1-1 By: Ellis S.B. No. 1190
1-2 (In the Senate - Filed March 10, 1995; March 16, 1995, read
1-3 first time and referred to Committee on Health and Human Services;
1-4 April 27, 1995, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 8, Nays 0; April 27, 1995,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 1190 By: Nixon
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to the duty of nonprofit, tax-exempt hospitals to provide
1-11 charity care.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Section 311.031, Health and Safety Code, is
1-14 amended to read as follows:
1-15 Sec. 311.031. Definitions. In this subchapter:
1-16 (1) "Board" means the Texas Board of Health.
1-17 (2) "Charity care" means the unreimbursed cost to a
1-18 hospital of:
1-19 (A) providing, funding, or otherwise financially
1-20 supporting health care services on an inpatient or outpatient basis
1-21 to a person classified by the hospital as "financially indigent" or
1-22 "medically indigent"; and/or
1-23 (B) providing, funding, or otherwise financially
1-24 supporting health care services provided to financially indigent
1-25 persons <patients> through other nonprofit or public outpatient
1-26 clinics, hospitals, <or> health care organizations, or an
1-27 elementary or secondary school in which at least 50 percent or more
1-28 of the students qualify under the federal program for free or
1-29 reduced-price school lunches or meet an equivalent economic index.
1-30 (3) "Contractual allowances" means the difference
1-31 between revenue at established rates and amounts realizable from
1-32 third-party payors under contractual agreements.
1-33 (4) "Department" means the Texas Department of Health.
1-34 (5) "Donations" means the unreimbursed costs of
1-35 providing cash and in-kind services and gifts, including
1-36 facilities, equipment, personnel, and programs, to other nonprofit
1-37 or public outpatient clinics, hospitals, <or> health care
1-38 organizations, or an elementary or secondary school in which at
1-39 least 50 percent or more of the students qualify under the federal
1-40 program for free or reduced-price school lunches or meet an
1-41 equivalent economic index.
1-42 (6) "Education-related costs" means the unreimbursed
1-43 cost to a hospital of providing, funding, or otherwise financially
1-44 supporting educational benefits, services, and programs including:
1-45 (A) education of physicians, nurses,
1-46 technicians, and other medical professionals and health care
1-47 providers;
1-48 (B) provision of scholarships and funding to
1-49 medical schools, colleges, and universities for health professions
1-50 education;
1-51 (C) education of patients concerning diseases
1-52 and home care in response to community needs; and
1-53 (D) community health education through
1-54 informational programs, publications, and outreach activities in
1-55 response to community needs.
1-56 (7) "Financially indigent" means an uninsured or
1-57 underinsured person who is accepted for care with no obligation or
1-58 a discounted obligation to pay for the services rendered based on
1-59 the hospital's eligibility system.
1-60 (8) "Government-sponsored indigent health care" means
1-61 the unreimbursed cost to a hospital of providing health care
1-62 services to recipients of Medicaid and other federal, state, or
1-63 local indigent health care programs, eligibility for which is based
1-64 on financial need.
1-65 (9) "Health care organization" means a nonprofit or
1-66 public organization that provides, funds, or otherwise financially
1-67 supports health care services provided to financially indigent
1-68 persons.
2-1 (10) "Hospital" means:
2-2 (A) a general or special hospital licensed under
2-3 Chapter 241;
2-4 (B) a private mental hospital licensed under
2-5 Chapter 577; and
2-6 (C) a treatment facility licensed under Chapter
2-7 464.
2-8 (11) <(10)> "Hospital eligibility system" means the
2-9 financial criteria and procedure used by a hospital to determine if
2-10 a patient is eligible for charity care. The system shall include
2-11 income levels and means testing indexed to the federal poverty
2-12 guidelines; provided, however, that a hospital may not establish an
2-13 eligibility system which sets the income level eligible for charity
2-14 care lower than that required by counties under Section 61.023 or
2-15 higher, in the case of the financially indigent, than 200 percent
2-16 of the federal poverty guidelines. A hospital may determine that a
2-17 person is financially or medically indigent pursuant to the
2-18 hospital's eligibility system after health care services are
2-19 provided.
2-20 (12) "Hospital system" means a system of local
2-21 nonprofit hospitals under the common governance of a single
2-22 corporate parent that are located within a radius of not more than
2-23 125 linear miles of the corporate parent.
2-24 (13) <(11)> "Medically indigent" means a person whose
2-25 medical or hospital bills after payment by third-party payors
2-26 exceed a specified percentage of the patient's annual gross income,
2-27 determined in accordance with the hospital's eligibility system,
2-28 and the person is financially unable to pay the remaining bill.
2-29 (14) <(12)> "Research-related costs" means the
2-30 unreimbursed cost to a hospital of providing, funding, or otherwise
2-31 financially supporting facilities, equipment, and personnel for
2-32 medical and clinical research conducted in response to community
2-33 needs.
