                               ATTORNEY GENERAL                      OF   TEXAS
                                            GREG         ABBOTT




                                                October 23,2006



The Honorable Robert G. Neal, Jr.                           Opinion No. GA-0472
Sabine County Attorney
Post Office Box 1783                                        Re: Sabine County Hospital District’s authority
Hemphill, Texas 75948                                       and duties (RQ-0466-GA)

Dear Mr. Neal:

         You ask several questions        about the Sabine County Hospital District’s (the “District”)
authority and duties.’

        You first ask:

                         Is the Sabine County Hospital District, which reportedly
                 intends to maintain an ambulance for transporting patients only [to
                 other hospitals], required to dispatch the ambulance on an emergency
                 call? (if there is ‘no other ambulance service within the county
                 providing emergency ambulance services.)

Request Letter, supra note 1, at 2

         As background, a brief submitted in response to your question informs us that Sabine County
asked the District to provide ambulance service to the county’s residents.* “The District undertook
the task and currently has two fully staffed ambulances and one other ambulance used for the
purpose of transferring emergency patients [from the District’s hospital] to the nearest medical
center, which is approximately 45 minutes away from Sabine.” Fuller Brief, supra note 2, at 2. The,
District, however, has determined that it “cannot financially continue to maintain three ambulances
and operate within its fiscal budget.” Id.

         The District’s enabling~legislation~requires the~District:as authorized by Texas Constitution
article IX, section 9-to “establish[ ] a hospital or a hospital system within its boundaries to furnish


          ‘See Letter from Honorable Robert G. Neal, Jr., Sabine County Attorney, to Honbrable Greg Abbott, Attorney
General of Texas (Mar. 8, 2006) (on tile with the Opinion Committee, also available at http://uww.oag.state.tx.us)
[hereinaPter Request Letter].

          ?See Brief from Alex J. Fuller, Jr., Davis and Davis, to Nancy S. Fuller, Chair, Opinion Committee, Oftice of
the Attorney General of Texas, at 2 (May 12,2006) (on file with the Opinion Committee) [hereinafter Fuller Brief].
The Honorable Robert G. Neal, Jr. - Page 2                     (GA-0472)




hospital and medical care to the residents of the district.“3 The enabling legislation also requires the
District to “provide all necessary hospital and medical care for the needy inhabitants of the district.“4
Nevertheless, this office has long held that, despite a district’s general duty to provide medical care,
a district is not required to provide ambulance services. See Tex. Att’y Gen. Op. Nos. JC-0420
(2001) at 5, H-1279 (1978) at 1, M-385 (1969) at 34, C-759 (1966) at 3. A district’s ambulance
service is “an ancillary function which a hospital district could undertake if it were deemed
necessary.” Tex. Att’y Gen. Op. No. M-385 (1969) at 3 (citing Tex. Att’y Gen. Op. No. C-759
(1966)). As such, whether a district will provide ambulance services is a discretionary matter; and
to the extent a district does provide those services, it is also for the district to determine the scope
of those services. In answer to your first question, then, assuming the District has not entered into
a contract to dispatch ambulances for a prescribed period, the District is not required by law to
dispatch its ambulances for emergency calls, even if there are no other ambulances operating within
the District.

         You next ask the following questions:

                           Can the Sabine County Hospital District contract with a
                  physician to provide a complete utilization review and analysis of the
                  emergency room to maximize hospital efficiency and improve
                  healthcare and perform a study for a future hospital operating room
                  and pay the physician a consulting fee of %85,000.00[?] If so, does
                  the hospital have to publicly bid this contract? May the hospital
                  district board of directors restrict its discussion of this contract to
                  closed sessions?

                          Can the Sabine County Hospital District located within a
                  medically underserved area and a health professional shortage area,
                  enter into a contract with a physician agreeing to pay the physician
                  the sum of $6,250.00 per month for a period of up to ten months
                  should the physician be unable to organize his practice under a rural
                  health clinic designation[?]

Request Letter, supra note 1, at 2. Because they are related, we first address the two contract issues
together; We will address separately your question about the District’s authority to discuss these
contracts in a closed meeting.

         As background~to ~your contract questions, a brief informs us that the District has difficulty
attracting quality physicians to practice in its area. See Fuller Brief,,supra note 2, at 3. We
understand that as a consequence of the District’s difficulties in finding health care professionals,



          iActofMay22,1975,64thLeg.,R.S.,ch.565,        $5 1,3,1975Tex.   Gen. Laws 1829,1829;seealsoTEX.CON~~.
art. IX, 5 9.

         4Act ofMay    22, 1975,64th   Leg., R.S., ch. 565, 5 3, 1975 Tex. Gen. Laws 1829, 1829.
The Honorable Robert G. Neal, Jr. - Page 3                (GA-0472)




the District has offered a particular doctor a variety of financial incentives as a part of a consulting
and service contract in order to induce the doctor to relocate to and practice medicine in the District.
See id. at 34. Specifically, the District has proposed to pay the doctor $85,000 forrelocation costs,
as a recruiting fee, and as compensation to the doctor to perform a “complete utilization review and
analysis of the emergency room.” Id. at 2. In addition, the District has proposed to pay the doctor
a sum of $6,250 per month for up to ten months to provide “emergency room services and services
to patients in the Sabine County Hospital,” should the physician be unable to organize his private
practice in a manner that would qualify it for federal funding. See id. at 3. You question whether
the District is authorized to compensate the doctor in this way and whether the contract has to be
competitively bid. See Request Letter, supra note 1, at 2.

