The Attorney General of Texas
JIM MATTOX July 11. 1986
Attorney General
Supreme Court Building ElonorableBrad Wrig'ht Opinion No. JM-518
P. 0. BOX 1254S
Austin. TX. 78711. 2548
Chairman
5121475-2501 Committee on Public Health Re: Authority of hospital owned
Telex 910/874-1367 Texas House of Representatives by a political subdivision to
Telecooier 512f475-0266 P. 0. Box 2910 offer discounts to specific groups
Austin, Texas 78769 such as senior citizens, insurance
714 Jackson. Suite 700
companies, etc.
Dallas, TX. 75202.4506
214/742-8944 Dear Representative Wright:
You ask whet,her hospitals owned by a city, county, or other
4824 Alberta Ave., Suite 180
El Paso, TX. 79905-2793
political subdivision may legally offer discounts on hospital services
91515333484 to specific groups such as senior citizens or insurance companies.
You do not ask us to consider proposed discounts offered by a
P particular hospital.board. Instead, you ask the question in general
01 Texas, Suite 700 terms, and our answer must necessarily also be generalized. The
Houston, TX. 77W2-3’111
subject you inqu:ire about has many variables, in that there are
713/223-5886
different categories of local hospitals, each category governed by a
statute with its own provisions for rate-setting. Moreover, statutes
SW Broadway, Suite 312 on health care of low income persons may also be relevant to hospital
Lubbock, TX. 79401-3479 rates. Although lye cannot answer your question definitively, we can
0081747-5233
discuss legal isr,ues that are relevant to providing hospital rate
discounts for certain defined groups.
4309 N. Tenth. Suite B
McAllen, TX. 78501-1885 The legislatcre has enacted several provisions authorizing cities
512lSS2-4547 and counties to ,establish hospitals. See, e.g., V.T.C.S. arts.
1015(4) (general law cities); 1175(15), (28) (home rule cities); 4437e
200 Main Plaza, Suite 400 (city hospital authority); 4478 (county hospitals); 44941 (joint city
San Antonio, TX. 782052797 and county hospita,l).Article IX, section 4. of the Texas Constitution
512/2254191 empowers the 1eg::slature to authorize the creation of county-wide
hospital districts;,while article IX, section 9, of the constitution
An Equal Opportunity/
authorizes legisl.ar:ionproviding for hospital districts composed of
Affirmative Action Employer one or more counties or parts of a county. Pursuant to these
constitutional prrrisions, the legislature has created a number of
hospital districtI;by special act. See V.T.C:S. art. 4494q. It has
also enacted ger.eral laws authorizg the creation of hospital
districts. V.T.C.S. arts. 4494n (hospital districts in counties of
190,000 or more people and Galveston County); 44940 (public hospital
districts in count:ies of 75,000 or fewer people); 4494p (Optional
Hospital District Law of 1957); see also art. 4494r (county hospital
r authority without taxing power).
p. 2377
Honorable Brad Wright - Page 2 (JM-518)
As an initial matter, it is necessary to review the statute
pertaining to the particular hospital in question to determine whether
its governing body has autb.orityto provide discounts for some groups
of patients. The relevant statute in some cases may rule out
discounts. For example, .e 1913 enactment which authorizes the
commissioners court of any county to establish a county hospital
Includes the following provi:sion:
No discrimination shall be made in the accommoda-
tions, care or tre.stmentof any patient because of
the fact that the patient or his relatives
contribute to tIie cost of his maintenance, in
whole or in part. No patient shall be permitted
to pay for his maintenance in such hospital a
greater sum than the average per capita cost of
maintenance the,cein, including a reasonable
allowance for the interest on the cost of the
hospital. . . .
V.T.C.S. art. 4486; Acts 1913, 33rd Leg., ch. 39, 69, at 71. 76.
Hospital districts established pursuant to article IX, section 4,
of the Texas Constitution "shall assume full responsibility for
providing medical and hospital care to needy inhabitants of the
county. . . .'I A similar duty is placed upon hospital districts
established under article IX. section 9. Article 4494n. V.T.C.S.,
enacted under the authority of article IX, section 4, includes the
following provision on payment for medical care:
Whenever a patient has been admitted to the facil-
ities of the HosINitalDistrict from the county in
which the District is situated, the Administrator
shall cause inquiry to be made as to his circum-
stances, and .of the relatives of such patient
legally liable far his support. If he finds that
such patient or iraidrelatives areliable to pay
for his care and cceatment In whole or in part, an
order shall be made directing such patient, or
said relatives, to pay to the treasurer of the
Hospital District-for the support of such patient
a specified sum ,,?rweek, in proportion to their
financial ability- but such sum shall not exceed
the actual per capita cost of maintenance. The
Administrator shill have newer and authority to
collect such sum from the-estate of the patient,
or his relatives Ilegallyliable for his support,
in the manner provided by law for the collection
of expenses of the last illness of a deceased
person. If the Administrator finds that such
patient or said ;.elatives are not able to pay,
either in whole ear in part, for his care and
p. 2378
Honorable Brad Wright - Page 3 (m-518) .
treatment in sud,hospital, the same shall become
a charge upon -the Hospital District. . . .
(Emphasis added).
