient revenue, provided that charity care and
12-6 government-sponsored indigent health care are provided in an amount
12-7 equal to at least four percent of net patient revenue;
12-8 (G) a hospital operated on a nonprofit basis
12-9 that is located in a county with a population of less than 50,000
12-10 and in which the entire county or the population of the entire
12-11 county has been designated as a health professionals shortage area
12-12 is considered to be in compliance with the standards provided by
12-13 this subsection; or
12-14 (H) a hospital providing health care services to
12-15 inpatients or outpatients without receiving any payment for
12-16 providing those services from any source, including the patient or
12-17 person legally obligated to support the patient, third-party
12-18 payors, Medicare, Medicaid, or any other state or local indigent
12-19 care program but excluding charitable donations, legacies,
12-20 bequests, or grants or payments for research, is considered to be
12-21 in compliance with the standards provided by this subsection;
12-22 (2) providing support or relief to orphans,
12-23 delinquent, dependent, or handicapped children in need of
12-24 residential care, abused or battered spouses or children in need of
12-25 temporary shelter, the impoverished, or victims of natural disaster
13-1 without regard to the beneficiaries' ability to pay;
13-2 (3) providing support to elderly persons or the
13-3 handicapped without regard to the beneficiaries' ability to pay;
13-4 (4) preserving a historical landmark or site;
13-5 (5) promoting or operating a museum, zoo, library,
13-6 theater of the dramatic arts, or symphony orchestra or choir;
13-7 (6) promoting or providing humane treatment of
13-8 animals;
13-9 (7) acquiring, storing, transporting, selling, or
13-10 distributing water for public use;
13-11 (8) answering fire alarms and extinguishing fires with
13-12 no compensation or only nominal compensation to the members of the
13-13 organization;
13-14 (9) promoting the athletic development of boys or
13-15 girls under the age of 18 years;
13-16 (10) preserving or conserving wildlife;
13-17 (11) promoting educational development through loans
13-18 or scholarships to students;
13-19 (12) providing halfway house services pursuant to a
13-20 certification as a halfway house by the Board of Pardons and
13-21 Paroles;
13-22 (13) providing permanent housing and related social,
13-23 health care, and educational facilities for persons who are 62
13-24 years of age or older without regard to the residents' ability to
13-25 pay;
14-1 (14) promoting or operating an art gallery, museum, or
14-2 collection, in a permanent location or on tour, that is open to the
14-3 public;
14-4 (15) providing for the organized solicitation and
14-5 collection for distributions through gifts, grants, and agreements
14-6 to nonprofit charitable, education, religious, and youth
14-7 organizations that provide direct human, health, and welfare
14-8 services;
14-9 (16) performing biomedical or scientific research or
14-10 biomedical or scientific education for the benefit of the public;
14-11 or
14-12 (17) operating a television station that produces or
14-13 broadcasts educational, cultural, or other public interest
14-14 programming and that receives grants from the Corporation for
14-15 Public Broadcasting under 47 U.S.C. Section 396<; or>
14-16 <(18) in the case of a nonprofit hospital, providing
14-17 health care services without receiving any payment for providing
14-18 those services to inpatients or outpatients from any source
14-19 including but not limited to the patient or person legally
14-20 obligated to support the patient, third-party payors, Medicare,
14-21 Medicaid, or any other state or local indigent care program.
14-22 Payment for providing health care services does not include
14-23 charitable donations, legacies, bequests, or grants or payment for
14-24 research>.
14-25 For purposes of satisfying Paragraph (F) of Subdivision (1),
15-1 a hospital or hospital system may not change its existing fiscal
15-2 year unless the hospital or hospital system changes its ownership
15-3 or corporate structure as a result of a sale or merger.
15-4 For purposes of this subsection, a hospital that satisfies
15-5 Paragraph (A), (D), (G), or (H) of Subdivision (1) shall be
15-6 excluded in determining a hospital system's compliance with the
15-7 standards provided by Paragraph (B), (C), (E), or (F) of
15-8 Subdivision (1).
15-9 For purposes of this subsection, the terms "charity care,"
15-10 "government-sponsored indigent health care," "health care
15-11 organization," "hospital system," "net patient revenue," "nonprofit
15-12 hospital," and "tax-exempt benefits" have the meanings set forth in
15-13 Sections 311.031 and 311.042, Health and Safety Code. A
15-14 determination of the amount of community benefits and charity care
15-15 and government-sponsored indigent health care provided by a
15-16 hospital or hospital system and the hospital's or hospital system's
15-17 compliance with the requirements of Section 311.045, Health and
15-18 Safety Code, shall be based on the most recently completed and
15-19 audited prior fiscal year of the hospital or hospital system.
