                                    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