V.T.C.S. art. 4494n, 514. The requirement that a patient pay in
proportion to his financial.ability would rule out discounts based on
criteria other than financ::alability. Moreover, the charges for the
support of a patient may no,t exceed the actual cost of maintenance;
thus, the cost of providing discounts could not be shifted to patients
not eligible for discounts. See Attorney General Opinion M-912 (1971)
(discounts on, laboratory test8performed for patients of a private
hospital authorized by section 5 of article 4494n, V.T.C.S.).
Article 4437e. V.T.C.S., which authorizes a city to create a
hospital authority without taxing power, leaves the governing board
considerable discretion over hospital rates:
Unless the Hospital is being leased, it shall be
operated by the A;thority without the intervention
of private profit-for the use and benefit of the
public. If the Hospital is not being used, operated,
or acquired by a nonprofit corporation, under the
provisions of the Hospital Project Financing Act
(Article 4437e-2, Vernon's Texas Civil Statutes) or
not leased --
It shall be the duty of the Board of
Directors to charge sufficient rates for services
rendered by the Hospital and to utilize other
sources of its re&ues that revenues will be pro-
duced sufficient i;)pay all expenses in connection
with the ownershz,, operation and upkeep of the
Hospital, to pay the interest on the bonds as it
becomes due, to create a sinking fund to pay the
bonds as they beccme due, and to ~createand maintain
a bond reserve fu:ldand other funds as provided in
the Bond Resolution or Trust Indenture. . . .
(Emphasis added).
V.T.C.S. art. 4437e. 914. We believe this provision would allow the
governing board of the hospital to provide discounts for particular
groups of patients, within the limits stated therein and found in
other statutes applicable to the hospital.. In considering a different
kind of discount, this office determined in Attorney General Opinion
M-912 (1971) that a county hospital district established under article
4494n, V.T.C.S.. could contract with a privately owned hospital to
perform laboratory tests for its patients at a discount. The opinion
relied on the provision $acing responsibility for management and
operation of the hospital jn the Board of Hospital Managers,
whose duties shall be to manage, control and
administer the ho+ital or hospital system of the
Hospital District. . . .
p. 2379
Ronorable Brad Wright - Pago 4 (JMi518)
V.T.C.S. art. 4494n. 55. ,Such language, if not limited by other
provisions, would authorize discounted hospital rates.
Other statutes, in addition to the statute under which a public
hospital is established, are relevant to the hospital's power to offer
discounts. Article 4438a. V.T.C.S., for example, prohibits hospital
officers, employees, and members of the hospital medical staff from
denying emergency services available at the hospital to
a person diagnosed by a licensed physician as
requiring emergent:yservices because the person is
unable to establish his ability to pay .for the
services or because of race. reliaion or national
ancestry. In addition, the person - needing the
services may not be subjected to arbitrary,
capricious. or uzeasonable discrimination based
on age, sex, Izysical condition or economic
statue. (EmphasiFadded).
V.T.C.S. art. 4438a, 51(a). The above statute prohibits discounts in
the provision of emergency services which would arbitrarily,
capriciously, or unreasonably discriminate against a person "based on
age, sex, physical condition, or economic status." Discounts on
emergency services offered to persons over age 65 and to insured
persons would have to be evaluated against the quoted requirements.
If a hospital is authorized to provide medical assistance under
federal grant programs administered by the Department of Human
Resources, the following provision will be relevant to its
rate-setting:
(4 The department shall adopt reasonable
rules and standards governing the determination of
fees, charges, and rates for medical assistance
payments.
(b) The fee, charge, or rate for a profes-
sional service Is the usual and customary fee,
charge, or rate that prevails In the community.
(c) The fee, charge, or rate for other medical
assistance is the usual and customary fee, charge,
or rate that prevails in the community unless the
payment is limited by state or federal law.
Hum. Res. Code 932.028; ---
set!also Hum. Res. Code 532.027 (recipient of
medical assistance may select any provider authorized by department).
Hospitals which receive federal funds for construction under the
Hill-Burton Act, (42 U.S.C. §291 et. seq.), are required to provide
free or reduced cost services to persons unable to pay for them. 42
p. 2380
Honorable Brad Wright - Pags 5 cm-518)
U.S.C. Q291c(e); see also V.T.C.S. art. 4437d. This provision is thus
relevant to charges esta,lished by public hospitals which have
received Hill-Burton funds, and may indirectly affect the hospital's
authority to grant discounts.
Any regulation promuligatedby the governing board of a public
hospital to provide discounted rates for a particular group must also
be consistent with federal and state statutes and constitutional
provisions,providing for the equal protection of the laws. See U.S.
Const. 14th amend; Tex. Coast. art. I, §3a; Tex. Civil Practice and
Remedies Code 0106.001 (fornerly V.T.C.S. art. 6252-16).
Other statutes, in adili.tion
to those addressed, may be relevant
to the efforts of a particular public hospital to provide discounts.
The existence and effect of such other provisions would best be
addressed in connection with discounts proposed by. a particular
hospital.
SUMMARY
Whether a particular public hospital may offer
discounts on ite services to particular groups
must be determined by examining the statute under
which the hospital was established and any other
'provisions of LiS" relevant to its payment
policies.
JIM MATTOX
Attorney General of Texas
JACK HIGHTOWER
F'irstAssistant Attorney General
MARY KELLER
Executive 'AssistantAttorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Susan L. Garrisnl
Assistant Attorney General
p. 2381