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 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 establish new ventures, affecting hundreds of
1-14     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 these health care assets, which are impressed with a
1-17     constructive charitable trust for health care purposes, continue to
1-18     serve the public and 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)  "Charitable health care organization" means an
1-23     organization that is:
1-24                       (A)  exempt from federal income tax under Section
 2-1     501(a) of the Internal Revenue Code of 1986 by being listed as an
 2-2     exempt organization in Section 501(c)(3) of the code; and
 2-3                       (B)  dedicated to:
 2-4                             (i)  serving unmet health care needs in
 2-5     this state, particularly the health care needs of low-income
 2-6     uninsured and underserved populations; and
 2-7                             (ii)  promoting access to health care and
 2-8     improving the quality of health care.
 2-9                 (2)  "For-profit entity" means a business entity that
2-10     is not a mutual plan provider or a nonprofit provider.
2-11                 (3)  "Health benefit plan provider" means an insurer,
2-12     group hospital service corporation, health maintenance
2-13     organization, or other entity that issues:
2-14                       (A)  an individual, group, blanket, or franchise
2-15     insurance policy, insurance agreement, or group hospital service
2-16     contract that provides benefits for medical or surgical expenses
2-17     incurred as a result of an accident or sickness;
2-18                       (B)  an evidence of coverage or group subscriber
2-19     contract; or
2-20                       (C)  a long-term care insurance policy.
2-21                 (4)  "Health care provider" means an entity licensed to
2-22     provide health or long-term care.  The term includes a facility
2-23     licensed under Subtitle B, Title 4, Health and Safety Code.
2-24                 (5)  "Mutual plan provider" means a mutual or mutual
2-25     assessment association subject to Chapter 11, 12, 13, or 14,
2-26     Insurance Code, that provides health and accident insurance,
2-27     including any entity exempt under Article 14.17, Insurance Code.
 3-1                 (6)  "Nonprofit provider" means a health benefit plan
 3-2     provider or a health care provider that is:
 3-3                       (A)  exempt from federal income tax under Section
 3-4     501(a) of the Internal Revenue Code of 1986 by being listed as an
 3-5     exempt organization in Section 501(c)(3) or 501(c)(4) of the code;
 3-6                       (B)  incorporated under the Texas Non-Profit
 3-7     Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil
 3-8     Statutes) or a similar law of another state;
 3-9                       (C)  exempt from state franchise, property, and
3-10     sales taxes; or
3-11                       (D)  organized and operated exclusively for the
3-12     promotion of social welfare and that normally receives more than
3-13     one-third of its support in a year from private or public gifts,
3-14     grants, contributions, or membership fees.
3-15           SECTION 4.  DUTIES OF NONPROFIT PROVIDER.  (a)  A nonprofit
3-16     provider shall comply with this Act, in accordance with the periods
3-17     established by this Act, with respect to an agreement or
3-18     transaction under which the nonprofit provider directly or
3-19     indirectly:
3-20                 (1)  sells, transfers, leases, exchanges, provides an
3-21     option with respect to, or otherwise disposes of assets of the
3-22     nonprofit provider in favor of another nonprofit provider, a
3-23     for-profit entity, or a mutual plan provider;
3-24                 (2)  restructures as or converts to another nonprofit
3-25     provider, a for-profit entity, or a mutual plan provider;
3-26                 (3)  transfers control, responsibility, or governance
3-27     of the assets, operations, or business of the nonprofit provider in
 4-1     favor of another nonprofit provider, a for-profit entity, or a
 4-2     mutual plan provider; or
 4-3                 (4)  closes a licensed facility operated by the
 4-4     nonprofit provider or dissolves.
 4-5           (b)  Subsection (a)(1) or (2) of this section applies only
 4-6     if:
 4-7                 (1)  the fair market value of the assets of the
 4-8     nonprofit provider involved in the proposed agreement or
 4-9     transaction is at least 30 percent of the value of the total assets
4-10     of the nonprofit provider; or
4-11                 (2)  the fair market value of the assets of the
4-12     nonprofit provider involved in the proposed agreement or
4-13     transaction, when added to the fair market value of all assets of
4-14     the nonprofit provider that have been subject to a previous
4-15     agreement or transaction described by Subsection (a)(1), (2), or
4-16     (3) of this section that has been made during the two-year period
4-17     before the date on which the proposed agreement or transaction
4-18     becomes effective, is at least 35 percent of the value of the total
4-19     assets of the nonprofit provider.
