Office of House Bill AnalysisH.B. 3505
By: Solis, Jim
Public Health


Counties with a hospital district or public hospital provide care to
indigent patients through that district or hospital.  These hospital
districts may receive additional compensation for indigent health care
services through the disproportionate share hospital program, which is
established under Medicaid and provides federal funds to match state and
local expenditures.  Counties without a hospital district or public
hospital must provide care to indigent patients and pay the cost of this
care from general revenue.  This may pose a hardship for counties with many
low-income residents, because the tax base is lower and the county has no
opportunity to recoup any of the cost of indigent health care. 

H.B. 3505 allows counties to pool resources in providing health care for
indigent residents through the formation of a health services district
(district).  This bill provides such a district with contracting and
bonding authority, and provides the counties with the opportunity to pool
their resources and function as one unit for the purpose of providing
indigent health care. 


It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
office, department, agency, or institution. 


SECTION 1.  Amends Subtitle D, Title 4, Health and Safety Code, by adding
Chapter 287, as follows: 



Sec. 287.001.  DEFINITIONS.  Defines "board," "district," " and "director"
for purposes of this chapter. 

Sec. 287.002.  DISTRICT AUTHORIZATION.  Authorizes a health services
district (district) to be created and established.  Provides that if
created, the district is required to be maintained, operated, and financed
as provided by this chapter. 


Sec. 287.021.  CREATION BY CONTRACT.  (a)  Authorizes two or more political
subdivisions of this state, except as provided in Subsection (b) and
including a hospital district, to create a district by adopting concurrent

(b)  Prohibits a county in the service area of a hospital district from
being a party to the creation of a district or to a contract with a
district.  Authorizes the hospital district serving the county to create
and contract with the district for its service area. 

(c)  Provides that a concurrent order to create a district must to meet
certain criteria. 
Sec. 287.022.  CONTRACT TERMS. (a)  Requires a political subdivision
creating a district under this chapter to contract with the district to
provide at minimum the health care services the subdivision is required to
provide by law or under the constitution.  Provides that a contract with a
subdivision that created the district under this chapter must contain
certain information. 

(b)  Makes Chapter 791 (Interlocal Cooperation Contracts), Government Code,
inapplicable to a contract made under this chapter. 

Sec. 287.023.  PURPOSE AND DUTIES.  Requires a district to provide health
care services to certain categories of persons in a certain manner; manage
funds; manage and operate the land, buildings, improvements, equipment, and
other assets for which the district is responsible; and plan and coordinate
with public and private health care providers and entities. 

Sec. 287.024.  FUNDING.  (a)  Requires each political subdivision
contracting with the district to contribute for its operation certain

(b) Requires the district to maintain an accounting of the funds received
from each subdivision contracting with the district. 

(c)  Authorizes the district to commingle and administer the financial
contributions of all parties to the contract for district purposes. 


Sec. 287.041.  BOARD OF DIRECTORS.  (a)  Requires each political
subdivision creating the district to appoint two directors to the board. 

(b)  Requires the subdivision to agree on and collectively appoint on
additional director, in addition to the two directors appointed. 

(c)  Provides that directors serve staggered, two-year terms, with as near
as possible to one-half of the terms expiring each year. 

Sec. 287.042.  QUALIFICATIONS FOR OFFICE.  (a)  Provides that in order to
be eligible to serve as a director, an individual must meet certain

(b)  Prohibits an employee of the district from serving as a director.

Sec. 287.043.  BOND.  (a)  Provides that before assuming the duties of
office, each director is required to execute a bond for $5,000 payable to
the district, conditioned on the faithful performance of the person's
duties as director. 

(b)  Requires the bond to be kept in the district's permanent records.

(c)  Authorizes the board to pay for directors' bonds with district funds.

Sec. 287.044.  BOARD VACANCY.  Requires a vacancy in the office of a
director to be filled for the unexpired term in the same manner as the
original appointment. 

Sec. 287.045.  OFFICERS.  (a)  Requires the board to elect from its members
a president and vice president. 

(b)  Requires the board to appoint a secretary who need not be a director.

Sec. 287.046.  OFFICERS' TERMS; VACANCY.  (a)  Provides that each officer
of the board serves for a one-year term. 
(b)  Requires the board to fill a vacancy for the unexpired term.

