By Maxey H.B. No. 876
76R3435 DLF-D
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 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, a nonprofit provider's
9-12 publication area is:
9-13 (1) the county in which the provider maintains its
9-14 registered agent;
9-15 (2) if different from the county described in
9-16 Subdivision (1) of this subsection, the county in which the
9-17 principal executive office of the provider is located;
9-18 (3) each county that is contiguous to a county
9-19 described by Subdivisions (1) or (2) of this subsection; and
9-20 (4) each county not described by Subdivision (1), (2),
9-21 or (3) of this subsection in which the provider maintains an
9-22 office.
9-23 SECTION 7. ENFORCEMENT BY ATTORNEY GENERAL'S OFFICE. (a)
9-24 The attorney general may bring an action in a district court of
9-25 Travis County for:
9-26 (1) a temporary restraining order, a temporary
9-27 injunction, or a permanent injunction to prevent a nonprofit
10-1 provider from entering into an agreement or transaction described
10-2 by Section 4 of this Act in violation of this Act;
10-3 (2) a civil penalty in an amount not to exceed $10,000
10-4 for each day of a continuing violation of this Act; or
10-5 (3) any other appropriate relief authorized under a
10-6 statute or the common law.
10-7 (b) In an action brought under this section in which the
10-8 attorney general prevails, the court may award to the attorney
10-9 general the costs of the suit and attorney's fees.
10-10 SECTION 8. EFFECTIVE DATE. This Act takes effect September
10-11 1, 1999.
10-12 SECTION 9. TRANSITION. (a) This Act applies only to:
10-13 (1) an agreement described by Section 4 of this Act
10-14 that is entered into on or after September 1, 1999; or
10-15 (2) a transaction described by Section 4 of this Act
10-16 that is made pursuant to an agreement entered into on or after
10-17 September 1, 1999.
10-18 (b) An agreement described by Section 4 of this Act that is
10-19 entered into before September 1, 1999, and a transaction described
10-20 by Section 4 of this Act that is made pursuant to an agreement
10-21 entered into before September 1, 1999, are governed by the law as
10-22 it existed immediately before the effective date of this Act, and
10-23 that law is continued in effect for that purpose.
10-24 SECTION 10. EMERGENCY. The importance of this legislation
10-25 and the crowded condition of the calendars in both houses create an
10-26 emergency and an imperative public necessity that the
10-27 constitutional rule requiring bills to be read on three several
11-1 days in each house be suspended, and this rule is hereby suspended.