4-20           (c)  Subsection (a)(3) of this section applies only if:
4-21                 (1)  the fair market value of the assets of the
4-22     nonprofit provider with respect to which control, responsibility,
4-23     or governance would be transferred under the proposed agreement or
4-24     transaction, is at least 30 percent of the value of the total
4-25     assets of the nonprofit provider;
4-26                 (2)  the fair market value of the assets of the
4-27     nonprofit provider with respect to which control, responsibility,
 5-1     or governance would be transferred under the proposed agreement or
 5-2     transaction, when added to the fair market value of all assets of
 5-3     the nonprofit provider that have been subject to a previous
 5-4     agreement or transaction described by Subsection (a)(1), (2), or
 5-5     (3) of this section that has been made during the two-year period
 5-6     before the date on which the proposed agreement or transaction
 5-7     becomes effective, is at least 35 percent of the value of the total
 5-8     assets of the nonprofit provider;
 5-9                 (3)  the gross revenues associated with business or
5-10     operations of the nonprofit provider with respect to which control,
5-11     responsibility, or governance would be transferred under the
5-12     proposed agreement or transaction is at least 30 percent of the
5-13     value of the gross revenues associated with all of the business or
5-14     operations of the nonprofit provider; or
5-15                 (4)  the gross revenues associated with business or
5-16     operations of the nonprofit provider with respect to which control,
5-17     responsibility, or governance would be transferred under the
5-18     proposed agreement or transaction, when added to the gross revenues
5-19     associated with the business or operations with respect to which
5-20     control, responsibility, or governance has been transferred under a
5-21     previous agreement or transaction described by Subsection (a)(3) of
5-22     this section that has been made during the two-year period before
5-23     the date on which the proposed agreement or transaction becomes
5-24     effective, is at least 35 percent of the value of the gross
5-25     revenues associated with all of the business or operations of the
5-26     nonprofit provider.
5-27           (d)  For purposes of applying Subsection (b) or (c)(1) or (2)
 6-1     of this section:
 6-2                 (1)  the fair market value of assets of a nonprofit
 6-3     provider involved in a previous agreement or transaction is
 6-4     determined as of the time the previous agreement or transaction
 6-5     became effective; and
 6-6                 (2)  the fair market value of the total assets of the
 6-7     nonprofit provider is determined as of the time the proposed
 6-8     agreement or transaction would become effective.
 6-9           (e)  For purposes of applying Subsection (c)(3) or (4) of
6-10     this section:
6-11                 (1)  the gross revenues associated with the business or
6-12     operations of a nonprofit provider with respect to which control,
6-13     responsibility, or governance has been transferred under a previous
6-14     agreement or transaction are determined as of the time the previous
6-15     agreement or transaction became effective; and
6-16                 (2)  the value of the gross revenues associated with
6-17     all of the business or operations of the nonprofit provider is
6-18     determined as of the time the proposed agreement or transaction
6-19     would become effective.
6-20           (f)  If a nonprofit provider is a health care system that
6-21     owns or operates more than one licensed hospital, each separately
6-22     licensed hospital is a nonprofit provider for purposes of applying
6-23     this section and, for purposes of applying Subsections (b), (c),
6-24     (d), and (e) of this section, only the assets and business or
6-25     operations of the separately licensed hospital shall be considered.
6-26           SECTION 5.  CHARITABLE HEALTH CARE ASSETS. (a)  Except as
6-27     provided by Subsection (b) of this section,  a nonprofit provider
 7-1     that enters into an agreement or transaction described by Section 4
 7-2     of this Act shall:
 7-3                 (1)  establish the fair market value of the assets of
 7-4     the nonprofit provider; and
 7-5                 (2)  request an appraisal from the chief appraiser or
 7-6     appraisers of the appraisal district or districts in which the
 7-7     nonprofit provider's property is located.
 7-8           (b)  A nonprofit provider that enters into an agreement or
 7-9     transaction  described by Section 4 of this Act with another
7-10     nonprofit provider is not required to request an appraisal from the
7-11     chief appraiser or appraisers of the appraisal district or
7-12     districts in which the nonprofit provider's property is located.
7-13           (c)  An assessor who is not an employee of the nonprofit
7-14     provider and who is otherwise independent of the nonprofit provider
7-15     and of the other nonprofit provider, the for-profit entity, or the
7-16     mutual plan provider with which the agreement or transaction is
7-17     being made  shall determine the fair market value of the charitable
7-18     health care assets.  In determining the fair market value, the
7-19     assessor shall consider market value, investment or earnings value,
7-20     net asset value, and a control premium, if any. The nonprofit
7-21     provider shall pay for the assessment conducted under this
7-22     subsection.