Sec. 287.047.  COMPENSATION.  (a)  Provides that directors and officers
serve without compensation, however, authorizes them to be reimbursed or
actual expenses incurred in the performance of official duties. 

(b)  Provides that expenses reimbursed under this section must be reported
in a certain manner and approved by the board. 

Sec. 287.048.  VOTING REQUIREMENT.  Provides that a majority of board
members voting must concur in a matter relating to the district's business. 

Authorizes the board to appoint qualified persons as administrator of the
district, assistant administrator, and attorney for the district. 

(b) Provides that the individuals listed in Subsection (a) serve at the
board's will. 

(c) Entitles individuals in Subsection (a) to compensation as determined by
the board. 

(d)  Requires the administrator, before assuming duties, to execute a bond
payable to the district for no less than $5,000 as determined by the board,
conditioned on the faithful performance of the administrator's duties under
this chapter.  Authorizes the board to pay for the bond with district

Sec. 287.050.  APPOINTMENTS TO STAFF.  Authorizes the board to appoint to
the staff any doctors it considers necessary for the efficient operation of
the district and make temporary appointments as necessary. 

Authorizes the district to employ technicians, nurses, fiscal agents,
accountants, architects, additional attorneys, and other necessary

(b)  Authorizes the board to delegate to the administrator the authority to
employ persons for the district. 

Sec. 287.052.  GENERAL DUTIES OF ADMINISTRATOR.  Requires the administrator
to supervise the work and activities of the district and direct the
district's general affairs, subject to limitations prescribed by the board. 

Sec. 287.053.  RETIREMENT BENEFITS.  Authorizes the board to provide
retirement benefits for district employees by establishing or administering
a retirement program or electing to participate in certain statewide
retirement systems. 


Sec. 287.071.  RESPONSIBILITY OF GOVERNMENTAL ENTITY.  Requires a county,
municipality, hospital district, or other governmental entity where the
district is located to transfer certain operations to the district upon its

Sec. 287.072.  DISTRICT RESPONSIBILITIES.  Provides that upon creation of a
district, the district assumes the duties required by Section 287.023,
Health and Safety Code, and any additional duties specified in the contract
with the political subdivisions that created the district. 

Sec. 287.073.  MANAGEMENT, CONTROL, AND ADMINISTRATION.  Requires the board
to manage, control, and administer the hospital system and the funds and
resources of the district that are transferred under Section 287.071,
Health and Safety Code. 
Sec. 287.074.  DISTRICT RULES.  Authorizes the board to adopt rules
governing the district's operation, and the duties, functions and
responsibilities of district staff and employees. 

Sec. 287.075.  METHODS AND PROCEDURES.  Authorizes the board to prescribe
the method of making purchases and expenditures and accounting and control
procedures or the district. 

the board to determine the type, number, and location of buildings required
to establish and maintain an adequate hospital system and the type of
equipment necessary for hospital care. 

(b)  Authorizes the board to make additional determinations, including
those related to: 

_acquisition of property, facilities, and equipment;
_a mortgage or pledge of the property, facilities, or equipment; 
_transfer to lease to certain individuals and entities;
_sale or disposal of properties, facilities, or equipment; and
_contracts with a state agency to provide facilities and health care

Sec. 287.077.  CONSTRUCTION CONTRACTS. (a)  Authorizes the board to enter
into construction contracts for the district. 

(b)  Authorizes the board to enter into construction contracts of more than
$10,000 only after competitive bidding as provided by Subchapter B
(Competitive Bidding on Certain Public Works Contracts), Chapter 271
(Purchasing and Contracting Authority of Municipalities, Counties, and
Certain Other Local Governments), Local Government Code. 

(c)  Makes Chapter 2253 (Public Work Performance and Payment Bonds),
Government Code, as it relates to performance and payment bonds, applicable
to construction contracts let by the district. 

board to enter into operating or management contracts relating to hospital
facilities owned by the district or for which the district assumes
responsibility for managing and operating under the terms of the contract
with the political subdivisions that created the district. 