2-34 (15) <(13)> "Subsidized health services" means those
2-35 services provided by a hospital in response to community needs for
2-36 which the reimbursement is less than the hospital's cost for
2-37 providing the services and which must be subsidized by other
2-38 hospital or nonprofit supporting entity revenue sources.
2-39 Subsidized health services may include but are not limited to:
2-40 (A) emergency and trauma care;
2-41 (B) neonatal intensive care;
2-42 (C) free-standing community clinics; and
2-43 (D) collaborative efforts with local government
2-44 or private agencies in preventive medicine, such as immunization
2-45 programs.
2-46 (16) <(14)> "Unreimbursed costs" means the costs a
2-47 hospital incurs for providing services after subtracting payments
2-48 received from any source for such services including but not
2-49 limited to the following: third-party insurance payments; Medicare
2-50 payments; Medicaid payments; Medicare education reimbursements;
2-51 state reimbursements for education; payments from drug companies to
2-52 pursue research; grant funds for research; and disproportionate
2-53 share payments. For purposes of this definition, the term "costs"
2-54 shall be calculated by applying the cost to charge ratios derived
2-55 in accordance with generally accepted accounting principles for
2-56 hospitals <from the hospital's Medicare cost report> to billed
2-57 charges. The calculation of the cost to charge ratios shall be
2-58 based on the most recently completed and audited prior fiscal year
2-59 of the hospital or hospital system. Prior to January 1, 1996, for
2-60 purposes of this definition, charitable contributions and grants to
2-61 a hospital, including transfers from endowment or other funds
2-62 controlled by the hospital or its nonprofit supporting entities,
2-63 shall not be subtracted from the costs of providing services for
2-64 purposes of determining unreimbursed costs. After January 1, 1996,
2-65 for purposes of this definition, charitable contributions and
2-66 grants to a hospital, including transfers from endowment or other
2-67 funds controlled by the hospital or its nonprofit supporting
2-68 entities, shall not be subtracted from the costs of providing
2-69 services for purposes of determining the unreimbursed costs of
2-70 charity care and government-sponsored indigent health care.
3-1 SECTION 2. Section 311.042, Health and Safety Code, is
3-2 amended by adding Subdivision (15) to read as follows:
3-3 (15) "Hospital system" means a system of local
3-4 nonprofit hospitals under the common governance of a single
3-5 corporate parent that are located within a radius of not more than
3-6 125 linear miles of the corporate parent.
3-7 SECTION 3. Section 311.045, Health and Safety Code, is
3-8 amended to read as follows:
3-9 Sec. 311.045. Community Benefits and Charity Care
3-10 Requirements. (a) A nonprofit hospital or hospital system shall
3-11 annually satisfy the requirements of this subchapter and of
3-12 Sections 11.18(d)(1), 151.310(a)(2) and (e), and 171.063(a)(1), Tax
3-13 Code, to provide community benefits which include charity care and
3-14 government-sponsored indigent health care by complying with one or
3-15 more of the standards set forth in Subsection (b). The hospital or
3-16 hospital system shall file a statement with the Bureau of State
3-17 Health Data and Policy Analysis at the department, with the chief
3-18 appraiser of the local appraisal district, and with the
3-19 comptroller's office no later than the 120th day after the
3-20 hospital's or hospital system's fiscal year ends, stating which of
3-21 the standards in Subsection (b) have been satisfied, provided,
3-22 however, that the first report shall be filed no later than the
3-23 120th day after the end of the hospital's or hospital system's
3-24 fiscal year ending during 1994. For hospitals in a hospital system
3-25 <under the common control of a single parent corporation>, the
3-26 corporate parent may elect to satisfy the charity care requirements
3-27 of this subchapter for each of the hospitals within the system on a
3-28 consolidated basis<; however, each hospital controlled by the
3-29 parent corporation shall satisfy the requirements of Sections
3-30 11.18(d)(1), 151.310(a), (c), (d), and (e), and 171.063(a)(1), Tax
3-31 Code, and provide community benefits which include charity care and
3-32 government-sponsored indigent health care>.
