By Maxey H.B. No. 975
77R3821 JMG-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the duties of hospitals, including nonprofit hospitals.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 311.031(16), Health and Safety Code, is
1-5 amended to read as follows:
1-6 (16) "Unreimbursed costs" means the costs a hospital
1-7 incurs for providing inpatient and outpatient services after
1-8 subtracting payments received from any source for such services
1-9 including but not limited to the following: third-party insurance
1-10 payments; Medicare payments; Medicaid payments; Medicare education
1-11 reimbursements; state reimbursements for education; payments from
1-12 drug companies to pursue research; grant funds for research; and
1-13 disproportionate share payments. For purposes of this definition,
1-14 the term "costs" shall be calculated by applying the cost to charge
1-15 ratios derived from the hospital's Medicare cost report [in
1-16 accordance with generally accepted accounting principles for
1-17 hospitals] to billed charges. The calculation of the cost to
1-18 charge ratios shall be based on the [most recently completed and
1-19 audited] prior year's Medicare cost report [fiscal year] of the
1-20 hospital or hospital system. For [Prior to January 1, 1996, for
1-21 purposes of this definition, charitable contributions and grants to
1-22 a hospital, including transfers from endowment or other funds
1-23 controlled by the hospital or its nonprofit supporting entities,
1-24 shall not be subtracted from the costs of providing services for
2-1 purposes of determining unreimbursed costs. After January 1, 1996,
2-2 for] purposes of this definition, charitable contributions and
2-3 grants to a hospital, including transfers from endowment or other
2-4 funds controlled by the hospital or its nonprofit supporting
2-5 entities, shall not be subtracted from the costs of providing
2-6 services for purposes of determining the unreimbursed costs of
2-7 charity care and government-sponsored indigent health care.
2-8 SECTION 2. Section 311.033(a), Health and Safety Code, is
2-9 amended to read as follows:
2-10 (a) A hospital shall submit to the department financial and
2-11 utilization data for that hospital, including data relating to the
2-12 hospital's:
2-13 (1) total gross revenue, including:
2-14 (A) Medicare gross revenue;
2-15 (B) Medicaid gross revenue;
2-16 (C) other revenue from state programs;
2-17 (D) revenue from local government programs;
2-18 (E) local tax support;
2-19 (F) charitable contributions;
2-20 (G) other third party payments;
2-21 (H) gross inpatient revenue; and
2-22 (I) gross outpatient revenue;
2-23 (2) total deductions from gross revenue, including:
2-24 (A) contractual allowance; and
2-25 (B) any other deductions;
2-26 (3) charity care;
2-27 (4) bad debt expense;
3-1 (5) total admissions, including:
3-2 (A) Medicare admissions;
3-3 (B) Medicaid admissions;
3-4 (C) admissions under a local government program;
3-5 (D) charity care admissions; and
3-6 (E) any other type of admission;
3-7 (6) total discharges;
3-8 (7) total patient days;
3-9 (8) average length of stay;
3-10 (9) total outpatient visits;
3-11 (10) total assets;
3-12 (11) total liabilities;
3-13 (12) estimates of unreimbursed costs of subsidized
3-14 health services reported separately in the following categories:
3-15 (A) emergency care and trauma care;
3-16 (B) neonatal intensive care;
3-17 (C) free-standing community clinics;
3-18 (D) collaborative efforts with local government
3-19 or private agencies in preventive medicine, such as immunization
3-20 programs; and
3-21 (E) other services that satisfy the definition
3-22 of "subsidized health services" contained in Section 311.031(15)
3-23 [311.031(13)];
3-24 (13) donations;
3-25 (14) total cost of reimbursed and unreimbursed
3-26 research;
3-27 (15) total cost of reimbursed and unreimbursed
4-1 education separated into the following categories:
4-2 (A) education of physicians, nurses,
4-3 technicians, and other medical professionals and health care
4-4 providers;
4-5 (B) scholarships and funding to medical schools,
4-6 colleges, and universities for health professions education;
4-7 (C) education of patients concerning diseases
4-8 and home care in response to community needs;
4-9 (D) community health education through
4-10 informational programs, publications, and outreach activities in
4-11 response to community needs; and
4-12 (E) other educational services that satisfy the
4-13 definition of "education-related costs" under Section 311.031(6).