Sec. 287.079.  EMINENT DOMAIN.  (a)  Authorizes a district to exercise the
power of eminent domain to acquire a fee simple or other interest in
property located in the district's territory if the property interest is
necessary to the exercise of the rights or authority conferred by this

(b)  Provides that a district must exercise the power of eminent domain as
provided in Chapter 21 (Eminent Domain), Property Code.  Does not require
the district to deposit in the trial court money or a bond as provided by
Section 21.021(a) (Possession Pending Litigation), Property Code, which,
after an award in a condemnation proceeding has been made, authorizes the
condemnor to take possession of the condemned property pending the results
of further litigation under certain conditions. 

(c)  Provides that in a condemnation proceeding brought by a district, the
district is not required to pay certain costs or give certain bonds
associated with the proceeding. 

Provides that the district, in exercising the power of eminent domain, must
bear the actual costs of relocating, raising, lowering, rerouting, changing
the grade, or altering the construction to provide comparable replacement
without enhancement of a facility, after  deducting the net salvage value
derived from the old facility with respect to any of the following: 

_electric transmission and electric distribution
_telephone lines

Sec. 287.081.  PAYMENT FOR HEALTH CARE SERVICES.  (a)  Requires the
district to supply without charge to a patient residing in the district the
care and treatment the patient or relative legally responsible for the
patient's support cannot pay. 

(b)  Requires the district to adopt an application procedure to determine
eligibility for assistance that complies with Section 61.053 (Application
Procedure), Health and Safety Code, no later than the first day of each
operating year. 

(c)  Authorizes the administrator of the district to have an inquiry made
into the financial circumstances of certain individuals. 

(d)  Requires the administrator to report to the board upon finding that a
patient or relative of the patient legally responsible for the patient's
support is able to pay for all or any part of the care and treatment
provided by the district.  Requires the board, in this instance, to issue
an order directing the patient or relative to pay the district each week a
specified amount that the individual is able to pay. 

(e)  Authorizes the board to adopt a sliding-fee scale for health care
services provided to a patient who can pay for some, but not all, of the
care and treatment provided by the district.   

(f)  Authorizes a county that created and contracted with the district,
notwithstanding Section 61.036 (Determination of Eligibility for Purposes
of State Assistance), Health and Safety Code, to credit a district
expenditure for the care and treatment of a county resident qualifying for
payment on the sliding-fee scale toward eligibility for state assistance,
even if the resident does not meet eligibility standards under Chapter 61
(Indigent Health Care and Treatment Act), Health and Safety Code. 

(g)  Authorizes the administrator to collect money owed to the district
from the estate of a patient or from that of a relative who was legally
responsible for the patient's support in the manner provided by law for
collection of expenses in the last illness of a deceased person. 

(h)  Requires the board to call witnesses, hear and resolve a question, and
issue a final order if there is a dispute relating to an individual's
ability to pay, or if the administrator has any doubt with respect to this
matter.  Provides that an appeal from a final order of the board must be
made to a district court in the county where the district is located, and
the substantial evidence rule applies. 

Sec. 287.082.  REIMBURSEMENT FOR SERVICES.  (a)  Requires the board to
mandate reimbursement from a county, municipality, or public hospital
located outside the district's boundaries for the district's care and
treatment of a sick, diseased, or injured person of that service area as
provided by Chapter 61, Health and Safety Code. 

(b)  Requires the board to mandate reimbursement from the sheriff or police
chief of a county or municipality for the district's care and treatment of
a person confined in a jail  of that area who is not a resident of the

(c)  Authorizes the board to contract with the state or federal government
for those entities to reimburse the district for treatment of a sick,
diseased, or injured person. 

Sec. 287.083.  SERVICE CONTRACTS.  Authorizes the board to contract with a
municipality, county, special district, or other political subdivision of
the state or with a state or federal agency for the district to furnish a
mobile emergency medical service or provide for the investigatory or
welfare needs of inhabitants of the district. 

Sec. 287.084.  GIFTS AND ENDOWMENTS.   Authorizes the board, on behalf of
the district, to accept gifts and endowments to be held in trust for any
purpose and under any direction, limitation, or provision prescribed in
writing by the donor that is consistent with the proper management of the

Sec. 287.085.  AUTHORITY TO SUE AND BE SUED.  Authorizes the board to sue
and be sued on the district's behalf. 


Sec. 287.101.  DISSOLUTION.  Requires the district to be dissolved if the
contract with the political subdivision that created the district expires
and is not renewed. 