3-33 (b)(1) A nonprofit hospital or hospital system may elect to
3-34 provide community benefits, which include charity care and
3-35 government-sponsored indigent health care, according to any of the
3-36 following standards:
3-37 (A) charity care and government-sponsored
3-38 indigent health care are provided at a level which is reasonable in
3-39 relation to the community needs, as determined through the
3-40 community needs assessment, the available resources of the hospital
3-41 or hospital system, and the tax-exempt benefits received by the
3-42 hospital or hospital system;
3-43 (B) charity care and government-sponsored
3-44 indigent health care are provided in an amount equal to at least
3-45 four percent of the hospital's or hospital system's net patient
3-46 revenue;
3-47 (C) charity care and government-sponsored
3-48 indigent health care are provided in an amount equal to at least
3-49 100 percent of the hospital's or hospital system's tax-exempt
3-50 benefits, excluding federal income tax;
3-51 (D) prior to January 1, 1996, charity care and
3-52 community benefits are provided in a combined amount equal to at
3-53 least five percent of the hospital's or hospital system's net
3-54 patient revenue, provided that charity care and
3-55 government-sponsored indigent health care are provided in an amount
3-56 equal to at least three percent of net patient revenue; or
3-57 (E) beginning with the hospital's or hospital
3-58 system's fiscal year starting after December 31, 1995, charity care
3-59 and community benefits are provided in a combined amount equal to
3-60 at least five percent of the hospital's or hospital system's net
3-61 patient revenue, provided that charity care and
3-62 government-sponsored indigent health care are provided in an amount
3-63 equal to at least four percent of net patient revenue.
3-64 (2) For purposes of satisfying Subdivision (1)(E), a
3-65 hospital or hospital system may not change its existing fiscal year
3-66 unless the hospital or hospital system changes its ownership or
3-67 corporate structure as a result of a sale or merger.
3-68 (3) A nonprofit hospital that has been designated as a
3-69 disproportionate share hospital under the state Medicaid program in
3-70 the current fiscal year or in either of the previous two fiscal
4-1 years shall be considered to have provided a reasonable amount of
4-2 charity care and government-sponsored indigent health care and
4-3 shall be deemed in compliance with the standards in this
4-4 subsection.
4-5 <(3) A nonprofit hospital that is located in a county
4-6 with a population under 100,000 which has a hospital district
4-7 created pursuant to Article IX, Section 5, of the Texas
4-8 Constitution and Chapter 136, Acts of the 55th Legislature, Regular
4-9 Session, 1957, shall not be required to comply with one or more of
4-10 the standards set forth in this subsection.>
4-11 (c) The providing of charity care and government-sponsored
4-12 indigent health care in accordance with Subsection (b)(1)(A) shall
4-13 be guided by the prudent business judgment of the hospital which
4-14 will ultimately determine the appropriate level of charity care and
4-15 government-sponsored indigent health care based on the community
4-16 needs, the available resources of the hospital, the tax-exempt
4-17 benefits received by the hospital, and other factors that may be
4-18 unique to the hospital, such as the hospital's volume of Medicare
4-19 and Medicaid patients. These criteria shall not be determinative
4-20 factors, but shall be guidelines contributing to the hospital's
4-21 decision, along with other factors which may be unique to the
4-22 hospital. The standards set forth in Subsections (b)(1)(B),
4-23 (b)(1)(C), (b)(1)(D), and (b)(1)(E) shall also not be considered
4-24 determinative of the amount of charity care and
4-25 government-sponsored indigent health care that will be considered
4-26 reasonable under Subsection (b)(1)(A).
4-27 (d) For purposes of this section, a hospital that satisfies
4-28 Subsection (b)(1)(A) or (b)(3) shall be excluded in determining a
4-29 hospital system's compliance with the standards provided by
4-30 Subsection (b)(1)(B), (b)(1)(C), (b)(1)(D), or (b)(1)(E).
4-31 (e) In any fiscal year that a hospital or hospital system,
4-32 through unintended miscalculation, fails to meet any of the
4-33 standards in Subsection (b), the hospital or hospital system shall
4-34 not lose its tax-exempt status without the opportunity to cure the
4-35 miscalculation in the fiscal year following the fiscal year the
4-36 failure is discovered by both meeting one of the standards and
4-37 providing an additional amount of charity care and
4-38 government-sponsored indigent health care that is equal to the
4-39 shortfall from the previous fiscal year. A hospital or hospital
4-40 system may apply this provision only once every five years.