4-14 SECTION 3. Sections 311.042(11), (13), and (14), Health and
4-15 Safety Code, are amended to read as follows:
4-16 (11) "Research-related costs" means those amounts
4-17 defined as research-related costs in Section 311.031(14)
4-18 [311.031(12)].
4-19 (13) "Subsidized health services" means those amounts
4-20 defined as subsidized health services in Section 311.031(15)
4-21 [311.031(13)].
4-22 (14) "Unreimbursed costs" means costs as defined in
4-23 Section 311.031(16) [311.031(14)].
4-24 SECTION 4. Section 311.045(a), Health and Safety Code, is
4-25 amended to read as follows:
4-26 (a) A nonprofit hospital or hospital system shall annually
4-27 satisfy the requirements of this subchapter and of Sections
5-1 11.18(d)(1), 151.310(a)(2) and (e), and 171.063(a)(1), Tax Code, to
5-2 provide community benefits which include charity care and
5-3 government-sponsored indigent health care by complying with one or
5-4 more of the standards set forth in Subsection (b). The hospital or
5-5 hospital system shall file a statement with the Office [Bureau] of
5-6 [State Health Data and] Policy and Planning [Analysis] at the
5-7 department, with the chief appraiser of the local appraisal
5-8 district, and with the comptroller's office no later than the 120th
5-9 day after the hospital's or hospital system's fiscal year ends,
5-10 stating which of the standards in Subsection (b) have been
5-11 satisfied[, provided, however, that the first report shall be filed
5-12 no later than the 120th day after the end of the hospital's or
5-13 hospital system's fiscal year ending during 1994]. For hospitals
5-14 in a hospital system, the corporate parent may elect to satisfy the
5-15 charity care requirements of this subchapter for each of the
5-16 hospitals within the system on a consolidated basis.
5-17 SECTION 5. Sections 311.0455(b) and (d), Health and Safety
5-18 Code, are amended to read as follows:
5-19 (b) The department shall submit to the attorney general and
5-20 the comptroller not later than November 1 of each year a report
5-21 containing the following information for each nonprofit hospital or
5-22 hospital system during the preceding fiscal year:
5-23 (1) the amount of charity care, as defined by Section
5-24 311.031, provided;
5-25 (2) the amount of government-sponsored indigent health
5-26 care, as defined by Section 311.031, provided;
5-27 (3) the amount of community benefits, as defined by
6-1 Section 311.042, provided;
6-2 (4) the amount of net patient revenue, as defined by
6-3 Section 311.042, and the amount constituting four percent of net
6-4 patient revenue;
6-5 (5) the dollar amount of the hospital's or hospital
6-6 system's charity care and community benefits requirements met;
6-7 (6) a computation of the percentage by which the
6-8 amount described by Subdivision (5) is above or below the dollar
6-9 amount of the hospital's or hospital system's charity care and
6-10 community benefits requirements; and
6-11 (7) the amount of tax-exempt benefits, as defined by
6-12 Section 311.042, provided, if the hospital is required to report
6-13 tax-exempt benefits under Section 311.045(b)(1)(A) or (b)(1)(B)[;
6-14 and]
6-15 [(8) the amount of charity care expenses reported in
6-16 the hospital's or hospital system's audited financial statement].
6-17 (d) For purposes of Subsection (b), "nonprofit hospital"
6-18 includes the following if the hospital is not located in a county
6-19 with a population under 50,000 where the entire county or the
6-20 population of the entire county has been designated as a Health
6-21 Professionals Shortage Area:
6-22 (1) a Medicaid disproportionate share hospital; or
6-23 (2) a public hospital that is owned or operated by the
6-24 state, including a state university, or a political subdivision or
6-25 municipal corporation of the state, including a hospital district
6-26 or authority.
