75R12759 DLF-F By Maxey, Delisi, Berlanga, Naishtat, H.B. No. 1331 Hirschi, et al. Substitute the following for H.B. No. 1331: By Berlanga C.S.H.B. No. 1331 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to certain nonprofit entities that provide health or 1-3 long-term care or health benefit plans. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. PURPOSE AND FINDINGS. Nonprofit health care 1-6 providers have historically served the needs of their community, 1-7 including the needs of uninsured individuals in the community. 1-8 Access to high quality, affordable health care is a continuing need 1-9 in a state with over four million uninsured individuals and 1-10 millions more individuals who do not have adequate insurance. 1-11 Changes in the health care market have caused a substantial number 1-12 of nonprofit health care providers and nonprofit health benefit 1-13 plan providers to establish for-profit ventures, affecting hundreds 1-14 of millions of charitable dollars. As these changes in the health 1-15 care system occur, it is in the best interest of this state to 1-16 ensure that the state and the public have adequate information to 1-17 evaluate the impact of the changes on the public and the unmet 1-18 health care needs in this state. 1-19 SECTION 2. SHORT TITLE. This Act may be cited as the 1-20 Charitable Health Care Trust Act. 1-21 SECTION 3. DEFINITIONS. In this Act: 1-22 (1) "For-profit entity" means a business entity that 1-23 is not a mutual plan provider or a nonprofit provider. 1-24 (2) "Health benefit plan provider" means an insurer, 2-1 group hospital service corporation, health maintenance 2-2 organization, or other entity that issues: 2-3 (A) an individual, group, blanket, or franchise 2-4 insurance policy, insurance agreement, or group hospital service 2-5 contract that provides benefits for medical or surgical expenses 2-6 incurred as a result of an accident or sickness; 2-7 (B) an evidence of coverage or group subscriber 2-8 contract issued by a health maintenance organization; or 2-9 (C) a long-term care insurance policy. 2-10 (3) "Health care provider" means any entity licensed 2-11 to provide health or long-term care. The term includes any 2-12 facility licensed under Subtitle B, Title 4, Health and Safety 2-13 Code. 2-14 (4) "Mutual plan provider" means any mutual or mutual 2-15 assessment association subject to Chapter 11, 12, 13, or 14, 2-16 Insurance Code, that provides health and accident insurance, 2-17 including any entity exempt under Article 14.17, Insurance Code. 2-18 (5) "Nonprofit provider" means a health benefit plan 2-19 provider or a health care provider that is: 2-20 (A) exempt from federal income tax under Section 2-21 501(a) of the Internal Revenue Code of 1986 by being listed as an 2-22 exempt organization in Section 501(c)(3) or 501(c)(4) of the code; 2-23 (B) incorporated under the Texas Non-Profit 2-24 Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil 2-25 Statutes) or a similar law of another state; 2-26 (C) exempt from state franchise, property, and 2-27 sales taxes; or 3-1 (D) organized and operated exclusively for the 3-2 promotion of social welfare and that normally receives more than 3-3 one-third of its support in any year from private or public gifts, 3-4 grants, contributions, or membership fees. 3-5 SECTION 4. DUTIES OF NONPROFIT PROVIDER. (a) A nonprofit 3-6 provider shall comply with this Act, in accordance with the periods 3-7 established by this Act, with respect to any agreement or 3-8 transaction under which the nonprofit provider directly or 3-9 indirectly: 3-10 (1) sells, transfers, leases, exchanges, provides an 3-11 option with respect to, or otherwise disposes of assets of the 3-12 nonprofit provider in favor of a for-profit entity or a mutual plan 3-13 provider; 3-14 (2) restructures as or converts to a for-profit entity 3-15 or a mutual plan provider; 3-16 (3) transfers control, responsibility, or governance 3-17 of the assets, operations, or business of the nonprofit provider in 3-18 favor of a for-profit entity or a mutual plan provider; or 3-19 (4) closes a facility operated by the nonprofit 3-20 provider or dissolves. 3-21 (b) Subsection (a)(1) or (2) of this section applies only 3-22 if: 3-23 (1) the fair market value of the assets of the 3-24 nonprofit provider involved in the proposed agreement or 3-25 transaction is at least 30 percent of the value of the total assets 3-26 of the nonprofit provider; or 3-27 (2) the fair market value of the assets of the 4-1 nonprofit provider involved in the proposed agreement or 4-2 transaction, when added to the fair market value of all assets of 4-3 the nonprofit provider that have been subject to a previous 4-4 agreement or transaction described by Subsection (a)(1), (2), or 4-5 (3) of this section that has been made during the two-year period 4-6 before the date on which the proposed agreement or transaction 4-7 becomes effective, is at least 35 percent of the value of the total 4-8 assets of the nonprofit provider. 