7-23           SECTION 6.  NOTICE OF AGREEMENT OR TRANSACTION.  (a)  A
7-24     nonprofit provider that signs a letter of intent or another
7-25     document evidencing the intent to enter into an agreement or
7-26     transaction described by Section 4 of this Act shall notify the
7-27     attorney general and shall publish notice in accordance with
 8-1     Section 7 of this Act.
 8-2           (b)  The notice to the attorney general must:
 8-3                 (1)  be made in writing not later than the earlier of:
 8-4                       (A)  the fifth day after the date the letter of
 8-5     intent or other document is signed; or
 8-6                       (B)  the 90th day before the date on which the
 8-7     agreement or transaction is to become effective; and
 8-8                 (2)  disclose the conditions under which the agreement
 8-9     or transaction will be made according to the best information
8-10     available to the nonprofit provider.
8-11           (c)  The notice provided to the attorney general under
8-12     Subsection (b) of this section must state:
8-13                 (1)  the identity of the nonprofit provider and any
8-14     nonprofit entity that owns or controls the nonprofit provider;
8-15                 (2)  the identity of the other nonprofit provider, the
8-16     for-profit entity, or the mutual plan provider with which the
8-17     proposed agreement or transaction is to be made;
8-18                 (3)  the identity of any other party to the proposed
8-19     agreement or transaction;
8-20                 (4)  the terms of the proposed agreement or
8-21     transaction;
8-22                 (5)  the value of consideration to be provided in
8-23     connection with the proposed agreement or transaction and the basis
8-24     on which this valuation is made;
8-25                 (6)  the value of the local appraisal of the nonprofit
8-26     provider's property, if requested under Section 5(a) of this Act;
8-27                 (7)  the identity of any individual or entity who is an
 9-1     officer, director, or affiliate of the nonprofit provider and a
 9-2     statement as to whether each named individual or entity:
 9-3                       (A)  has been promised future employment as a
 9-4     result of the proposed agreement or transaction;
 9-5                       (B)  has been a party to discussions relating to
 9-6     future employment as a result of the proposed agreement or
 9-7     transaction; or
 9-8                       (C)  has any other direct or indirect economic
 9-9     interest in the proposed agreement or transaction; and
9-10                 (8)  the date on which the proposed agreement or
9-11     transaction is to become effective.
9-12           (d)  The nonprofit provider shall notify the attorney general
9-13     of a material change in the agreement or transaction  or the
9-14     information required by Subsection (c) of this section not later
9-15     than the 30th day before the date the agreement or transaction
9-16     becomes effective.  The attorney general may waive the requirement
9-17     that the notice be provided within the time required by this
9-18     subsection if the attorney general finds the waiver is appropriate.
9-19           (e)  The information submitted to the attorney general under
9-20     Subsections (c)(1), (2), (3), and (6) of this section is public
9-21     information.  The attorney general shall make the information
9-22     described by this subsection available as required by Chapter 552,
9-23     Government Code.  On the request of any person, the nonprofit
9-24     provider shall make the information described by this subsection
9-25     available at the business office of the nonprofit provider the
9-26     address of which is required to be published under Section 7 of
9-27     this Act.
 10-1          SECTION 7. PUBLICATION OF NOTICE. (a)  The published notice
 10-2    required by Section 6(a) of this Act must state:
 10-3                (1)  that the nonprofit provider intends to enter into
 10-4    an agreement or transaction that is subject to this Act;
 10-5                (2)  the address of the business office of the
 10-6    nonprofit provider in the nonprofit provider's publication area;
 10-7    and
 10-8                (3)  that more detailed information concerning the
 10-9    proposed agreement or transaction as described by Section 6 of this
10-10    Act is available at the business office.
10-11          (b)  Not later than the 90th day before the date the
10-12    agreement or transaction is to become effective, the notice must be
10-13    published in the Texas Register and at least once in a newspaper of
10-14    general circulation in the nonprofit provider's publication area.
10-15          (c)  If the nonprofit provider's publication area includes
10-16    more than one county, the nonprofit provider must send the notice
10-17    to a newspaper of general circulation in each county included in
10-18    the publication area. If a newspaper of general circulation does
10-19    not exist in a county in which publication is required, the
10-20    nonprofit provider shall send the notice to the commissioners court
10-21    of that county.  The commissioners court may post the notice as it
10-22    finds appropriate.