6-27 SECTION 6. Sections 311.046(a), (b), (d), and (e), Health
7-1 and Safety Code, are amended to read as follows:
7-2 (a) A nonprofit hospital shall prepare an annual report of
7-3 the community benefits plan and shall include in the report at
7-4 least the following information:
7-5 (1) the hospital's mission statement;
7-6 (2) a disclosure of the health care needs of the
7-7 community that were considered in developing the hospital's
7-8 community benefits plan pursuant to Section 311.044(b);
7-9 (3) a disclosure of the amount and types of community
7-10 benefits, including charity care, actually provided. Charity care
7-11 shall be reported as a separate item from other community benefits;
7-12 and
7-13 (4) [a statement of its total operating expenses
7-14 computed in accordance with generally accepted accounting
7-15 principles for hospitals from the most recent completed and audited
7-16 prior fiscal year of the hospital; and]
7-17 [(5)] a completed worksheet that computes the ratio of
7-18 cost to charge based on the hospital's or hospital system's
7-19 Medicare cost report for the prior [fiscal] year [referred to in
7-20 Subdivision (4) and that includes the same requirements] as
7-21 [Worksheet 1-A] adopted by the department [in August 1994 for the
7-22 1994 "Annual Statement of Community Benefits Standards"].
7-23 (b) A nonprofit hospital shall file the annual report of the
7-24 community benefits plan with the Office [Bureau] of [State Health
7-25 Data and] Policy and Planning [Analysis] at the department. The
7-26 report shall be filed no later than April 30 of each year. In
7-27 addition to the annual report, a completed worksheet as required by
8-1 Subsection (a)(4) [(a)(5)] shall be filed no later than 10 working
8-2 days after the date the hospital files its Medicare cost report.
8-3 (d) Each hospital shall provide, to each person who seeks
8-4 any inpatient or outpatient health care service from [at] the
8-5 hospital, notice, in appropriate languages, if possible, about the
8-6 charity care program and how to apply for charity care. Such
8-7 notice shall also be conspicuously posted in the general waiting
8-8 area, the waiting area for emergency services, in the business
8-9 office, and in such other locations as the hospital deems likely to
8-10 give notice of the charity care program.
8-11 (e) For purposes of this section, "nonprofit hospital"
8-12 includes the following if the hospital is not located in a county
8-13 with a population under 50,000 where the entire county or the
8-14 population of the entire county has been designated as a Health
8-15 Professionals Shortage Area:
8-16 (1) a Medicaid disproportionate share hospital; or
8-17 (2) a public hospital that is owned or operated by the
8-18 state, including a state university, or a political subdivision or
8-19 municipal corporation of the state, including a hospital district
8-20 or authority.
8-21 SECTION 7. Section 11.18(d), Tax Code, is amended to read as
8-22 follows:
8-23 (d) A charitable organization must be organized exclusively
8-24 to perform religious, charitable, scientific, literary, or
8-25 educational purposes and, except as permitted by Subsections (h)
8-26 and (l) of this section, engage exclusively in performing one or
8-27 more of the following charitable functions:
9-1 (1) providing health [medical] care services without
9-2 regard to the beneficiaries' ability to pay, which in the case of a
9-3 nonprofit hospital or hospital system means providing charity care
9-4 and community benefits as set forth in Paragraph (A), (B), (C),
9-5 (D), (E), or (F)[, (G), or (H)]:
9-6 (A) charity care and government-sponsored
9-7 indigent health care are provided at a level which is reasonable in
9-8 relation to the community needs, as determined through the
9-9 community needs assessment, the available resources of the hospital
9-10 or hospital system, and the tax-exempt benefits received by the
9-11 hospital or hospital system;
9-12 (B) [charity care and government-sponsored
9-13 indigent health care are provided in an amount equal to at least
9-14 four percent of the hospital's or hospital system's net patient
9-15 revenue;]
9-16 [(C)] charity care and government-sponsored
9-17 indigent health care are provided in an amount equal to at least
9-18 100 percent of the hospital's or hospital system's tax-exempt
9-19 benefits, excluding federal income tax;
9-20 (C) charity care and community benefits are
9-21 provided in a combined amount equal to at least five percent of the
9-22 hospital's or hospital system's net patient revenue, provided that
9-23 charity care and government-sponsored indigent health care are
9-24 provided in an amount equal to at least four percent of net patient
9-25 revenue;
9-26 (D) a nonprofit hospital that has been
9-27 designated as a disproportionate share hospital under the state
10-1 Medicaid program in the current year or in either of the previous
10-2 two fiscal years shall be considered to have provided a reasonable
10-3 amount of charity care and government-sponsored indigent health
10-4 care and shall be deemed in compliance with the standards in this
10-5 subsection;
10-6 (E) [for tax years before 1996, charity care and
10-7 community benefits are provided in a combined amount equal to at
10-8 least five percent of the hospital's or hospital system's net
10-9 patient revenue, provided that charity care and
10-10 government-sponsored indigent health care are provided in an amount
10-11 equal to at least three percent of net patient revenue;]
