JIMMATTOX Attorney General

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An Equal Opportunity/ Affirmative Action Employer

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# The Attorney General of Texas
July 11. 1986

Elonorable

Brad Wrig'ht Chairman Committeeon Public Health Texas House of Representatives P. 0. Box 2910 Austin,Texas 78769 OpinionNo. JM-518
Re: Authority of hospital owned by a political subdivision to offerdiscounts to specificgroups such as senior citizens, insurance companies,etc.
Dear RepresentativeWright:
You ask whet,herhospitals owned by a city, county, or other political subdivisionmay legallyofferdiscounts onhospital services to specific groups such as senior citizens or insurance companies. You do not ask us to consider proposed discounts offered by a particular hospital. board. Instead, you ask the question in general terms, and our answer must necessarily also be generalized. The subject you inqu:ireabout has many variables, in that there are different categories of local hospitals, each category governed by a statutewith its own provisions for rate-setting. Moreover, statutes on health care of low incomepersonsmay also be relevant to hospital rates. Although lyecannot answer your question definitively,we can discuss legal isr,uesthat are relevant to providing hospital rate discounts for certaindefined groups. The legislatcrehas enacted severalprovisionsauthorizingcities and counties to ,establishhospitals. See, e.g., V.T.C.S. arts. 1015(4) (generallaw cities); 1175(15), (28) (homerule cities); 4437e (cityhospital authority); 4478 (countyhospitals); 44941 (joint city and countyhospita,l). Article IX, section 4. of the Texas Constitution empowers the 1eg::slatureto authorize the creation of county-wide hospital districts;, while article IX, section 9, of the constitution authorizes legisl.ar:ion providing for hospital districts composed of 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 (publichospital districts in count:iesof 75,000 or fewer people); 4494p (Optional Hospital District Law of 1957); see also art. 4494r (countyhospital authoritywithout taxingpower).

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As an initial matter, it is necessary to review the statute pertaining to theparticularhospital in question todeterminewhether its governingbody has autb.ority to 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 followingprovi:sion:

No discrimination shall be made in the accommodations, care or tre.stment of any patientbecause of the fact that the patient or his relatives contribute to tIiecost 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, 33rdLeg., ch. 39, 69, at 71. 76. Hospital districtsestablishedpursuant 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 followingprovision on payment formedical care:

Whenever a patienthas been admitted to the facilities of the HosINital District from the county in which the District is situated, the Administrator shall cause inquiry to be made as to his circumstances, 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 cceatmentInwhole 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 ;.elativesare not able to pay, either in whole earin part, for his care and

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treatment in sud,hospital, the same shall become a charge upon -the Hospital District.
. . . (Emphasisadded).
V.T.C.S. art. 4494n, 514. The requirement that a patient pay in proportion to his financial. abilitywould rule out discountsbased on criteria other than financ::al ability. Moreover, the charges for the support of a patient may no,texceed the actual cost of maintenance; thus, the cost of providingdiscountscouldnot be shifted topatients not eligible for discounts. SeeAttorneyGeneralOpinionM-912 (1971) (discounts on,laboratory test8performed for patients of a private hospital authorizedby 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 considerablediscretionoverhospitalrates:

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 theHospital isnot 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 produced 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 theybeccme due, and to~createandmaintain a bond reserve fu:ldand other funds as provided in the Bond Resolution or Trust Indenture.
. . . (Emphasisadded).
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 statutesapplicableto thehospital.. In consideringa different kind of discount, this office determined in Attorney General Opinion M-912 (1971)thata countyhospitaldistrictestablishedunder 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 operationof thehospital jn theBoard of HospitalManagers,

whose duties shall be to manage, control and administer the ho+ital or hospital system of the HospitalDistrict.
. . .

p. 2379RonorableBrad Wright - Pago 4 (JMi518)

V.T.C.S. art. 4494n. 55. ,Suchlanguage, if not limited by other provisions,would authorizediscountedhospital rates. Other statutes, in addition to the statute under which a public hospital is established,are relevant to the hospital'spower 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 servicesavailableat thehospital to

a person diagnosed by a licensed physician as requiringemergent:y servicesbecause theperson is unable to establish his ability to pay .for the services or because of race. reliaion or national

In addition, the p - ancestry. erson 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 statuteprohibits discounts in the provision of emergency services which would arbitrarily, capriciously, or unreasonablydiscriminate 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 personswould have tobe evaluatedagainst 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 standardsgoverning the determinationof fees, charges, and rates for medical assistance payments. (b) The fee, charge, or rate for a professional service Is the usual and customary fee, charge, or rate thatprevails In the community. (c) The fee, charge, or rate for othermedical assistanceis the usual and customary fee, charge, or rate that prevails in the community unless the payment is limitedby state or federal law.
Hum. Res. Code 932.028; set!also Hum. Res. --- Code 532.027 (recipientof medical assistancemay select any provider authorizedby department). Hospitalswhich receive federal funds for constructionunder 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

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U.S.C. Q291c(e);see alsoV.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 grantdiscounts. Any regulation promuligatedby the governing board of a public hospital to provide discountedrates for a particular groupmust 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 (fornerlyV.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 particularpublic hospital may offer discounts on ite services to particular groups must be determinedby 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'irst AssistantAttorney General
MARY KELLER Executive'Assistant AttorneyGeneral
RICK GILPIN Chairman,OpinionCommittee Preparedby SusanL. Garrisnl AssistantAttorney General

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