4-41 SECTION 4. Subsection (d), Section 11.18, Tax Code, is
4-42 amended to read as follows:
4-43 (d) A charitable organization must be organized exclusively
4-44 to perform religious, charitable, scientific, literary, or
4-45 educational purposes and, except as permitted by Subsection (h) of
4-46 this section, engage exclusively in performing one or more of the
4-47 following charitable functions:
4-48 (1) providing medical care without regard to the
4-49 beneficiaries' ability to pay, which in the case of a nonprofit
4-50 hospital or hospital system means providing charity care and
4-51 community benefits as set forth in Paragraph (A), (B), (C), (D),
4-52 (E), <or> (F), (G), or (H):
4-53 (A) charity care and government-sponsored
4-54 indigent health care are provided at a level which is reasonable in
4-55 relation to the community needs, as determined through the
4-56 community needs assessment, the available resources of the hospital
4-57 or hospital system, and the tax-exempt benefits received by the
4-58 hospital or hospital system;
4-59 (B) charity care and government-sponsored
4-60 indigent health care are provided in an amount equal to at least
4-61 four percent of the hospital's or hospital system's net patient
4-62 revenue;
4-63 (C) charity care and government-sponsored
4-64 indigent health care are provided in an amount equal to at least
4-65 100 percent of the hospital's or hospital system's tax-exempt
4-66 benefits, excluding federal income tax;
4-67 (D) a nonprofit hospital that has been
4-68 designated as a disproportionate share hospital under the state
4-69 Medicaid program in the current year or in either of the previous
4-70 two fiscal years shall be considered to have provided a reasonable
5-1 amount of charity care and government-sponsored indigent health
5-2 care and shall be deemed in compliance with the standards in this
5-3 subsection;
5-4 (E) for tax years before 1996, charity care and
5-5 community benefits are provided in a combined amount equal to at
5-6 least five percent of the hospital's or hospital system's net
5-7 patient revenue, provided that charity care and
5-8 government-sponsored indigent health care are provided in an amount
5-9 equal to at least three percent of net patient revenue; <or>
5-10 (F) beginning with the hospital's or hospital
5-11 system's tax year starting <for tax years> after 1995, charity care
5-12 and community benefits are provided in a combined amount equal to
5-13 at least five percent of the hospital's or hospital system's net
5-14 patient revenue, provided that charity care and
5-15 government-sponsored indigent health care are provided in an amount
5-16 equal to at least four percent of net patient revenue;
5-17 (G) a hospital operated on a nonprofit basis
5-18 that is located in a county with a population of less than 50,000
5-19 and in which the entire county or the population of the entire
5-20 county has been designated as a health professionals shortage area
5-21 is considered to be in compliance with the standards provided by
5-22 this subsection; or
5-23 (H) a hospital providing health care services to
5-24 inpatients or outpatients without receiving any payment for
5-25 providing those services from any source, including the patient or
5-26 person legally obligated to support the patient, third-party
5-27 payors, Medicare, Medicaid, or any other state or local indigent
5-28 care program but excluding charitable donations, legacies,
5-29 bequests, or grants or payments for research, is considered to be
5-30 in compliance with the standards provided by this subsection;
5-31 (2) providing support or relief to orphans,
5-32 delinquent, dependent, or handicapped children in need of
5-33 residential care, abused or battered spouses or children in need of
5-34 temporary shelter, the impoverished, or victims of natural disaster
5-35 without regard to the beneficiaries' ability to pay;
5-36 (3) providing support to elderly persons or the
5-37 handicapped without regard to the beneficiaries' ability to pay;
5-38 (4) preserving a historical landmark or site;
5-39 (5) promoting or operating a museum, zoo, library,
5-40 theater of the dramatic arts, or symphony orchestra or choir;
5-41 (6) promoting or providing humane treatment of
5-42 animals;
5-43 (7) acquiring, storing, transporting, selling, or
5-44 distributing water for public use;
5-45 (8) answering fire alarms and extinguishing fires with
5-46 no compensation or only nominal compensation to the members of the
5-47 organization;
5-48 (9) promoting the athletic development of boys or
5-49 girls under the age of 18 years;
5-50 (10) preserving or conserving wildlife;
5-51 (11) promoting educational development through loans
5-52 or scholarships to students;
5-53 (12) providing halfway house services pursuant to a
5-54 certification as a halfway house by the Board of Pardons and
5-55 Paroles;
5-56 (13) providing permanent housing and related social,
5-57 health care, and educational facilities for persons who are 62
5-58 years of age or older without regard to the residents' ability to
5-59 pay;
5-60 (14) promoting or operating an art gallery, museum, or
5-61 collection, in a permanent location or on tour, that is open to the
5-62 public;
5-63 (15) providing for the organized solicitation and
5-64 collection for distributions through gifts, grants, and agreements
5-65 to nonprofit charitable, education, religious, and youth
5-66 organizations that provide direct human, health, and welfare
5-67 services;
5-68 (16) performing biomedical or scientific research or
5-69 biomedical or scientific education for the benefit of the public;
5-70 or
6-1 (17) operating a television station that produces or
6-2 broadcasts educational, cultural, or other public interest
6-3 programming and that receives grants from the Corporation for
6-4 Public Broadcasting under 47 U.S.C. Section 396<; or>
6-5 <(18) in the case of a nonprofit hospital, providing
6-6 health care services without receiving any payment for providing
6-7 those services to inpatients or outpatients from any source
6-8 including but not limited to the patient or person legally
6-9 obligated to support the patient, third-party payors, Medicare,
6-10 Medicaid, or any other state or local indigent care program.
6-11 Payment for providing health care services does not include
6-12 charitable donations, legacies, bequests, or grants or payment for
6-13 research>.