4-9 (c) Subsection (a)(3) of this section applies only if: 4-10 (1) the fair market value of the assets of the 4-11 nonprofit provider with respect to which control, responsibility, 4-12 or governance would be transferred under the proposed agreement or 4-13 transaction is at least 30 percent of the value of the total assets 4-14 of the nonprofit provider; 4-15 (2) the fair market value of the assets of the 4-16 nonprofit provider with respect to which control, responsibility, 4-17 or governance would be transferred under the proposed agreement or 4-18 transaction, when added to the fair market value of all assets of 4-19 the nonprofit provider that have been subject to a previous 4-20 agreement or transaction described by Subsection (a)(1), (2), or 4-21 (3) of this section that has been made during the two-year period 4-22 before the date on which the proposed agreement or transaction 4-23 becomes effective, is at least 35 percent of the value of the total 4-24 assets of the nonprofit provider; 4-25 (3) the gross revenues associated with business or 4-26 operations of the nonprofit provider with respect to which control, 4-27 responsibility, or governance would be transferred under the 5-1 proposed agreement or transaction is at least 30 percent of the 5-2 value of the gross revenues associated with all of the business or 5-3 operations of the nonprofit provider; or 5-4 (4) the gross revenues associated with business or 5-5 operations of the nonprofit provider with respect to which control, 5-6 responsibility, or governance would be transferred under the 5-7 proposed agreement or transaction, when added to the gross revenues 5-8 associated with the business or operations with respect to which 5-9 control, responsibility, or governance has been transferred under a 5-10 previous agreement or transaction described by Subsection (a)(3) of 5-11 this section that has been made during the two-year period before 5-12 the date on which the proposed agreement or transaction becomes 5-13 effective, is at least 35 percent of the value of the gross 5-14 revenues associated with all of the business or operations of the 5-15 nonprofit provider. 5-16 (d) For purposes of applying Subsection (b) or (c)(1) or (2) 5-17 of this section: 5-18 (1) the fair market value of assets of a nonprofit 5-19 provider involved in a previous agreement or transaction is 5-20 determined as of the time the previous agreement or transaction 5-21 became effective; and 5-22 (2) the fair market value of the total assets of the 5-23 nonprofit provider is determined as of the time the proposed 5-24 agreement or transaction would become effective. 5-25 (e) For purposes of applying Subsection (c)(3) or (4) of 5-26 this section: 5-27 (1) the gross revenues associated with the business or 6-1 operations of a nonprofit provider with respect to which control, 6-2 responsibility, or governance has been transferred under a previous 6-3 agreement or transaction are determined as of the time the previous 6-4 agreement or transaction became effective; and 6-5 (2) the value of the gross revenues associated with 6-6 all of the business or operations of the nonprofit provider is 6-7 determined as of the time the proposed agreement or transaction 6-8 would become effective. 6-9 (f) If a nonprofit provider is a health care system that 6-10 owns or operates more than one licensed hospital, each separately 6-11 licensed hospital is a nonprofit provider for purposes of applying 6-12 this section and, for purposes of applying Subsections (b), (c), 6-13 (d), and (e) of this section, only the assets and business or 6-14 operations of the separately licensed hospital shall be considered. 6-15 SECTION 5. NOTICE OF AGREEMENT OR TRANSACTION. (a) A 6-16 nonprofit provider that signs a letter of intent or any other 6-17 written agreement evidencing the intent to enter into an agreement 6-18 or transaction described by Section 4 of this Act shall notify the 6-19 attorney general and shall publish notice of that fact. 6-20 (b) The notice to the attorney general must: 6-21 (1) be made in writing not later than the earlier of: 6-22 (A) the fifth day after the date the letter of 6-23 intent or other written agreement evidencing intent is signed; or 6-24 (B) the 90th day before the date on which the 6-25 agreement or transaction is to become effective; and 6-26 (2) disclose the conditions under which the agreement 6-27 or transaction will be made according to the best information 7-1 available to the nonprofit provider. 