10-12 [(F) beginning with the hospital's or hospital
10-13 system's tax year starting after 1995, charity care and community
10-14 benefits are provided in a combined amount equal to at least five
10-15 percent of the hospital's or hospital system's net patient revenue,
10-16 provided that charity care and government-sponsored indigent health
10-17 care are provided in an amount equal to at least four percent of
10-18 net patient revenue;]
10-19 [(G)] a hospital operated on a nonprofit basis
10-20 that is located in a county with a population of less than 50,000
10-21 and in which the entire county or the population of the entire
10-22 county has been designated as a health professionals shortage area
10-23 is considered to be in compliance with the standards provided by
10-24 this subsection; or
10-25 (F) [(H)] a hospital providing health care
10-26 services to inpatients or outpatients without receiving any payment
10-27 for providing those services from any source, including the patient
11-1 or person legally obligated to support the patient, third-party
11-2 payors, Medicare, Medicaid, or any other state or local indigent
11-3 care program but excluding charitable donations, legacies,
11-4 bequests, or grants or payments for research, is considered to be
11-5 in compliance with the standards provided by this subsection;
11-6 (2) providing support or relief to orphans,
11-7 delinquent, dependent, or handicapped children in need of
11-8 residential care, abused or battered spouses or children in need of
11-9 temporary shelter, the impoverished, or victims of natural disaster
11-10 without regard to the beneficiaries' ability to pay;
11-11 (3) providing support to elderly persons, including
11-12 the provision of recreational or social activities and facilities
11-13 designed to address the special needs of elderly persons, or to the
11-14 handicapped, without regard to the beneficiaries' ability to pay;
11-15 (4) preserving a historical landmark or site;
11-16 (5) promoting or operating a museum, zoo, library,
11-17 theater of the dramatic or performing arts, or symphony orchestra
11-18 or choir;
11-19 (6) promoting or providing humane treatment of
11-20 animals;
11-21 (7) acquiring, storing, transporting, selling, or
11-22 distributing water for public use;
11-23 (8) answering fire alarms and extinguishing fires with
11-24 no compensation or only nominal compensation to the members of the
11-25 organization;
11-26 (9) promoting the athletic development of boys or
11-27 girls under the age of 18 years;
12-1 (10) preserving or conserving wildlife;
12-2 (11) promoting educational development through loans
12-3 or scholarships to students;
12-4 (12) providing halfway house services pursuant to a
12-5 certification as a halfway house by the Board of Pardons and
12-6 Paroles;
12-7 (13) providing permanent housing and related social,
12-8 health care, and educational facilities for persons who are 62
12-9 years of age or older without regard to the residents' ability to
12-10 pay;
12-11 (14) promoting or operating an art gallery, museum, or
12-12 collection, in a permanent location or on tour, that is open to the
12-13 public;
12-14 (15) providing for the organized solicitation and
12-15 collection for distributions through gifts, grants, and agreements
12-16 to nonprofit charitable, education, religious, and youth
12-17 organizations that provide direct human, health, and welfare
12-18 services;
12-19 (16) performing biomedical or scientific research or
12-20 biomedical or scientific education for the benefit of the public;
12-21 (17) operating a television station that produces or
12-22 broadcasts educational, cultural, or other public interest
12-23 programming and that receives grants from the Corporation for
12-24 Public Broadcasting under 47 U.S.C. Section 396 and its subsequent
12-25 amendments;
12-26 (18) providing housing for low-income and
12-27 moderate-income families, for unmarried individuals 62 years of age
13-1 or older, for handicapped individuals, and for families displaced
13-2 by urban renewal, through the use of trust assets that are
13-3 irrevocably and, pursuant to a contract entered into before
13-4 December 31, 1972, contractually dedicated on the sale or
13-5 disposition of the housing to a charitable organization that
13-6 performs charitable functions described by Subdivision (9);
13-7 (19) providing housing and related services to persons
13-8 who are 62 years of age or older in a retirement community, if the
13-9 retirement community provides independent living services, assisted
13-10 living services, and nursing services to its residents on a single
13-11 campus:
13-12 (A) without regard to the residents' ability to
13-13 pay; or
13-14 (B) in which at least four percent of the
13-15 retirement community's combined net resident revenue is provided in
13-16 charitable care to its residents; or
13-17 (20) providing housing on a cooperative basis to
13-18 students of an institution of higher education if:
13-19 (A) the organization is exempt from federal
13-20 income taxation under Section 501(a) of the Internal Revenue Code
13-21 of 1986, and its subsequent amendments, by being listed as an
13-22 exempt entity under Section 501(c)(3) of that code;
13-23 (B) membership in the organization is open to
13-24 all students enrolled in the institution and is not limited to
13-25 those chosen by current members of the organization;
13-26 (C) the organization is governed by its members;
13-27 and
14-1 (D) the members of the organization share the
14-2 responsibility for managing the housing.