6-14 For purposes of satisfying Paragraph (F) of Subdivision (1),
6-15 a hospital or hospital system may not change its existing fiscal
6-16 year unless the hospital or hospital system changes its ownership
6-17 or corporate structure as a result of a sale or merger.
6-18 For purposes of this subsection, a hospital that satisfies
6-19 Paragraph (A), (D), (G), or (H) of Subdivision (1) shall be
6-20 excluded in determining a hospital system's compliance with the
6-21 standards provided by Paragraph (B), (C), (E), or (F) of
6-22 Subdivision (1).
6-23 For purposes of this subsection, the terms "charity care,"
6-24 "government-sponsored indigent health care," "health care
6-25 organization," "hospital system," "net patient revenue," "nonprofit
6-26 hospital," and "tax-exempt benefits" have the meanings set forth in
6-27 Sections 311.031 and 311.042, Health and Safety Code. A
6-28 determination of the amount of community benefits and charity care
6-29 and government-sponsored indigent health care provided by a
6-30 hospital or hospital system and the hospital's or hospital system's
6-31 compliance with the requirements of Section 311.045, Health and
6-32 Safety Code, shall be based on the most recently completed and
6-33 audited prior fiscal year of the hospital or hospital system.
6-34 The providing of charity care and government-sponsored
6-35 indigent health care in accordance with Paragraph (A) of
6-36 Subdivision (1) shall be guided by the prudent business judgment of
6-37 the hospital which will ultimately determine the appropriate level
6-38 of charity care and government-sponsored indigent health care based
6-39 on the community needs, the available resources of the hospital,
6-40 the tax-exempt benefits received by the hospital, and other factors
6-41 that may be unique to the hospital, such as the hospital's volume
6-42 of Medicare and Medicaid patients. These criteria shall not be
6-43 determinative factors, but shall be guidelines contributing to the
6-44 hospital's decision along with other factors which may be unique to
6-45 the hospital. The formulas contained in Paragraphs (B), (C), (E),
6-46 and (F) of Subdivision (1) shall also not be considered
6-47 determinative of a reasonable amount of charity care and
6-48 government-sponsored indigent health care.
6-49 The requirements of this subsection shall not apply to the
6-50 extent a hospital or hospital system demonstrates that reductions
6-51 in the amount of community benefits, charity care, and
6-52 government-sponsored indigent health care are necessary to maintain
6-53 financial reserves at a level required by a bond covenant, are
6-54 necessary to prevent the hospital or hospital system from
6-55 endangering its ability to continue operations, or if the hospital
6-56 or hospital system, as a result of a natural or other disaster, is
6-57 required substantially to curtail its operations.
6-58 In any fiscal year that a hospital or hospital system,
6-59 through unintended miscalculation, fails to meet any of the
6-60 standards in Subdivision (1), the hospital or hospital system shall
6-61 not lose its tax-exempt status without the opportunity to cure the
6-62 miscalculation in the fiscal year following the fiscal year the
6-63 failure is discovered by both meeting one of the standards and
6-64 providing an additional amount of charity care and
6-65 government-sponsored indigent health care that is equal to the
6-66 shortfall from the previous fiscal year. A hospital or hospital
6-67 system may apply this provision only once every five years.
6-68 SECTION 5. Subsections (a) and (e), Section 151.310, Tax
6-69 Code, are amended to read as follows:
6-70 (a) A taxable item sold, leased, or rented to, or stored,
7-1 used, or consumed by, any of the following organizations is
7-2 exempted from the taxes imposed by this chapter:
7-3 (1) an organization created for religious,
7-4 educational, or charitable purposes if no part of the net earnings
7-5 of the organization benefits a private shareholder or individual
7-6 and the items purchased, leased, or rented are related to the
7-7 purpose of the organization<, and in the case of a nonprofit
7-8 hospital, the hospital does not receive any payment for providing
7-9 health care services to inpatients or outpatients from any source
7-10 including but not limited to the patient or person legally
7-11 obligated to support the patient, third-party payors, Medicare,
7-12 Medicaid, or any other state or local indigent care program.
7-13 Payment for providing health care services does not include
7-14 charitable donations, legacies, bequests, or grants or payments for
7-15 research>;
7-16 (2) an organization qualifying for an exemption from
7-17 federal income taxes under Section 501(c)(3), (4), (8), (10), or
7-18 (19), Internal Revenue Code, of the item sold, leased, rented,
7-19 stored, used, or consumed relates to the purpose of the exempted
7-20 organization and the item is not used for the personal benefit of a
7-21 private stockholder or individual;
7-22 (3) a nonprofit organization engaged exclusively in
7-23 providing athletic competition among persons under 19 years old if
7-24 no financial benefit goes to an individual or shareholder;
7-25 (4) a company, department, or association organized
7-26 for the purpose of answering fire alarms and extinguishing fires or
7-27 for the purpose of answering fire alarms, extinguishing fires, and
7-28 providing emergency medical services, the members of which receive
7-29 no compensation or only nominal compensation for their services
7-30 rendered, if the taxable item is used exclusively by the company,
7-31 department, or association; or
7-32 (5) a chamber of commerce or a convention and tourist
7-33 promotional agency representing at least one Texas city or county
7-34 if the chamber of commerce or the agency is not organized for
7-35 profit and no part of its net earnings inures to a private
7-36 shareholder or other individual.
