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.