15-20 The providing of charity care and government-sponsored
15-21 indigent health care in accordance with Paragraph (A) of
15-22 Subdivision (1) shall be guided by the prudent business judgment of
15-23 the hospital which will ultimately determine the appropriate level
15-24 of charity care and government-sponsored indigent health care based
15-25 on the community needs, the available resources of the hospital,
16-1 the tax-exempt benefits received by the hospital, and other factors
16-2 that may be unique to the hospital, such as the hospital's volume
16-3 of Medicare and Medicaid patients. These criteria shall not be
16-4 determinative factors, but shall be guidelines contributing to the
16-5 hospital's decision along with other factors which may be unique to
16-6 the hospital. The formulas contained in Paragraphs (B), (C), (E),
16-7 and (F) of Subdivision (1) shall also not be considered
16-8 determinative of a reasonable amount of charity care and
16-9 government-sponsored indigent health care.
16-10 The requirements of this subsection shall not apply to the
16-11 extent a hospital or hospital system demonstrates that reductions
16-12 in the amount of community benefits, charity care, and
16-13 government-sponsored indigent health care are necessary to maintain
16-14 financial reserves at a level required by a bond covenant, are
16-15 necessary to prevent the hospital or hospital system from
16-16 endangering its ability to continue operations, or if the hospital
16-17 or hospital system, as a result of a natural or other disaster, is
16-18 required substantially to curtail its operations.
16-19 In any fiscal year that a hospital or hospital system,
16-20 through unintended miscalculation, fails to meet any of the
16-21 standards in Subdivision (1), the hospital or hospital system shall
16-22 not lose its tax-exempt status without the opportunity to cure the
16-23 miscalculation in the fiscal year following the fiscal year the
16-24 failure is discovered by both meeting one of the standards and
16-25 providing an additional amount of charity care and
17-1 government-sponsored indigent health care that is equal to the
17-2 shortfall from the previous fiscal year. A hospital or hospital
17-3 system may apply this provision only once every five years.
17-4 SECTION 5. Subsections (a) and (e), Section 151.310, Tax
17-5 Code, are amended to read as follows:
17-6 (a) A taxable item sold, leased, or rented to, or stored,
17-7 used, or consumed by, any of the following organizations is
17-8 exempted from the taxes imposed by this chapter:
17-9 (1) an organization created for religious,
17-10 educational, or charitable purposes if no part of the net earnings
17-11 of the organization benefits a private shareholder or individual
17-12 and the items purchased, leased, or rented are related to the
17-13 purpose of the organization<, and in the case of a nonprofit
17-14 hospital, the hospital does not receive any payment for providing
17-15 health care services to inpatients or outpatients from any source
17-16 including but not limited to the patient or person legally
17-17 obligated to support the patient, third-party payors, Medicare,
17-18 Medicaid, or any other state or local indigent care program.
17-19 Payment for providing health care services does not include
17-20 charitable donations, legacies, bequests, or grants or payments for
17-21 research>;
17-22 (2) an organization qualifying for an exemption from
17-23 federal income taxes under Section 501(c)(3), (4), (8), (10), or
17-24 (19), Internal Revenue Code, of the item sold, leased, rented,
17-25 stored, used, or consumed relates to the purpose of the exempted
18-1 organization and the item is not used for the personal benefit of a
18-2 private stockholder or individual;
18-3 (3) a nonprofit organization engaged exclusively in
18-4 providing athletic competition among persons under 19 years old if
18-5 no financial benefit goes to an individual or shareholder;
18-6 (4) a company, department, or association organized
18-7 for the purpose of answering fire alarms and extinguishing fires or
18-8 for the purpose of answering fire alarms, extinguishing fires, and
18-9 providing emergency medical services, the members of which receive
18-10 no compensation or only nominal compensation for their services
18-11 rendered, if the taxable item is used exclusively by the company,
18-12 department, or association; or
18-13 (5) a chamber of commerce or a convention and tourist
18-14 promotional agency representing at least one Texas city or county
18-15 if the chamber of commerce or the agency is not organized for
18-16 profit and no part of its net earnings inures to a private
18-17 shareholder or other individual.
