76R13138 DLF-F By Maxey, Naishtat H.B. No. 876 Substitute the following for H.B. No. 876: By Maxey C.S.H.B. No. 876 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; providing a civil penalty. 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 convert to or establish for-profit ventures, 1-14 affecting hundreds of millions of charitable dollars. As these 1-15 changes in the health care system occur, it is in the best interest 1-16 of this state to ensure that the state and the public have adequate 1-17 information to evaluate the impact of the changes on the public and 1-18 the unmet 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; or 2-9 (C) a long-term care insurance policy. 2-10 (3) "Health care provider" means an entity licensed to 2-11 provide health or long-term care. The term includes a facility 2-12 licensed under Subtitle B, Title 4, Health and Safety Code. 2-13 (4) "Mutual plan provider" means a mutual or mutual 2-14 assessment association subject to Chapter 11, 12, 13, or 14, 2-15 Insurance Code, that provides health and accident insurance, 2-16 including an entity exempt under Article 14.17, Insurance Code. 2-17 (5) "Nonprofit provider" means a health benefit plan 2-18 provider or a health care provider that is: 2-19 (A) exempt from federal income tax under Section 2-20 501(a) of the Internal Revenue Code of 1986 by being listed as an 2-21 exempt organization in Section 501(c)(3) or 501(c)(4) of the code; 2-22 (B) incorporated under the Texas Non-Profit 2-23 Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil 2-24 Statutes) or a similar law of another state; 2-25 (C) exempt from state franchise, property, and 2-26 sales taxes; or 2-27 (D) organized and operated exclusively for the 3-1 promotion of social welfare and that normally receives more than 3-2 one-third of its support in a year from private or public gifts, 3-3 grants, contributions, or membership fees. 3-4 SECTION 4. DUTIES OF NONPROFIT PROVIDER. (a) A nonprofit 3-5 provider shall comply with this Act, in accordance with the periods 3-6 established by this Act, with respect to an agreement or 3-7 transaction under which the nonprofit provider directly or 3-8 indirectly: 3-9 (1) sells, transfers, leases, exchanges, provides an 3-10 option with respect to, or otherwise disposes of assets of the 3-11 nonprofit provider in favor of a for-profit entity or a mutual plan 3-12 provider; 3-13 (2) restructures as or converts to a for-profit entity 3-14 or a mutual plan provider; 3-15 (3) transfers control, responsibility, or governance 3-16 of the assets, operations, or business of the nonprofit provider in 3-17 favor of a for-profit entity or a mutual plan provider; or 3-18 (4) closes a facility operated by the nonprofit 3-19 provider or dissolves. 3-20 (b) Subsection (a)(1) or (2) of this section applies only 3-21 if: 3-22 (1) the fair market value of the assets of the 3-23 nonprofit provider involved in the proposed agreement or 3-24 transaction is at least 30 percent of the value of the total assets 3-25 of the nonprofit provider; or 3-26 (2) the fair market value of the assets of the 3-27 nonprofit provider involved in the proposed agreement or 4-1 transaction, when added to the fair market value of all assets of 4-2 the nonprofit provider that have been subject to a previous 4-3 agreement or transaction described by Subsection (a)(1), (2), or 4-4 (3) of this section that has been made during the two-year period 4-5 before the date on which the proposed agreement or transaction 4-6 becomes effective, is at least 35 percent of the value of the total 4-7 assets of the nonprofit provider. 4-8 (c) Subsection (a)(3) of this section applies only if: 4-9 (1) the fair market value of the assets of the 4-10 nonprofit provider with respect to which control, responsibility, 4-11 or governance would be transferred under the proposed agreement or 4-12 transaction is at least 30 percent of the value of the total assets 4-13 of the nonprofit provider; 4-14 (2) the fair market value of the assets of the 4-15 nonprofit provider with respect to which control, responsibility, 4-16 or governance would be transferred under the proposed agreement or 4-17 transaction, when added to the fair market value of all assets of 4-18 the nonprofit provider that have been subject to a previous 4-19 agreement or transaction described by Subsection (a)(1), (2), or 4-20 (3) of this section that has been made during the two-year period 4-21 before the date on which the proposed agreement or transaction 4-22 becomes effective, is at least 35 percent of the value of the total 4-23 assets of the nonprofit provider; 4-24 (3) the gross revenues associated with business or 4-25 operations of the nonprofit provider with respect to which control, 4-26 responsibility, or governance would be transferred under the 4-27 proposed agreement or transaction is at least 30 percent of the 5-1 value of the gross revenues associated with all of the business or 5-2 operations of the nonprofit provider; or 5-3 (4) the gross revenues associated with business or 5-4 operations of the nonprofit provider with respect to which control, 5-5 responsibility, or governance would be transferred under the 5-6 proposed agreement or transaction, when added to the gross revenues 5-7 associated with the business or operations with respect to which 5-8 control, responsibility, or governance has been transferred under a 5-9 previous agreement or transaction described by Subsection (a)(3) of 5-10 this section that has been made during the two-year period before 5-11 the date on which the proposed agreement or transaction becomes 5-12 effective, is at least 35 percent of the value of the gross 5-13 revenues associated with all of the business or operations of the 5-14 nonprofit provider. 5-15 (d) For purposes of applying Subsection (b) or (c)(1) or (2) 5-16 of this section: 5-17 (1) the fair market value of assets of a nonprofit 5-18 provider involved in a previous agreement or transaction is 5-19 determined as of the time the previous agreement or transaction 5-20 became effective; and 5-21 (2) the fair market value of the total assets of the 5-22 nonprofit provider is determined as of the time the proposed 5-23 agreement or transaction would become effective. 