7-2 (c) The notice provided to the attorney general under 7-3 Subsection (b) of this section must state: 7-4 (1) the identity of the nonprofit provider and any 7-5 nonprofit entity that owns or controls the nonprofit provider; 7-6 (2) the identity of the for-profit entity or mutual 7-7 plan provider with which the proposed agreement or transaction is 7-8 to be made; 7-9 (3) the identity of any other party to the proposed 7-10 agreement or transaction; 7-11 (4) the terms of the proposed agreement or 7-12 transaction; 7-13 (5) the value of consideration to be provided in 7-14 connection with the proposed agreement or transaction and the basis 7-15 on which this valuation is made; 7-16 (6) the identity of any individual or entity who is an 7-17 officer, director, or affiliate of the nonprofit provider and a 7-18 statement as to whether each named individual or entity: 7-19 (A) has been promised future employment as a 7-20 result of the proposed agreement or transaction; 7-21 (B) has been a party to discussions relating to 7-22 future employment as a result of the proposed agreement or 7-23 transaction; or 7-24 (C) has any other direct or indirect economic 7-25 interest in the proposed agreement or transaction; and 7-26 (7) the date on which the proposed agreement or 7-27 transaction is to become effective. 8-1 (d) In addition to the notice required under Subsection (b) 8-2 of this section, the nonprofit provider shall notify the attorney 8-3 general of any material change in the agreement or transaction or 8-4 any of the information required by Subsection (c) of this section 8-5 not later than the 30th day before the date the agreement or 8-6 transaction becomes effective. The attorney general may waive the 8-7 requirement that the notice be provided within the time required by 8-8 this subsection if the attorney general finds the waiver is 8-9 appropriate. 8-10 (e) The notice submitted to the attorney general under this 8-11 section and any materials submitted with the notice are public 8-12 information. On the request of any person, the nonprofit provider 8-13 shall make the information available at the business office of the 8-14 nonprofit provider in the affected service area. 8-15 (f) The publication of notice under this section must be 8-16 made not later than the 90th day before the date the agreement or 8-17 transaction would become effective and must state the address of 8-18 the business office of the nonprofit provider in the affected 8-19 service area and state that more detailed information concerning 8-20 the proposed agreement or transaction is available at the business 8-21 office. 8-22 SECTION 6. PUBLICATION OF NOTICE. (a) A nonprofit provider 8-23 that is required to publish notice under this Act must publish 8-24 notice in: 8-25 (1) the Texas Register; and 8-26 (2) one or more newspapers in accordance with 8-27 Subsection (b) of this section. 9-1 (b) Notice published under Subsection (a)(2) of this section 9-2 must be published at least once in a newspaper of general 9-3 circulation in the publication area described by Subsection (d) of 9-4 this section. If the publication area includes more than one 9-5 county, the nonprofit provider must send a news release to a 9-6 newspaper of general circulation in each county included in the 9-7 publication area. 9-8 (c) If a newspaper of general circulation does not exist in 9-9 a county in the publication area, the nonprofit provider shall send 9-10 the notice to the county commissioners court in the county. The 9-11 county commissioners court may post the notice as it finds 9-12 appropriate. 9-13 (d) For purposes of this section, the publication area of a 9-14 nonprofit provider is: 9-15 (1) the county in this state in which the provider 9-16 maintains its registered agent; 9-17 (2) if different from the county described in 9-18 Subdivision (1) of this subsection, the county in this state in 9-19 which the principal executive office of the provider is located; 9-20 (3) any county that is contiguous to a county 9-21 described by Subdivisions (1) and (2) of this subsection; and 9-22 (4) any county not described by Subdivision (1), (2), 9-23 or (3) of this subsection in which the provider maintains an 9-24 office. 9-25 SECTION 7. EFFECTIVE DATE. This Act takes effect September 9-26 1, 1997. 9-27 SECTION 8. TRANSITION. (a) This Act applies only to: 10-1 (1) an agreement described by Section 4 of this Act 10-2 that is entered into on or after September 1, 1997; or 10-3 (2) a transaction described by Section 4 of this Act 10-4 that is made pursuant to an agreement entered into on or after 10-5 September 1, 1997. 10-6 (b) An agreement described by Section 4 of this Act that is 10-7 entered into before September 1, 1997, and a transaction described 10-8 by Section 4 of this Act that is made pursuant to an agreement 10-9 entered into before September 1, 1997, are governed by the law as 10-10 it existed immediately before the effective date of this Act, and 10-11 that law is continued in effect for that purpose. 10-12 SECTION 9. EMERGENCY. The importance of this legislation and 10-13 the crowded condition of the calendars in both houses create an 10-14 emergency and an imperative public necessity that the 10-15 constitutional rule requiring bills to be read on three several 10-16 days in each house be suspended, and this rule is hereby suspended.