Sec. 287.102.  TRANSFER OF ASSETS AFTER DISSOLUTION.  (a)  Requires the
board, after the district is dissolved, to perform certain functions with
respect to district property. 

(b) Provides that if the district transfers its lands, buildings,
improvements, equipment, and other assets to a county or other governmental
entity, the county or entity assumes all debts and obligations related to
this property, and the district is dissolved. 

DISSOLUTION.  (a) Requires the board, if the district does not transfer its
property to a county or other governmental entity, to continue to control
and administer the property, debts, and assets of the district until all
funds have been exhausted and the district's debts have been paid or

(b)  Requires the district, if, after administering the property and assets
and determining that these are insufficient to pay the district's debts, to
transfer the remaining debts to the political subdivisions that created the
district in proportion to the funds contributed to the district by that

(c) Requires the board, if after administering the property and assets and
determining that unused funds remain, to transfer these funds to the
political subdivisions that created the district in proportion to the funds
contributed to the district by the subdivision. 

Sec. 287.104.  ACCOUNTING.  Requires the board, after the district has paid
all debts and disposed of all assets and funds, to provide an accounting to
each political subdivision that created and contracted with the district.
Provides that the accounting must show the manner in which the assets and
debts of the district were distributed. 


Sec. 287.121.  FISCAL YEAR.  (a)  Provides that the district operates on
the fiscal year established by the board. 

(b)  Prohibits the fiscal year from being changed if revenue bonds of the
district are outstanding or more than once in a 24-month period. 

Sec. 287.122.  ANNUAL AUDIT.  (a)  Requires the board to annually audit the
financial  condition of the district. 

(b)  Provides that a copy of the audit must be provided to each political
subdivision that created and contracted with the district. 

Sec. 287.123.  DISTRICT AUDIT AND RECORDS.  Provides that the annual audit
and other district records are open for inspection during regular business
hours and at the principal office of the district. 

Sec. 287.124.  ANNUAL BUDGET. (a)  Requires the district administrator to
prepare a proposed budget for the district. 

(b)  Provides that the budget is required to contain a complete financial
statement, including certain information regarding the district's financial

Sec. 287.125.  NOTICE; HEARING; ADOPTION OF BUDGET.  (a)  Requires the
board to hold a public hearing on the proposed annual budget. 

(b)  Requires the board to publish notice of the hearing in a newspaper of
general circulation in the district no later than the 10th day before the

(c) Entitles any resident of the district to attend and participate in the

(d)  Authorizes the board, at the conclusion of the hearing, to adopt a
budget by acting on the budget proposed by the administrator.  Authorizes
the board to make any changes in the budget that, in its judgment, the
interests of the district residents demand. 

(e)  Provides that the budget is effective only after the board adopts it.

Sec. 287.126.  AMENDING BUDGET.  Authorizes the budget to be amended on the
board's approval after its adoption. 

Sec. 287.127.  LIMITATION OF EXPENDITURES.  Prohibits money from being
spent for an expense not included in the annual budget or an amendment to

Sec. 287.128.  SWORN STATEMENT.  Requires the administrator to prepare for
the board a sworn statement of the amount of money that belongs to the
district and an account of the disbursements of that money as soon as
practicable after the close of the fiscal year. 

Sec. 287.129.  SPENDING AND INVESTMENT LIMITATIONS.  (a) Prohibits the
district from  incurring a debt payable from revenues of the district other
than those on hand or to be on hand in the current and immediately
following fiscal year of the district except for construction contracts
under Section 287.077(a), Health and Safety Code or as provided by Sections
287.142 and 287.143, Health and Safety Code. 

(b)  Authorizes the board to invest operating, depreciation, or building
reserves only in funds or securities specified by Articles 836 or 837,
V.T.C.S. (Investments and Secondary Investments, respectively). 

Sec. 287.130.  DEPOSITORY.  (a)  Requires the board to name at least one
bank to serve as a depository for district funds. 

(b)  Requires these funds, other than those invested as provided by Section
287.129(b), Health and Safety Code, and those transmitted to a bank of
payment for bonds or obligations issued or assumed by the district to be
deposited as soon as they are received with the depository bank, where they
must remain on deposit.  Provides that this subsection does not limit the
board's power to place a portion of the funds on time deposit or to
purchase certificates of deposit. 