7-37 (e) A nonprofit hospital or hospital system that qualifies
7-38 for an exemption under Subsection (a)(2) shall provide charity care
7-39 and community benefits as set forth in Subdivision (1), (2), (3),
7-40 (4), (5), <or> (6), (7), or (8) below:
7-41 (1) charity care and government-sponsored indigent
7-42 health care are provided at a level which is reasonable in relation
7-43 to the community needs, as determined through the community needs
7-44 assessment, the available resources of the hospital or hospital
7-45 system, and the tax-exempt benefits received by the hospital or
7-46 hospital system;
7-47 (2) charity care and government-sponsored indigent
7-48 health care are provided in an amount equal to at least four
7-49 percent of the hospital's or hospital system's net patient revenue;
7-50 (3) charity care and government-sponsored indigent
7-51 health care are provided in an amount equal to at least 100 percent
7-52 of the hospital's or hospital system's tax-exempt benefits,
7-53 excluding federal income tax; <or>
7-54 (4) <a nonprofit hospital that has been designated as
7-55 a disproportionate share hospital under the state Medicaid program
7-56 in either of the previous two fiscal years shall be considered to
7-57 have provided a reasonable amount of charity care and
7-58 government-sponsored indigent health care and shall be deemed in
7-59 compliance with the standards in this subsection;>
7-60 <(5)> for tax periods beginning <ending> before
7-61 January 1, 1996, charity care and community benefits are provided
7-62 in a combined amount equal to at least five percent of the
7-63 hospital's or hospital system's net patient revenue, provided that
7-64 charity care and government-sponsored indigent health care are
7-65 provided in an amount equal to at least three percent of net
7-66 patient revenue; <or>
7-67 (5) <(6)> for tax periods beginning <ending> after
7-68 December 31, 1995, charity care and community benefits are provided
7-69 in a combined amount equal to at least five percent of the
7-70 hospital's or hospital system's net patient revenue, provided that
8-1 charity care and government-sponsored indigent health care are
8-2 provided in an amount equal to at least four percent of net patient
8-3 revenue;
8-4 (6) a nonprofit hospital that has been designated as a
8-5 disproportionate share hospital under the state Medicaid program in
8-6 the current year or in either of the previous two fiscal years is
8-7 considered to have provided a reasonable amount of charity care and
8-8 government-sponsored indigent health care and is considered in
8-9 compliance with the standards provided by this subsection;
8-10 (7) a hospital operated on a nonprofit basis that is
8-11 located in a county with a population of less than 50,000 and in
8-12 which the entire county or the population of the entire county has
8-13 been designated as a health professionals shortage area is
8-14 considered to be in compliance with the standards provided by this
8-15 subsection; or
8-16 (8) a hospital providing health care services to
8-17 inpatients or outpatients without receiving any payment for
8-18 providing those services from any source, including the patient or
8-19 person legally obligated to support the patient, third-party
8-20 payors, Medicare, Medicaid, or any other state or local indigent
8-21 care program but excluding charitable donations, legacies,
8-22 bequests, or grants or payments for research, is considered to be
8-23 in compliance with the standards provided by this subsection.
8-24 For purposes of satisfying Subdivision (5), a hospital or
8-25 hospital system may not change its existing fiscal year unless the
8-26 hospital or hospital system changes its ownership or corporate
8-27 structure as a result of a sale or merger.
8-28 For purposes of this subsection, a hospital that satisfies
8-29 Subdivision (1), (6), (7), or (8) shall be excluded in determining
8-30 a hospital system's compliance with the standards provided by
8-31 Subdivision (2), (3), (4), or (5).
8-32 For purposes of this subsection, the terms "charity care,"
8-33 "government-sponsored indigent health care," "health care
8-34 organization," "hospital system," "net patient revenue," "nonprofit
8-35 hospital," and "tax-exempt benefits" have the meanings set forth in
8-36 Sections 311.031 and 311.042, Health and Safety Code. A
8-37 determination of the amount of community benefits and charity care
8-38 and government-sponsored indigent health care provided by a
8-39 hospital or hospital system and the hospital's or hospital system's
8-40 compliance with the requirements of this subsection and Section
8-41 311.045, Health and Safety Code, shall be based on the most
8-42 recently completed and audited prior fiscal year of the hospital or
8-43 hospital system.
