77R13959 DLF-F
By Maxey, Kitchen H.B. No. 393
Substitute the following for H.B. No. 393:
By Maxey C.S.H.B. No. 393
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 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 facility operated by the nonprofit
4-4 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) Subject to Subsections (f), (g), and (h) of this
7-14 section, the charitable health care assets resulting from an
7-15 agreement or transaction described by Section 4 of this Act must be
7-16 irrevocably dedicated to a charitable health care purpose and
7-17 distributed to an existing or newly created charitable health care
7-18 organization that will operate in the service area of the nonprofit
7-19 provider and that is designated to receive the distributions.
7-20 (d) An assessor who is not an employee of the nonprofit
7-21 provider and who is otherwise independent of the nonprofit provider
7-22 and of the other nonprofit provider, the for-profit entity, or the
7-23 mutual plan provider with which the agreement or transaction is
7-24 being made shall determine the fair market value of the charitable
7-25 health care assets. In determining the fair market value, the
7-26 assessor shall consider market value, investment or earnings value,
7-27 net asset value, and a control premium, if any. The nonprofit
8-1 provider shall pay for the assessment conducted under this
8-2 subsection.
8-3 (e) A portion of the consideration conveyed to the
8-4 charitable health care organization may consist of stock of a
8-5 for-profit entity that is a party to the agreement or transaction.
8-6 Stock conveyed to the charitable health care organization in
8-7 accordance with this subsection may not be subject to any
8-8 requirements relating to the sale or transfer of the stock by the
8-9 charitable health care organization, except to the extent required
8-10 by federal law. In addition, the agreement or transaction may not
8-11 place unreasonable requirements on the sale or transfer of the
8-12 stock that would adversely affect the value of the stock.
8-13 (f) The charitable health care assets may be used to satisfy
8-14 a debt or similar obligation of the nonprofit provider that exists
8-15 at the time the agreement or transaction becomes effective.
8-16 (g) In a case in which only a portion of the assets or
8-17 operations or business of a nonprofit provider is subject to an
8-18 agreement or transaction described by Section 4 of this Act, the
8-19 nonprofit provider is not required to distribute the charitable
8-20 health care assets and may satisfy the requirements of this Act
8-21 through continued use of the assets by the nonprofit provider,
8-22 provided that the assets are dedicated to a charitable health care
8-23 purpose in the nonprofit provider's service area.
8-24 (h) In a case in which there is an affiliated nonprofit
8-25 provider in the service area of the nonprofit provider that can
8-26 satisfy the requirements of this Act, the nonprofit provider is not
8-27 required to distribute the charitable health care assets and may
9-1 satisfy the requirements of this Act through continued use of the
9-2 assets by the affiliated nonprofit provider, provided that the
9-3 assets are dedicated to a charitable health care purpose in the
9-4 nonprofit provider's service area. For purposes of this subsection,
9-5 nonprofit providers are affiliated nonprofit providers if they
9-6 share common governance.
9-7 SECTION 6. NOTICE OF AGREEMENT OR TRANSACTION. (a) A
9-8 nonprofit provider that signs a letter of intent or another
9-9 document evidencing the intent to enter into an agreement or
9-10 transaction described by Section 4 of this Act shall notify the
9-11 attorney general and shall publish notice in accordance with
9-12 Section 7 of this Act.
9-13 (b) The notice to the attorney general must:
9-14 (1) be made in writing not later than the earlier of:
9-15 (A) the fifth day after the date the letter of
9-16 intent or other document is signed; or
9-17 (B) the 90th day before the date on which the
9-18 agreement or transaction is to become effective; and
9-19 (2) disclose the conditions under which the agreement
9-20 or transaction will be made according to the best information
9-21 available to the nonprofit provider.
9-22 (c) The notice provided to the attorney general under
9-23 Subsection (b) of this section must state:
9-24 (1) the identity of the nonprofit provider and any
9-25 nonprofit entity that owns or controls the nonprofit provider;
9-26 (2) the identity of the other nonprofit provider, the
9-27 for-profit entity, or the mutual plan provider with which the
10-1 proposed agreement or transaction is to be made;
10-2 (3) the identity of any other party to the proposed
10-3 agreement or transaction;
10-4 (4) the terms of the proposed agreement or
10-5 transaction;
10-6 (5) the value of consideration to be provided in
10-7 connection with the proposed agreement or transaction and the basis
10-8 on which this valuation is made;
10-9 (6) the value of the local appraisal of the nonprofit
10-10 provider's property, if requested under Section 5(a) of this Act;
10-11 (7) the identity of any individual or entity who is an
10-12 officer, director, or affiliate of the nonprofit provider and a
10-13 statement as to whether each named individual or entity:
10-14 (A) has been promised future employment as a
10-15 result of the proposed agreement or transaction;
10-16 (B) has been a party to discussions relating to
10-17 future employment as a result of the proposed agreement or
10-18 transaction; or
10-19 (C) has any other direct or indirect economic
10-20 interest in the proposed agreement or transaction; and
10-21 (8) the date on which the proposed agreement or
10-22 transaction is to become effective.
10-23 (d) The nonprofit provider shall notify the attorney general
10-24 of a material change in the agreement or transaction or the
10-25 information required by Subsection (c) of this section not later
10-26 than the 30th day before the date the agreement or transaction
10-27 becomes effective. The attorney general may waive the requirement
11-1 that the notice be provided within the time required by this
11-2 subsection if the attorney general finds the waiver is appropriate.
