Office of House Bill AnalysisC.S.H.B. 393
By: Maxey
Public Health
Committee Report (Substituted)


Many nonprofit hospitals, health maintenance organizations, and health
insurers, are converting to for-profit or mutual corporations or
transferring to another nonprofit.  Under the common law, a  nonprofit
health care organization is obligated to dedicate its assets to a nonprofit
organization that is dedicated to similar purposes. However, without
careful monitoring, such newly converted organizations may seek to hold on
to the nonprofit's public assets and devote them to serving the
corporation's stockholders. The attorney general is responsible for
protecting charitable trusts, gifts, and entities and for ensuring that
nonprofits are used for their dedicated purpose and not for individual
gain.  However, nonprofit organizations are not currently required to
inform the attorney general when considering whether to sell or change
their nonprofit status. C.S.H.B. 393 establishes provisions so that
charitable assets continue to serve the public's health care needs,
especially the needs of uninsured or underinsured individuals. 


It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 


C.S.H.B. 393 sets forth the Charitable Health Care Trust Act (Act) to guide
transfers, leases,  exchanges, conversions, restructurings, or sales of a
nonprofit health care provider (nonprofit) to another nonprofit, a
for-profit entity, or a mutual plan provider and the closing or the
dissolving of a facility operated by the nonprofit. The Act sets forth
applicability standards based on the type of agreement, whether previous
agreements or transactions are involved, and the fair market value of the
assets or gross revenues of the nonprofit (SECTION 4).  The fair market
value is determined by an independent assessor paid for by the nonprofit at
the time the agreement or transaction takes effect (SECTIONS 4 and 5). The
bill provides that the charitable health care assets resulting from an
agreement or transaction must be irrevocably dedicated to a charitable
health care purpose and distributed to an existing or newly created
charitable health care organization that will operate in the service area
of the nonprofit and that is designed to receive the distributions (SECTION

The bill requires a nonprofit that enters into an agreement or transaction
to establish the fair market value of the assets of the nonprofit and
request an appraisal from the chief appraiser or appraisers of the
appraisal district or districts in which the nonprofit's property is
located. The bill provides that a nonprofit provider that enters into an
agreement or transaction with another nonprofit provider is not required to
request an appraisal from the chief appraiser or appraiser of the appraisal
district or districts in which the nonprofit's property is located (SECTION

In the transaction, the nonprofit is prohibited from placing unreasonable
requirements on the sale or transfer of stock that adversely affects the
value of the stock (SECTION 5).  The bill requires the nonprofit to: 

 _notify the attorney general with a written disclosure of the agreement
_publish a public notice of the transaction;

_publish the time and place of at least one public meeting for the public
to make written comments; and 

_notify the commissioners court in each county in the publication area of
the nonprofit of the request for written comment (SECTION 8). 

The bill provides that the notice and related information submitted to the
attorney general are public information (SECTION 6). The bill sets forth
the content the notification must include (SECTION 7). 

The bill sets forth the attorney general's powers of enforcement, including
the imposition of a civil penalty not to exceed $10,000 for each day of a
continuing violation for organizations that fail to comply with the Act
(SECTION 9).  


September 1, 2001.


C.S.H.B. 393 modifies the original by applying the provisions of the bill
to the transfer, lease,  exchange, restructure, or sale of a nonprofit
healthcare provider (nonprofit) to another nonprofit and the closing of a
facility or the dissolving of a nonprofit (SECTION 4). The substitute
removes provisions relating to ensuring that an agreement or transaction
between a nonprofit and another organization is in the public interest, and
the requirement that a nonprofit use due diligence when entering into an
agreement or transaction. The substitute modifies what is required of a
nonprofit entering into an agreement or transaction (SECTION 5). The
substitute removes provisions relating to the requirements and duties of a
designated charitable health care organization which receives the assets of
the nonprofit. The substitute modifies the contents of the notice to the
attorney general, the publication of the notice, and provisions related to
the public meeting (SECTIONS 6-8). The substitute removes the provision
that the attorney general must be provided with the assessor's report The
bill modifies provisions setting forth what constitutes the nonprofit's
publication area (SECTION 7). The substitute removes provisions setting
forth penalties under licensing laws for a violation of the bill.