18-18 (e) A nonprofit hospital or hospital system that qualifies
18-19 for an exemption under Subsection (a)(2) shall provide charity care
18-20 and community benefits as set forth in Subdivision (1), (2), (3),
18-21 (4), (5), <or> (6), (7), or (8) below:
18-22 (1) charity care and government-sponsored indigent
18-23 health care are provided at a level which is reasonable in relation
18-24 to the community needs, as determined through the community needs
18-25 assessment, the available resources of the hospital or hospital
19-1 system, and the tax-exempt benefits received by the hospital or
19-2 hospital system;
19-3 (2) charity care and government-sponsored indigent
19-4 health care are provided in an amount equal to at least four
19-5 percent of the hospital's or hospital system's net patient revenue;
19-6 (3) charity care and government-sponsored indigent
19-7 health care are provided in an amount equal to at least 100 percent
19-8 of the hospital's or hospital system's tax-exempt benefits,
19-9 excluding federal income tax; <or>
19-10 (4) <a nonprofit hospital that has been designated as
19-11 a disproportionate share hospital under the state Medicaid program
19-12 in either of the previous two fiscal years shall be considered to
19-13 have provided a reasonable amount of charity care and
19-14 government-sponsored indigent health care and shall be deemed in
19-15 compliance with the standards in this subsection;>
19-16 <(5)> for tax periods beginning <ending> before
19-17 January 1, 1996, charity care and community benefits are provided
19-18 in a combined amount equal to at least five percent of the
19-19 hospital's or hospital system's net patient revenue, provided that
19-20 charity care and government-sponsored indigent health care are
19-21 provided in an amount equal to at least three percent of net
19-22 patient revenue; <or>
19-23 (5) <(6)> for tax periods beginning <ending> after
19-24 December 31, 1995, charity care and community benefits are provided
19-25 in a combined amount equal to at least five percent of the
20-1 hospital's or hospital system's net patient revenue, provided that
20-2 charity care and government-sponsored indigent health care are
20-3 provided in an amount equal to at least four percent of net patient
20-4 revenue;
20-5 (6) a nonprofit hospital that has been designated as a
20-6 disproportionate share hospital under the state Medicaid program in
20-7 the current year or in either of the previous two fiscal years is
20-8 considered to have provided a reasonable amount of charity care and
20-9 government-sponsored indigent health care and is considered in
20-10 compliance with the standards provided by this subsection;
20-11 (7) a hospital operated on a nonprofit basis that is
20-12 located in a county with a population of less than 50,000 and in
20-13 which the entire county or the population of the entire county has
20-14 been designated as a health professionals shortage area is
20-15 considered to be in compliance with the standards provided by this
20-16 subsection; or
20-17 (8) a hospital providing health care services to
20-18 inpatients or outpatients without receiving any payment for
20-19 providing those services from any source, including the patient or
20-20 person legally obligated to support the patient, third-party
20-21 payors, Medicare, Medicaid, or any other state or local indigent
20-22 care program but excluding charitable donations, legacies,
20-23 bequests, or grants or payments for research, is considered to be
20-24 in compliance with the standards provided by this subsection.
20-25 For purposes of satisfying Subdivision (5), a hospital or
21-1 hospital system may not change its existing fiscal year unless the
21-2 hospital or hospital system changes its ownership or corporate
21-3 structure as a result of a sale or merger.
21-4 For purposes of this subsection, a hospital that satisfies
21-5 Subdivision (1), (6), (7), or (8) shall be excluded in determining
21-6 a hospital system's compliance with the standards provided by
21-7 Subdivision (2), (3), (4), or (5).
21-8 For purposes of this subsection, the terms "charity care,"
21-9 "government-sponsored indigent health care," "health care
21-10 organization," "hospital system," "net patient revenue," "nonprofit
21-11 hospital," and "tax-exempt benefits" have the meanings set forth in
21-12 Sections 311.031 and 311.042, Health and Safety Code. A
21-13 determination of the amount of community benefits and charity care
21-14 and government-sponsored indigent health care provided by a
21-15 hospital or hospital system and the hospital's or hospital system's
21-16 compliance with the requirements of this subsection and Section
21-17 311.045, Health and Safety Code, shall be based on the most
21-18 recently completed and audited prior fiscal year of the hospital or
21-19 hospital system.