11-3 (e) The information submitted to the attorney general under
11-4 Subsections (c)(1), (2), (3), and (6) of this section and the
11-5 materials submitted with the notice are public information. The
11-6 attorney general shall make the information described by this
11-7 subsection available as required by Chapter 552, Government Code.
11-8 On the request of any person, the nonprofit provider shall make the
11-9 information described by Subsection (e) of this section available
11-10 at the business office of the nonprofit provider the address of
11-11 which is required to be published under Section 7 of this Act.
11-12 SECTION 7. PUBLICATION OF NOTICE. (a) The published notice
11-13 required by Section 6(a) of this Act must state:
11-14 (1) that the nonprofit provider intends to enter into
11-15 an agreement or transaction that is subject to this Act;
11-16 (2) the address of the business office of the
11-17 nonprofit provider in the nonprofit provider's publication area;
11-18 and
11-19 (3) that more detailed information concerning the
11-20 proposed agreement or transaction as described by Section 6 of this
11-21 Act is available at the business office.
11-22 (b) Not later than the 90th day before the date the
11-23 agreement or transaction is to become effective, the notice must be
11-24 published in the Texas Register and at least once in a newspaper of
11-25 general circulation in the nonprofit provider's publication area.
11-26 (c) If the nonprofit provider's publication area includes
11-27 more than one county, the nonprofit provider must send the notice
12-1 to a newspaper of general circulation in each county included in
12-2 the publication area. If a newspaper of general circulation does
12-3 not exist in a county in which publication is required, the
12-4 nonprofit provider shall send the notice to the commissioners court
12-5 of that county. The commissioners court may post the notice as it
12-6 finds appropriate.
12-7 (d) For purposes of this section, the nonprofit provider's
12-8 publication area is:
12-9 (1) each county in which a facility that is operated
12-10 by the nonprofit provider and that is affected by an agreement or
12-11 transaction described by Section 4 of this Act is located;
12-12 (2) if different from the county described in
12-13 Subdivision (1) of this subsection, the county in which the
12-14 principal executive office of the provider is located; and
12-15 (3) each county that is contiguous to a county
12-16 described by Subdivision (1) of this subsection.
12-17 SECTION 8. PUBLIC MEETING. (a) Except as provided by
12-18 Subsection (d) of this section, not later than the 45th day after
12-19 the date the attorney general receives the notice under Section 6
12-20 of this Act, the nonprofit provider shall:
12-21 (1) solicit written public comment; and
12-22 (2) hold at least one public meeting to obtain public
12-23 comment in the publication area of the nonprofit provider, as
12-24 determined under Section 7 of this Act.
12-25 (b) Not later than the 21st day before the date of the
12-26 public meeting, the nonprofit provider shall:
12-27 (1) publish notice of the request for written comment
13-1 and of the time and place of the meeting; and
13-2 (2) notify the commissioners court in each county in
13-3 the publication area of the nonprofit provider, as determined under
13-4 Section 7 of this Act, of the request for written comment and of
13-5 the time and place of the meeting.
13-6 (c) The notice provided under Subsection (b)(1) of this
13-7 section must state the address of the business office of the
13-8 nonprofit provider in the nonprofit provider's publication area, as
13-9 determined under Section 7 of this Act, and must state that more
13-10 detailed information concerning the proposed agreement or
13-11 transaction is available at the business office.
13-12 (d) A nonprofit provider that enters into an agreement or
13-13 transaction described by Section 4 of this Act with another
13-14 nonprofit provider that is located in the same publication area, as
13-15 determined under Section 7 of this Act, is not required to hold a
13-16 public meeting under Subsection (a)(2) of this section.
13-17 SECTION 9. ENFORCEMENT BY ATTORNEY GENERAL'S OFFICE. (a)
13-18 The attorney general may bring an action in a district court of
13-19 Travis County for:
13-20 (1) a temporary restraining order, a temporary
13-21 injunction, or a permanent injunction to prevent a nonprofit
13-22 provider from entering into an agreement or transaction described
13-23 by Section 4 of this Act in violation of this Act;
13-24 (2) a civil penalty in an amount not to exceed $10,000
13-25 for each day of a continuing violation of this Act; or
13-26 (3) any other appropriate relief authorized under a
13-27 statute or the common law.
14-1 (b) In an action brought under this section in which the
14-2 attorney general prevails, the court may award to the attorney
14-3 general the costs of the suit and attorney's fees.
14-4 SECTION 10. EFFECTIVE DATE. This Act takes effect September
14-5 1, 2001.
14-6 SECTION 11. TRANSITION. (a) This Act applies only to:
14-7 (1) an agreement described by Section 4 of this Act
14-8 that is entered into on or after September 1, 2001; or
14-9 (2) a transaction described by Section 4 of this Act
14-10 that is made pursuant to an agreement entered into on or after
14-11 September 1, 2001.
14-12 (b) An agreement described by Section 4 of this Act that is
14-13 entered into before September 1, 2001, and a transaction described
14-14 by Section 4 of this Act that is made pursuant to an agreement
14-15 entered into before September 1, 2001, are governed by the law as
14-16 it existed immediately before the effective date of this Act, and
14-17 that law is continued in effect for that purpose.