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