21-20 The providing of charity care and government-sponsored
21-21 indigent health care in accordance with Subdivision (1) shall be
21-22 guided by the prudent business judgment of the hospital which will
21-23 ultimately determine the appropriate level of charity care and
21-24 government-sponsored indigent health care based on the community
21-25 needs, the available resources of the hospital, the tax-exempt
22-1 benefits received by the hospital, and other factors that may be
22-2 unique to the hospital, such as the hospital's volume of Medicare
22-3 and Medicaid patients. These criteria shall not be determinative
22-4 factors, but shall be guidelines contributing to the hospital's
22-5 decision along with other factors which may be unique to the
22-6 hospital. The formulas contained in Subdivisions (2), (3), (4),
22-7 and (5)<, and (6)> shall also not be considered determinative of a
22-8 reasonable amount of charity care and government-sponsored indigent
22-9 health care.
22-10 The requirements of this subsection shall not apply to the
22-11 extent a hospital or hospital system demonstrates that reductions
22-12 in the amount of community benefits, charity care, and
22-13 government-sponsored indigent health care are necessary to maintain
22-14 financial reserves at a level required by a bond covenant, are
22-15 necessary to prevent the hospital or hospital system from
22-16 endangering its ability to continue operations, or if the hospital
22-17 or hospital system, as a result of a natural or other disaster, is
22-18 required substantially to curtail its operations.
22-19 In any fiscal year that a hospital or hospital system,
22-20 through unintended miscalculation, fails to meet any of the
22-21 standards in this subsection, the hospital or hospital system shall
22-22 not lose its tax-exempt status without the opportunity to cure the
22-23 miscalculation in the fiscal year following the fiscal year the
22-24 failure is discovered by both meeting one of the standards and
22-25 providing an additional amount of charity care and
23-1 government-sponsored indigent health care that is equal to the
23-2 shortfall from the previous fiscal year. A hospital or hospital
23-3 system may apply this provision only once every five years.
23-4 SECTION 6. Subsection (a), Section 171.063, Tax Code, is
23-5 amended to read as follows:
23-6 (a) The following corporations are exempt from the franchise
23-7 tax:
23-8 (1) a nonprofit corporation exempted from the federal
23-9 income tax under Section 501(c)(3), (4), (5), (6), or (7) of the
23-10 Internal Revenue Code of 1954, as it existed on January 1, 1975;
23-11 which in the case of a nonprofit hospital means a hospital
23-12 providing charity care and community benefits as set forth in
23-13 Paragraph (A), (B), (C), (D), (E), <or> (F), or (G):
23-14 (A) charity care and government-sponsored
23-15 indigent health care are provided at a level which is reasonable in
23-16 relation to the community needs, as determined through the
23-17 community needs assessment, the available resources of the hospital
23-18 or hospital system, and the tax-exempt benefits received by the
23-19 hospital or hospital system;
23-20 (B) charity care and government-sponsored
23-21 indigent health care are provided in an amount equal to at least
23-22 four percent of the hospital's or hospital system's net patient
23-23 revenue;
23-24 (C) charity care and government-sponsored
23-25 indigent health care are provided in an amount equal to at least
24-1 100 percent of the hospital's or hospital system's tax-exempt
24-2 benefits, excluding federal income tax; <or>
24-3 (D) <a nonprofit hospital that has been
24-4 designated as a disproportionate share hospital under the state
24-5 Medicaid program in either of the previous two fiscal years shall
24-6 be considered to have provided a reasonable amount of charity care
24-7 and government-sponsored indigent health care and shall be deemed
24-8 in compliance with the standards in this subsection;>
24-9 <(E)> for tax periods beginning <ending> before
24-10 January 1, 1996, charity care and community benefits are provided
24-11 in a combined amount equal to at least five percent of the
24-12 hospital's net patient revenue, provided that charity care and
24-13 government-sponsored indigent health care are provided in an amount
24-14 equal to at least three percent of net patient revenue; <or>
24-15 (E) <(F)> for tax periods beginning <ending>
24-16 after December 31, 1995, charity care and community benefits are
24-17 provided in a combined amount equal to at least five percent of the
24-18 hospital's or hospital system's net patient revenue, provided that
24-19 charity care and government-sponsored indigent health care are
24-20 provided in an amount equal to at least four percent of net patient
24-21 revenue;
24-22 (F) a nonprofit hospital that has been
24-23 designated as a disproportionate share hospital under the state
24-24 Medicaid program in the current year or in either of the previous
24-25 two fiscal years is considered to have provided a reasonable amount
25-1 of charity care and government-sponsored indigent health care and
25-2 is considered in compliance with the standards provided by this
25-3 subsection; or
25-4 (G) a hospital operated on a nonprofit basis
25-5 that is located in a county with a population of less than 50,000
25-6 and in which the entire county or the population of the entire
25-7 county has been designated as a health professionals shortage area
25-8 is considered in compliance with the standards provided by this
25-9 subsection;
25-10 (2) a corporation exempted under Section 501(c)(2) or
25-11 (25) of the Internal Revenue Code of 1986, if the corporation or
25-12 corporations for which it holds title to property is either exempt
25-13 from or not subject to the franchise tax;
25-14 (3) a corporation exempted from federal income tax
25-15 under Section 501(c)(16), Internal Revenue Code of 1986; and
25-16 (4) a nonprofit corporation exempted from the federal
25-17 income tax under Section 501(c)(3) of the Internal Revenue Code of
25-18 1986, that <is a nonprofit hospital and> does not receive any
25-19 payment for providing health care services to inpatients or
25-20 outpatients from any source including but not limited to the
25-21 patient or person legally obligated to support the patient,
25-22 third-party payors, Medicare, Medicaid, or any other state or local
25-23 indigent care program. Payment for providing health care services
25-24 does not include charitable donations, legacies, bequests, or
25-25 grants or payments for research.