14-3 For purposes of satisfying Paragraph (C) [(F)] of Subdivision
14-4 (1), a hospital or hospital system may not change its existing
14-5 fiscal year unless the hospital or hospital system changes its
14-6 ownership or corporate structure as a result of a sale or merger.
14-7 For purposes of this subsection, a hospital that satisfies
14-8 Paragraph (A), (D), (E), [(G),] or (F) [(H)] of Subdivision (1)
14-9 shall be excluded in determining a hospital system's compliance
14-10 with the standards provided by Paragraph (B)[,] or (C)[, (E), or
14-11 (F)] of Subdivision (1).
14-12 For purposes of this subsection, the terms "charity care,"
14-13 "government-sponsored indigent health care," "health care
14-14 organization," "hospital system," "net patient revenue," "nonprofit
14-15 hospital," and "tax-exempt benefits" have the meanings set forth in
14-16 Sections 311.031 and 311.042, Health and Safety Code. A
14-17 determination of the amount of community benefits and charity care
14-18 and government-sponsored indigent health care provided by a
14-19 hospital or hospital system and the hospital's or hospital system's
14-20 compliance with the requirements of Section 311.045, Health and
14-21 Safety Code, shall be based on the most recently completed and
14-22 audited prior fiscal year of the hospital or hospital system.
14-23 The providing of charity care and government-sponsored
14-24 indigent health care in accordance with Paragraph (A) of
14-25 Subdivision (1) shall be guided by the prudent business judgment of
14-26 the hospital which will ultimately determine the appropriate level
14-27 of charity care and government-sponsored indigent health care based
15-1 on the community needs, the available resources of the hospital,
15-2 the tax-exempt benefits received by the hospital, and other factors
15-3 that may be unique to the hospital, such as the hospital's volume
15-4 of Medicare and Medicaid patients. These criteria shall not be
15-5 determinative factors, but shall be guidelines contributing to the
15-6 hospital's decision along with other factors which may be unique to
15-7 the hospital. The standards prescribed by [formulas contained in]
15-8 Paragraphs (B)[,] and (C)[, (E), and (F)] of Subdivision (1) shall
15-9 also not be considered determinative of a reasonable amount of
15-10 charity care and government-sponsored indigent health care.
15-11 The requirements of this subsection shall not apply to the
15-12 extent a hospital or hospital system demonstrates that reductions
15-13 in the amount of community benefits, charity care, and
15-14 government-sponsored indigent health care are necessary to maintain
15-15 financial reserves at a level required by a bond covenant, are
15-16 necessary to prevent the hospital or hospital system from
15-17 endangering its ability to continue operations, or if the hospital
15-18 or hospital system, as a result of a natural or other disaster, is
15-19 required substantially to curtail its operations.
15-20 In any fiscal year that a hospital or hospital system,
15-21 through unintended miscalculation, fails to meet any of the
15-22 standards in Subdivision (1), the hospital or hospital system shall
15-23 not lose its tax-exempt status without the opportunity to cure the
15-24 miscalculation in the fiscal year following the fiscal year the
15-25 failure is discovered by both meeting one of the standards and
15-26 providing an additional amount of charity care and
15-27 government-sponsored indigent health care that is equal to the
16-1 shortfall from the previous fiscal year. A hospital or hospital
16-2 system may apply this provision only once every five years.
16-3 SECTION 8. This Act takes effect September 1, 2001.