           The District is authorized to contract for hospital services and pay for such services consistent
 with constitutional restrictions on the expenditure ofpublic funds. The District’s board of directors
 “has full power to. manage and control ,the district.“’ The District is specifically authorized to
 “employ          employees necessary for the efficient operation of the district” and to “employ an
 administrator to manage the operations of the hospital system, who may hire necessary personnel to
 perform the services provided by the system.“6 This duty to hire necessary personnel for a district’s
 efficient operation has been recognized by this office to confer on a hospital district’s board the
 implicit power “to do what is reasonable and necessary to perform such duty.” Tex. Att’y Gen. Op.
 No. M-223 (1968) at 2; Tex. Att’y Gen. LO-98-024 (1998) at 1. This implicit power includes
 granting public funds or thing of value to a person as an incentive to the person to provide services
 to the district consistent with Texas Constitution article III, section 52. See Tex. Att’y Gen. LO-9%
 024 (1998) at 3 (determining that a hospital district could pay temporary housing expenses to visiting
 army medical personnel with whom the district had contracted~ to perform services for the district);
 see also Tex. Att’y Gen. Op. No. DM-317 (1995) at 3 (determining that a commissioners court was
 authorized to pay travel expenses to a forensic pathologist whom the county wished to interview).
 Texas Constitution article III, section 52 prohibits a political subdivision from “grant[ing] public
‘money or thing of value in aid of, or to any individual, association, or corporation whatsoever.” TEX.
 CONST. art. III, § 52(a). But an expenditure of public funds for the benetit’of an individual to
 accomplish a public purpose does not violate this provision. Tex. Att’y Gen. Op. No. DM-317
 (1995) at 3; see also Graves v. Morales, 923 S.W.2d 754, 757 (Tex. App.-Austin                   1996, writ
  denied) (state agency canpay its employees’ occupation taxes). To be constitutional, such incentives
 must be necessary for the direct accomplishment of a legitimate public purpose, a district must
 receive adequate consideration for its expenditure, and there must be appropriate controls in place’
 to assure that the public purpose will be carried out. Tex. Mm. League Intergov ‘tl Risk Pool v. Tex.
  Workers ’Camp. Coornm‘n, 74 S.W.3d 377,383~84 (Tex. 2002). Whether the services a district may
 ~~~~~~
      ~~.~~. ~~~~ ~~~~~          .~~~~~~~,~~~~,
  recetve m exchange for the mcentrve rt offers is adequate to satisfy constitutional concerns is for the
  district to decide in the first instance, subject to judicial review for abuse of discretion.. Tex. Att’y
  Gen. LO-98-024 (1998) at 2-3; see also Barrington Y. Cokinos, 338 S.W.2d 133,142 (Tex. 1960)
  (“[A] court has no right to substitute its judgment and discretion for the judgment and discretion of
  the governing body upon whom the law visits the primary power and duty to act.“).


         ‘Id. $ 12(a), at 1833.

         6Id. 5 12(e)(2), (3), at 1833.
The Honorable Robert G. Neal, Jr. - Page 4              (GA-0472)




        It is clear that the District may pay for services. However, the sums at issue (a lump sum of
$85,000, and a possible $6,250 per month for up to ten months) appear to include incentives to the
doctor to relocate to the District. See Fuller Brief, supra note 2, at 2-3. To the extent that these
sums are an incentive payment, the District is authorized to pay them provided they are necessary
to obtain the required hospital services, the District receives adequate services for its expenditure,
and the District imposes the appropriate controls to assure that it receives the required services. And
the District’s board of directors must determine in the first instance whether the services the District
receives are adequate consideration in exchange for the amount paid.

         Furthermore, where a district is contracting with a physician who is to provide professional
services, the contract must also comply with Government Code chapter 2254, the Professional
Services Procurement Act. See TEX. GOV’T CODEANN. @j 2254.001-,154 (Vernon 2000 & Supp.
2006). This act applies any time a go,vernmental entity, like a hospital district, contracts for
professional services. See Tex. Att’y Gen. Op. No JM-1189 (1990) at 4-5; see also TEX. GOV’T
CODE ANN. 5 2254,002(1)(B) (Vernon Supp. 2006) (defining “governmental entity” to include
“district[s]” ofthe state); id. 5 2254.002(2)(A)(v), (B)(v) (defining “professional services” to include
medicine and services rendered by a physician). Under the act,

                (a) A governmental entity may not select a provider of professional
                services or a group or association of providers or award a contract for
                the services on the basis of competitive bids submitted for the
                contract or for the services, but shall make the selection and award:

                         (1) on the basis of demonstrated            competence     and
                qualifications to perform the services; and

                        (2) for a fair and reasonable price.

                (b) The professional   fees under the contract:

                         (1) must be consistent with and not higher than the
                recommended     practices and fees published by the applicable
                professional associations; and

                        (2) may not exceed any maximum provided by law.

Id. 5 2254.00% (Vernon 2000).

         Thus, to the extent the District’s proposed sums represent compensation ,for professional
services within the scope of the practice of medicine or provided in connection with the employment
or practice of a physician, they must be fair and reasonable, must be consistent with and not higher