10-23          (d)  For purposes of this section, the nonprofit provider's
10-24    publication area is:
10-25                (1)  each county in which a licensed facility that is
10-26    operated by the nonprofit provider and that is affected by an
10-27    agreement or transaction described by Section 4 of this Act is
 11-1    located;
 11-2                (2)  if different from the county described in
 11-3    Subdivision (1) of this subsection, the county in which the
 11-4    principal executive office of the provider is located; and
 11-5                (3)  each county that is contiguous to a county
 11-6    described by Subdivision (1) of this subsection.
 11-7          SECTION 8.  PUBLIC MEETING.  (a)  Except as provided by
 11-8    Subsection (d) of this section, not later than the 45th day after
 11-9    the date the attorney general receives the notice under Section 6
11-10    of this Act, the nonprofit provider shall:
11-11                (1)  solicit written public comment; and
11-12                (2)  hold at least one public meeting to obtain public
11-13    comment in the publication area of the nonprofit provider, as
11-14    determined under Section 7 of this Act.
11-15          (b)  Not later than the 21st day before the date of the
11-16    public meeting, the nonprofit provider shall:
11-17                (1)  publish notice of the request for written comment
11-18    and of the time and place of the meeting; and
11-19                (2)  notify the commissioners court in each county in
11-20    the publication area of the nonprofit provider, as determined under
11-21    Section 7 of this Act, of the request for written comment and of
11-22    the time and place of the meeting.
11-23          (c)  The notice provided under Subsection (b)(1) of this
11-24    section must state the address of the business office of the
11-25    nonprofit provider in the nonprofit provider's publication area, as
11-26    determined under Section 7 of this Act, and must state that more
11-27    detailed information concerning the proposed agreement or
 12-1    transaction is available at the business office.
 12-2          (d)  A nonprofit provider that enters into an agreement or
 12-3    transaction described by Section 4 of this Act with another
 12-4    nonprofit provider that is located in the same publication area, as
 12-5    determined under Section 7 of this Act, is not required to hold a
 12-6    public meeting under Subsection (a)(2) of this section.
 12-7          SECTION 9.  ENFORCEMENT BY ATTORNEY GENERAL'S OFFICE.  (a)
 12-8    The attorney general may bring an action in a district court of
 12-9    Travis County for:
12-10                (1)  a temporary restraining order, a temporary
12-11    injunction, or a permanent injunction to prevent a nonprofit
12-12    provider from entering into an agreement or transaction described
12-13    by Section 4 of this Act in violation of this Act;
12-14                (2)  a civil penalty in an amount not to exceed $10,000
12-15    for each day of a continuing violation of this Act; or
12-16                (3)  any other appropriate relief authorized under a
12-17    statute or the common law.
12-18          (b)  In an action brought under this section in which the
12-19    attorney general prevails, the court may award to the attorney
12-20    general the costs of the suit and attorney's fees.
12-21          SECTION 10.  EFFECTIVE DATE.  This Act takes effect September
12-22    1, 2001.
12-23          SECTION 11.  TRANSITION.  (a)  This Act applies only to:
12-24                (1)  an agreement described by Section 4 of this Act
12-25    that is entered into on or after September 1, 2001; or
12-26                (2)  a transaction described by Section 4 of this Act
12-27    that  is made pursuant to an agreement entered into on or after
 13-1    September 1, 2001.
 13-2          (b)  An agreement described by Section 4 of this Act that is
 13-3    entered into before September 1, 2001, and a transaction described
 13-4    by Section 4 of this Act that is made pursuant to an agreement
 13-5    entered into before September 1, 2001, are governed by the law as
 13-6    it existed immediately before the effective date of this Act, and
 13-7    that law is continued in effect for that purpose.
         _______________________________     _______________________________
             President of the Senate              Speaker of the House
               I certify that H.B. No. 393 was passed by the House on May 5,
         2001, by a non-record vote; that the House refused to concur in
         Senate amendments to H.B. No. 393 on May 24, 2001, and requested
         the appointment of a conference committee to consider the
         differences between the two houses; and that the House adopted the
         conference committee report on H.B. No. 393 on May 27, 2001, by a
         non-record vote.
                                             _______________________________
                                                 Chief Clerk of the House
               I certify that H.B. No. 393 was passed by the Senate, with
         amendments, on May 16, 2001, by a viva-voce vote; at the request of
         the House, the Senate appointed a conference committee to consider
         the differences between the two houses; and that the Senate adopted
         the conference committee report on H.B. No. 393 on May 27, 2001, by
         a viva-voce vote.
                                             _______________________________
                                                 Secretary of the Senate
         APPROVED:  __________________________
                              Date
                    __________________________
                            Governor