 (c)  Provides that before the district deposits funds in a bank in an
amount that exceeds the maximum amount secured by the Federal Deposit
Insurance Corporation, the bank is required to execute a bond or other
security in an amount sufficient to secure from loss the district funds
that exceed the amount secured. 

Sec. 287.131.  AD VALOREM TAXATION.  Prohibits a district from imposing an
ad valorem tax. 


Sec. 287.141.  GENERAL OBLIGATION BONDS.  Prohibits a district from issuing
general obligation bonds. 

Sec. 287.142.  REVENUE BONDS.  (a)  Authorizes the board to issue revenue
bonds for certain purposes. 

(b)  Provides that the bonds are required to be payable from and secured by
a pledge of all or part of the revenues derived from the operation of the
district's hospital system. Authorizes the bonds to be additionally secured
by a mortgage or deed of trust lien on all or part of district property. 

(c) Provides that the bonds must be issued as provided by Sections 264.042,
264.043, 264.046, 264.047, 264.048, and 264.049, Health and Safety Code,
for issuance of revenue bonds by county hospital authorities.  These
sections are titled, respectively: Form and Procedure, Terms,  Junior Lien
Bonds; Parity Bonds, Bond Proceeds; Investment of Funds, Refunding Bonds,
and Approval and Registration of Bonds. 
Sec. 287.143.  REFUNDING BONDS.  (a)  Authorizes refunding bonds to be
issued to refund an outstanding indebtedness the district has issued or

(b)  Provides that the bonds are required to be issued as provided by
Article 717k-3, V.T.C.S. (Chapter 784, Acts of the 61st Legislature,
Regular Session, 1969) (State, County, Municipality or Political
Subdivision; Issuer of Bonds, Notes, etc.). 

(c)  Provides the refunding bonds are authorized to be sold and the
proceeds applied to the payment of outstanding debts or exchanged in whole
or part for no less than a similar principal amount of outstanding debt.
Provides if the bonds are to be sold and the proceeds applied to the
payment of outstanding debts, the bonds are required to be issued and
payments made as provided by Article 717k, V.T.C.S. (Chapter 503, Acts of
the 54th Legislature, Regular Session, 1955). 

Sec. 287.144.  INTEREST AND MATURITY.  Provides that district bonds are
required to mature no later than the 50th anniversary of the date of
issuance and bear interest at a rate not to exceed that provided by Article
717k-2, V.T.C.S. (Chapter 3, Acts of the 61st Legislature, Regular Session,
1969) (Public Insecurities; Issuance by Public Agencies; Interest Rate). 

Sec. 287.145.  EXECUTION OF BONDS.  Requires the board's president to
execute the bonds in the name of the district.  Requires the board's
secretary to countersign the bonds as provided by Article 717j-1, V.T.C.S.
(Texas Uniform Facsimile Signature of Public Officials Act). 

Sec. 287.146.  APPROVAL AND REGISTRATION OF BONDS.  (a)  Provides that
district bonds are subject to the same requirements with regard to approval
by the attorney general and registration by the comptroller of public
accounts (comptroller) as provided by law for approval and registration of
bonds issued by counties. 

(b) Provides that on approval by the attorney general and registration by
the comptroller, the bonds are incontestable for any cause. 
Sec. 287.147.  BONDS AS INVESTMENTS.  Provides that district bonds and
debts assumed by the district are legal and authorized investments for
certain individuals and entities. 

Sec. 287.148.  BONDS AS SECURITY FOR DEPOSITS.  Provides that district
bonds are eligible to secure deposits of public funds of the state and of
municipalities, counties, school districts, and other political
subdivisions of the state.  Provides that the bonds are lawful and
sufficient security for deposits to the extent of their value if
accompanied by all unmatured coupons. 

Sec. 287.149.  TAX STATUS OF BONDS.  Provides that because the district
created under this chapter is a public entity performing an essential
public function, bonds issued by the district, any transaction relating to
the bonds, and profits made in the sale of the bonds are free from state
taxes or taxation by any municipality, county, special districts, or other
political subdivision of this state. 

SECTION 2.  Effective date: September 1, 1999.

SECTION 3.  Emergency clause.