26-1 For purposes of satisfying Paragraph (E) of Subdivision (1),
26-2 a hospital or hospital system may not change its existing fiscal
26-3 year unless the hospital or hospital system changes its ownership
26-4 or corporate structure as a result of a sale or merger.
26-5 For purposes of this subsection, a hospital that satisfies
26-6 Paragraph (A), (F), or (G) of Subdivision (1) shall be excluded in
26-7 determining a hospital system's compliance with the standards
26-8 provided by Paragraph (B), (C), (D), or (E) of Subdivision (1).
26-9 For purposes of this subsection, the terms "charity care,"
26-10 "government-sponsored indigent health care," "health care
26-11 organization," "hospital system," "net patient revenue," "nonprofit
26-12 hospital," and "tax-exempt benefits" have the meanings set forth in
26-13 Sections 311.031 and 311.042, Health and Safety Code. A
26-14 determination of the amount of community benefits and charity care
26-15 and government-sponsored indigent health care provided by a
26-16 hospital or hospital system and the hospital's or hospital system's
26-17 compliance with the requirements of Section 311.045, Health and
26-18 Safety Code, shall be based on the most recently completed and
26-19 audited prior fiscal year of the hospital or hospital system.
26-20 The providing of charity care and government-sponsored
26-21 indigent health care in accordance with Paragraph (A) of
26-22 Subdivision (1) shall be guided by the prudent business judgment of
26-23 the hospital which will ultimately determine the appropriate level
26-24 of charity care and government-sponsored indigent health care based
26-25 on the community needs, the available resources of the hospital,
27-1 the tax-exempt benefits received by the hospital, and other factors
27-2 that may be unique to the hospital, such as the hospital's volume
27-3 of Medicare and Medicaid patients. These criteria shall not be
27-4 determinative factors, but shall be guidelines contributing to the
27-5 hospital's decision along with other factors which may be unique to
27-6 the hospital. The formulas contained in Paragraphs (B), (C), (D),
27-7 and (E)<, and (F)> of Subdivision (1) shall also not be considered
27-8 determinative of a reasonable amount of charity care and
27-9 government-sponsored indigent health care.
27-10 The requirements of this subsection shall not apply to the
27-11 extent a hospital or hospital system demonstrates that reductions
27-12 in the amount of community benefits, charity care, and
27-13 government-sponsored indigent health care are necessary to maintain
27-14 financial reserves at a level required by a bond covenant, are
27-15 necessary to prevent the hospital or hospital system from
27-16 endangering its ability to continue operations, or if the hospital,
27-17 as a result of a natural or other disaster, is required
27-18 substantially to curtail its operations.
27-19 In any fiscal year that a hospital or hospital system,
27-20 through unintended miscalculation, fails to meet any of the
27-21 standards in Subdivision (1), the hospital or hospital system
27-22 shall not lose its tax-exempt status without the opportunity to
27-23 cure the miscalculation in the fiscal year following the fiscal
27-24 year the failure is discovered by both meeting one of the standards
27-25 and providing an additional amount of charity care and
28-1 government-sponsored indigent health care that is equal to the
28-2 shortfall from the previous fiscal year. A hospital or hospital
28-3 system may apply this provision only once every five years.
28-4 SECTION 7. This Act takes effect September 1, 1995.
28-5 SECTION 8. The importance of this legislation and the
28-6 crowded condition of the calendars in both houses create an
28-7 emergency and an imperative public necessity that the
28-8 constitutional rule requiring bills to be read on three several
28-9 days in each house be suspended, and this rule is hereby suspended.