JIM MATTOX 

Attorney General 

Supreme Court Building 

P. 0. BOX 1254S 

Austin. TX. 78711. 2548 

5121475-2501 

Telex 910/874-1367 

Telecooier 512f475-0266 

714 Jackson. Suite 700 

Dallas, TX. 75202.4506 

214/742-8944 

4824 Alberta Ave., Suite 180 

El Paso, TX. 79905-2793 

91515333484 

P 

01 Texas, Suite 700 

Houston, TX. 77W2-3’111 

713/223-5886 

SW Broadway, Suite 312 

Lubbock, TX. 79401-3479 

0081747-5233 

4309 N. Tenth. Suite B 

McAllen, TX. 78501-1885 

512lSS2-4547 

200 Main Plaza, Suite 400 

San Antonio, TX. 782052797 

512/2254191 

An Equal Opportunity/ 

Affirmative Action Employer 

r 

The Attorney General of Texas 

July 11. 1986 

Elonorable Brad Wrig'ht 

Chairman 

Committee on Public Health 

Texas House of Representatives 

P. 0. Box 2910 

Austin, Texas 78769 

Opinion No. JM-518 

Re: Authority of hospital owned 

by a political subdivision to 

offer discounts to specific groups 

such as senior citizens, insurance 

companies, etc. 

Dear Representative Wright: 

You ask whet,her hospitals owned by a city, county, or other 

political subdivision may legally offer discounts on hospital 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:ire about has many variables, in that there are 

different categories of local hospitals, each category governed by a 

statute with its own provisions for rate-setting. Moreover, statutes 

on health care of low income persons may also be relevant to hospital 

rates. Although lye cannot answer your question definitively, we can 

discuss legal isr,ues that are relevant to providing hospital rate 

discounts for certain defined groups. 

The legislatcre has enacted several provisions authorizing cities 

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 

(city hospital authority); 4478 (county hospitals); 44941 (joint city 

and county hospita,l). Article IX, section 4. of the Texas Constitution 

empowers the 1eg::slature to 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 (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 

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.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 following provi:sion: 

No discrimination shall be made in the accommodations, care or tre.stment of 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 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 iraid relatives 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 ,,?r week, 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 Ilegally liable 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::al ability. 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 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 they beccme due, and to ~create and maintain 

a bond reserve fu:ld and 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:y services 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 p 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 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 professional 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 promuligated by 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'irst Assistant Attorney General 

MARY KELLER 

Executive 'Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Susan L. Garrisnl 

Assistant Attorney General 

p. 2381