8-44 The providing of charity care and government-sponsored
8-45 indigent health care in accordance with Subdivision (1) shall be
8-46 guided by the prudent business judgment of the hospital which will
8-47 ultimately determine the appropriate level of charity care and
8-48 government-sponsored indigent health care based on the community
8-49 needs, the available resources of the hospital, the tax-exempt
8-50 benefits received by the hospital, and other factors that may be
8-51 unique to the hospital, such as the hospital's volume of Medicare
8-52 and Medicaid patients. These criteria shall not be determinative
8-53 factors, but shall be guidelines contributing to the hospital's
8-54 decision along with other factors which may be unique to the
8-55 hospital. The formulas contained in Subdivisions (2), (3), (4),
8-56 and (5)<, and (6)> shall also not be considered determinative of a
8-57 reasonable amount of charity care and government-sponsored indigent
8-58 health care.
8-59 The requirements of this subsection shall not apply to the
8-60 extent a hospital or hospital system demonstrates that reductions
8-61 in the amount of community benefits, charity care, and
8-62 government-sponsored indigent health care are necessary to maintain
8-63 financial reserves at a level required by a bond covenant, are
8-64 necessary to prevent the hospital or hospital system from
8-65 endangering its ability to continue operations, or if the hospital
8-66 or hospital system, as a result of a natural or other disaster, is
8-67 required substantially to curtail its operations.
8-68 In any fiscal year that a hospital or hospital system,
8-69 through unintended miscalculation, fails to meet any of the
8-70 standards in this subsection, the hospital or hospital system shall
9-1 not lose its tax-exempt status without the opportunity to cure the
9-2 miscalculation in the fiscal year following the fiscal year the
9-3 failure is discovered by both meeting one of the standards and
9-4 providing an additional amount of charity care and
9-5 government-sponsored indigent health care that is equal to the
9-6 shortfall from the previous fiscal year. A hospital or hospital
9-7 system may apply this provision only once every five years.
9-8 SECTION 6. Subsection (a), Section 171.063, Tax Code, is
9-9 amended to read as follows:
9-10 (a) The following corporations are exempt from the franchise
9-11 tax:
9-12 (1) a nonprofit corporation exempted from the federal
9-13 income tax under Section 501(c)(3), (4), (5), (6), or (7) of the
9-14 Internal Revenue Code of 1954, as it existed on January 1, 1975;
9-15 which in the case of a nonprofit hospital means a hospital
9-16 providing charity care and community benefits as set forth in
9-17 Paragraph (A), (B), (C), (D), (E), <or> (F), or (G):
9-18 (A) charity care and government-sponsored
9-19 indigent health care are provided at a level which is reasonable in
9-20 relation to the community needs, as determined through the
9-21 community needs assessment, the available resources of the hospital
9-22 or hospital system, and the tax-exempt benefits received by the
9-23 hospital or hospital system;
9-24 (B) charity care and government-sponsored
9-25 indigent health care are provided in an amount equal to at least
9-26 four percent of the hospital's or hospital system's net patient
9-27 revenue;
9-28 (C) charity care and government-sponsored
9-29 indigent health care are provided in an amount equal to at least
9-30 100 percent of the hospital's or hospital system's tax-exempt
9-31 benefits, excluding federal income tax; <or>
9-32 (D) <a nonprofit hospital that has been
9-33 designated as a disproportionate share hospital under the state
9-34 Medicaid program in either of the previous two fiscal years shall
9-35 be considered to have provided a reasonable amount of charity care
9-36 and government-sponsored indigent health care and shall be deemed
9-37 in compliance with the standards in this subsection;>
9-38 <(E)> for tax periods beginning <ending> before
9-39 January 1, 1996, charity care and community benefits are provided
9-40 in a combined amount equal to at least five percent of the
9-41 hospital's net patient revenue, provided that charity care and
9-42 government-sponsored indigent health care are provided in an amount
9-43 equal to at least three percent of net patient revenue; <or>
9-44 (E) <(F)> for tax periods beginning <ending>
9-45 after December 31, 1995, charity care and community benefits are
9-46 provided in a combined amount equal to at least five percent of the
9-47 hospital's or hospital system's net patient revenue, provided that
9-48 charity care and government-sponsored indigent health care are
9-49 provided in an amount equal to at least four percent of net patient
9-50 revenue;
9-51 (F) a nonprofit hospital that has been
9-52 designated as a disproportionate share hospital under the state
9-53 Medicaid program in the current year or in either of the previous
9-54 two fiscal years is considered to have provided a reasonable amount
9-55 of charity care and government-sponsored indigent health care and
9-56 is considered in compliance with the standards provided by this
9-57 subsection; or
9-58 (G) a hospital operated on a nonprofit basis
9-59 that is located in a county with a population of less than 50,000
9-60 and in which the entire county or the population of the entire
9-61 county has been designated as a health professionals shortage area
9-62 is considered in compliance with the standards provided by this
9-63 subsection;
9-64 (2) a corporation exempted under Section 501(c)(2) or
9-65 (25) of the Internal Revenue Code of 1986, if the corporation or
9-66 corporations for which it holds title to property is either exempt
9-67 from or not subject to the franchise tax;
9-68 (3) a corporation exempted from federal income tax
9-69 under Section 501(c)(16), Internal Revenue Code of 1986; and
9-70 (4) a nonprofit corporation exempted from the federal
10-1 income tax under Section 501(c)(3) of the Internal Revenue Code of
10-2 1986, that <is a nonprofit hospital and> does not receive any
10-3 payment for providing health care services to inpatients or
10-4 outpatients from any source including but not limited to the
10-5 patient or person legally obligated to support the patient,
10-6 third-party payors, Medicare, Medicaid, or any other state or local
10-7 indigent care program. Payment for providing health care services
10-8 does not include charitable donations, legacies, bequests, or
10-9 grants or payments for research.