than the recommended practices and fees published by the applicable professional associations, and
may not exceed any maximum provided by law. Whether the amounts the District proposes to pay
comply with those requirements requires the resolution of fact questions, which is not appropriate
The Honorable Robert G. Neal, Jr. - Page 5                    (GA-0472)




in the opinion process. See Tex. Att’y Gen. Op. No. GA-0430 (2006) at 3 n.4. Under the terms of
the Professional Services Procurement Act, the contract may not be competitively bid. TEX. GOV’T
CODE ANN. 5 2254.003(a) (Vernon 2000); see also Tex. Att’y Gen. Op. No. JM-1189 (1990) at 4
(concluding that a contract that comprises professional services may not be competitively bid by the
Professional Services Procurement Act’s operation).

           We last address your question on whether the District may restrict its discussion of the
doctor’s contract to a closed meeting. Request Letter, supra note 1, at 2. Specifically, you question
whether these deliberations fall under exceptions to the Open Meetings Act-the attorney exception
‘and the exception for deliberation regarding economic development negotiations. Id. at 4-5. Every
regular, special, or called meeting of a governmental body such as the District must be open to the
public, except as provided by Government Code chapter 551, the Open Meetings Act. TEX. GOV’T
 CODE&W.       5 551.002 (Vernon2004); id. 5 551.001(3)(H) (defining“govemmental         body”to include
 a hospital district).    Section 55 1.07 1, the attorney exception, is such an exception  and permits a
 governmental body to consult with its attorney in a closed meeting to seek the attorney’s advice on
 legal matters. See id. 5 55 1.071. This office has said that a governmental body may consult with
 its attorney ,in a closed meeting about the legal issues raised in connection with a proposed contract.
 See Tex. Att’y Gen. Op. No: K-0233 (2000) at 3. But the governmental body may not discuss the
merits of a proposed contract, financial considerations, or other nonlegal matters in a closed meeting
 held under this exception. See id. Thus, the District may meet in a closed meeting to discuss legal
 issues raised in connection with the contract for the doctor’s professional services, but the District
 is constrained to discussing only the legal issues raised in connection with the contract.

       You also ask about section 551.087, the exception for deliberation regarding economic
development.   See Request Letter, supra note 1, at 4-5.    Section 551.087 provides that a
governmental body may conduct a closed meeting

                          (1) to discuss or deliberate regarding commercial or financial
                 information that the governmental body has received from a business
                 prospect that the governmental body seeks to have locate, stay, or
                 expand in or near the territory of the governmental body and with
                 which the governmental body is conducting economic development
                 negotiations; or

                         (2) to deliberate the offer of fmancial or other incentive to ~a
                 business prospect described by Subdiyision (1).

TEX. GOV’T CODE&IN. 5 55 1.087 (Vernon 2004). We can find no authority permitting the District
to engage in or promote economic development programs7 and thus we must conclude that, based
on the exception’s plain language, it does not apply to the District. See id. 5 551.087(l) (requiring
the governmental body to be conducting “economic development negotiations” ‘for the exception to
apply) (emphasis added).


        ‘See generally   Act of May 22, 1915,64th   Leg., RX, ch. 565, 1975 Tex. Gen. Laws 1829,
The Honorable Robert G. Neal, Jr. - Page 6           (GA-0472)




                                      SUMMARY

                       The Sabine County Hospital District, which intends to
              maintain an ambulance only for transporting patients between
              hospitals, is not required by law to dispatch its ambulances for
              emergency calls, even if there are no other ambulances operating
              within the District.

                       The District may provide financial incentives in a contract to
              induce a doctor to move to the District so long as the District finds
              that such an incentive is necessary for the direct accomplishment of
              a legitimate public purpose, that the District receives adequate
              consideration for its expenditure, and that appropriate controls are in
              place to assure that the public purpose will be carried out.
              Furthermore, the Professional Services Procurement Act, Government
              Code chapter 2254, which governs a hospital district’s contract for
              professional services, requires that payment for services rendered
              under the contract be fair and reasonable, that they be consistent with
              and not higher than the recommended practices and fees published by
              the applicable professional associations, and that they not exceed any
              maximum provided by law. The act does not permit the contract to
              be competitively bid.

                        The District may meet under Government Code section
               551.071 in a closed meeting to discuss legal issues raised in
               connection with the contract for the doctor’s professional services.
               The District may not meet under Government Code section 55 1.087
               in a closed meeting to deliberate economic development negotiations.




RENT C. SULLIVAN
First Assistant Attorney General

ELLEN L. WITT
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Daniel C. Bradford
Assistant Attorney General, Opinion Committee