5-24 (e) For purposes of applying Subsection (c)(3) or (4) of 5-25 this section: 5-26 (1) the gross revenues associated with the business or 5-27 operations of a nonprofit provider with respect to which control, 6-1 responsibility, or governance has been transferred under a previous 6-2 agreement or transaction are determined as of the time the previous 6-3 agreement or transaction became effective; and 6-4 (2) the value of the gross revenues associated with 6-5 all of the business or operations of the nonprofit provider is 6-6 determined as of the time the proposed agreement or transaction 6-7 would become effective. 6-8 (f) If a nonprofit provider is a health care system that 6-9 owns or operates more than one licensed hospital, each separately 6-10 licensed hospital is a nonprofit provider for purposes of applying 6-11 this section and, for purposes of applying Subsections (b), (c), 6-12 (d), and (e) of this section, only the assets and business or 6-13 operations of the separately licensed hospital shall be considered. 6-14 SECTION 5. NOTICE OF AGREEMENT OR TRANSACTION. (a) A 6-15 nonprofit provider that signs a letter of intent or another 6-16 document evidencing the intent to enter into an agreement or 6-17 transaction described by Section 4 of this Act shall notify the 6-18 attorney general and shall publish notice in accordance with 6-19 Section 6 of this Act. 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 document 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) The nonprofit provider shall notify the attorney general 8-2 of a material change in the agreement or transaction or the 8-3 information required by Subsection (c) of this section not later 8-4 than the 30th day before the date the agreement or transaction 8-5 becomes effective. The attorney general may waive the requirement 8-6 that the notice be provided within the time required by this 8-7 subsection if the attorney general finds the waiver is appropriate. 8-8 (e) The notice submitted to the attorney general under this 8-9 section and the materials submitted with the notice are public 8-10 information. The attorney general shall make the information 8-11 available as required by Chapter 552, Government Code. On the 8-12 request of any person, the nonprofit provider shall make the 8-13 information available at the business office of the nonprofit 8-14 provider, the address of which is required to be published under 8-15 Section 6 of this Act. 8-16 SECTION 6. PUBLICATION OF NOTICE. (a) The published notice 8-17 required by Section 5(a) of this Act must state: 8-18 (1) that the nonprofit provider intends to enter into 8-19 an agreement or transaction that is subject to this Act; 8-20 (2) the address of the business office of the 8-21 nonprofit provider in the nonprofit provider's publication area; 8-22 and 8-23 (3) that more detailed information concerning the 8-24 proposed agreement or transaction as described by Section 5 of this 8-25 Act is available at the business office. 8-26 (b) Not later than the 90th day before the date the 8-27 agreement or transaction is to become effective, the notice must be 9-1 published in the Texas Register and at least once in a newspaper of 9-2 general circulation in the nonprofit provider's publication area. 9-3 (c) If the nonprofit provider's publication area includes 9-4 more than one county, the nonprofit provider must send the notice 9-5 to a newspaper of general circulation in each county included in 9-6 the publication area. If a newspaper of general circulation does 9-7 not exist in such a county, the nonprofit provider shall send the 9-8 notice to the county commissioners court of that county. The 9-9 county commissioners court may post the notice as it finds 9-10 appropriate. 9-11 (d) For purposes of this section, the nonprofit provider's 9-12 publication area is: 9-13 (1) each county in which a facility that is operated 9-14 by the nonprofit provider and that is affected by an agreement or 9-15 transaction described by Section 4 of this Act is located; 9-16 (2) if different from the county described in 9-17 Subdivision (1) of this subsection, the county in which the 9-18 principal executive office of the provider is located; and 9-19 (3) each county that is contiguous to a county 9-20 described by Subdivision (1) of this subsection. 9-21 SECTION 7. ENFORCEMENT BY ATTORNEY GENERAL'S OFFICE. (a) 9-22 The attorney general may bring an action in a district court of 9-23 Travis County for: 9-24 (1) a temporary restraining order, a temporary 9-25 injunction, or a permanent injunction to prevent a nonprofit 9-26 provider from entering into an agreement or transaction described 9-27 by Section 4 of this Act in violation of this Act; 10-1 (2) a civil penalty in an amount not to exceed $10,000 10-2 for each day of a continuing violation of this Act; or 10-3 (3) any other appropriate relief authorized under a 10-4 statute or the common law. 10-5 (b) In an action brought under this section in which the 10-6 attorney general prevails, the court may award to the attorney 10-7 general the costs of the suit and attorney's fees. 10-8 SECTION 8. EFFECTIVE DATE. This Act takes effect September 10-9 1, 1999. 10-10 SECTION 9. TRANSITION. (a) This Act applies only to: 10-11 (1) an agreement described by Section 4 of this Act 10-12 that is entered into on or after September 1, 1999; or 10-13 (2) a transaction described by Section 4 of this Act 10-14 that is made pursuant to an agreement entered into on or after 10-15 September 1, 1999. 10-16 (b) An agreement described by Section 4 of this Act that is 10-17 entered into before September 1, 1999, and a transaction described 10-18 by Section 4 of this Act that is made pursuant to an agreement 10-19 entered into before September 1, 1999, are governed by the law as 10-20 it existed immediately before the effective date of this Act, and 10-21 that law is continued in effect for that purpose. 10-22 SECTION 10. EMERGENCY. The importance of this legislation 10-23 and the crowded condition of the calendars in both houses create an 10-24 emergency and an imperative public necessity that the 10-25 constitutional rule requiring bills to be read on three several 10-26 days in each house be suspended, and this rule is hereby suspended.