10-10 For purposes of satisfying Paragraph (E) of Subdivision (1),
10-11 a hospital or hospital system may not change its existing fiscal
10-12 year unless the hospital or hospital system changes its ownership
10-13 or corporate structure as a result of a sale or merger.
10-14 For purposes of this subsection, a hospital that satisfies
10-15 Paragraph (A), (F), or (G) of Subdivision (1) shall be excluded in
10-16 determining a hospital system's compliance with the standards
10-17 provided by Paragraph (B), (C), (D), or (E) of Subdivision (1).
10-18 For purposes of this subsection, the terms "charity care,"
10-19 "government-sponsored indigent health care," "health care
10-20 organization," "hospital system," "net patient revenue," "nonprofit
10-21 hospital," and "tax-exempt benefits" have the meanings set forth in
10-22 Sections 311.031 and 311.042, Health and Safety Code. A
10-23 determination of the amount of community benefits and charity care
10-24 and government-sponsored indigent health care provided by a
10-25 hospital or hospital system and the hospital's or hospital system's
10-26 compliance with the requirements of Section 311.045, Health and
10-27 Safety Code, shall be based on the most recently completed and
10-28 audited prior fiscal year of the hospital or hospital system.
10-29 The providing of charity care and government-sponsored
10-30 indigent health care in accordance with Paragraph (A) of
10-31 Subdivision (1) shall be guided by the prudent business judgment of
10-32 the hospital which will ultimately determine the appropriate level
10-33 of charity care and government-sponsored indigent health care based
10-34 on the community needs, the available resources of the hospital,
10-35 the tax-exempt benefits received by the hospital, and other factors
10-36 that may be unique to the hospital, such as the hospital's volume
10-37 of Medicare and Medicaid patients. These criteria shall not be
10-38 determinative factors, but shall be guidelines contributing to the
10-39 hospital's decision along with other factors which may be unique to
10-40 the hospital. The formulas contained in Paragraphs (B), (C), (D),
10-41 and (E)<, and (F)> of Subdivision (1) shall also not be considered
10-42 determinative of a reasonable amount of charity care and
10-43 government-sponsored indigent health care.
10-44 The requirements of this subsection shall not apply to the
10-45 extent a hospital or hospital system demonstrates that reductions
10-46 in the amount of community benefits, charity care, and
10-47 government-sponsored indigent health care are necessary to maintain
10-48 financial reserves at a level required by a bond covenant, are
10-49 necessary to prevent the hospital or hospital system from
10-50 endangering its ability to continue operations, or if the hospital,
10-51 as a result of a natural or other disaster, is required
10-52 substantially to curtail its operations.
10-53 In any fiscal year that a hospital or hospital system,
10-54 through unintended miscalculation, fails to meet any of the
10-55 standards in Subdivision (1), the hospital or hospital system
10-56 shall not lose its tax-exempt status without the opportunity to
10-57 cure the miscalculation in the fiscal year following the fiscal
10-58 year the failure is discovered by both meeting one of the standards
10-59 and providing an additional amount of charity care and
10-60 government-sponsored indigent health care that is equal to the
10-61 shortfall from the previous fiscal year. A hospital or hospital
10-62 system may apply this provision only once every five years.
10-63 SECTION 7. This Act takes effect September 1, 1995.
10-64 SECTION 8. The importance of this legislation and the
10-65 crowded condition of the calendars in both houses create an
10-66 emergency and an imperative public necessity that the
10-67 constitutional rule requiring bills to be read on three several
10-68 days in each house be suspended, and this rule is hereby suspended.
10-69 * * * * *