Did a county hospital authority's hospital stop being a public hospital when a private corporation leased and operated it?

Texas AG Opinion JM-603: Leased Public Hospital Status

Plain-English summary

JM-603 concluded that Hale County had a public hospital even though a private corporation leased and operated the facility. The hospital authority remained the owner and lessor, and the Indigent Health Care and Treatment Act defined a public hospital to include one owned, operated, or leased by a governmental entity. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0603.pdf

Because a hospital authority owned and leased the facility, Title 3 of the Act applied. The opinion said the governmental entity that created or authorized the authority had to provide sufficient funding for the required health-care assistance. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0603.pdf

On eligibility, the opinion gave a conditional answer. If the hospital had a Hill-Burton obligation during part of the relevant operating year and did not use an income-and-resources standard during that year, section 10.02(d) required the hospital to adopt its Hill-Burton standard. Whether the hospital had used another standard was a fact question the AG did not decide. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0603.pdf

Currency note

This opinion was issued in 1986. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Who this opinion affected in 1986

Hospital authorities: JM-603 said leasing operations to a private corporation did not end public-hospital status when the authority retained ownership and a landlord's rights under the lease. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0603.pdf

Counties and other creating governmental entities: The opinion linked public-hospital status to a duty under the Act to provide sufficient funding for required indigent health-care assistance. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0603.pdf

Eligibility administrators: The applicable standard depended on whether the hospital had used an income-and-resources standard during the relevant year and whether it had a Hill-Burton obligation. The opinion did not resolve the underlying fact question. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0603.pdf

Common questions

Did the private operator become the hospital owner?

No. JM-603 read the agreement as a lease. The authority retained ownership, the right of reversion, inspection rights, and control over specified capital additions. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0603.pdf

Was Hale County treated as a county without a public hospital?

No. The opinion concluded that the authority-owned and leased hospital remained a public hospital under the Act. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0603.pdf

Which part of the indigent-care law applied?

JM-603 said Title 3, governing areas served by a public hospital, applied to Hale County. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0603.pdf

Did the AG decide which eligibility standard the hospital had actually used?

No. The opinion said that was a factual determination outside the opinion process. It gave the section 10.02(d) result on the assumption that no other income-and-resources standard had been used during the relevant year. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0603.pdf

Background and statutory framework

The Hale County Hospital Authority leased Central Plains Regional Hospital to a corporation for a long term. The lease left ownership with the authority, gave the operator a leasehold interest, and reserved inspection, reversion, and specified approval rights to the authority. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0603.pdf

Section 1.02(10) of the Indigent Health Care and Treatment Act defined a public hospital as a hospital owned, operated, or leased by a governmental entity. Section 1.02(6) included a hospital authority within the definition of governmental entity. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0603.pdf

Section 10.02 provided the income-and-resources framework. Subsection (c) addressed a less restrictive standard used during the prior operating year, while subsection (d) addressed a hospital that had no such standard but did have a Hill-Burton obligation during part of that year. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0603.pdf

Key source language

JM-603 stated:

"Hale County is not a county without a public hospital and is instead a county with a public hospital owned by a hospital authority and leased by it to a corporation that operates the hospital."

"Whether the hospital used an income and resources standard during the operating year that ended before January 1, 1985 is a factual determination that this agency is not equipped to make in the opinion process."

"A public hospital that had a Hill-Burton obligation during part of the operating year that ended before January 1, 1985, and did not use an income and resources eligibility standard for health care assistance during that year, is required by article 4438f, section 10.02(d) to adopt the standard used by the hospital to meet its Hill-Burton obligation."

Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0603.pdf

Citations and references

Statutory provisions:

• V.T.C.S. article 4438f, sections 1.02(6), 1.02(10), 10.02(b)-(d), and 12.03
• V.T.C.S. article 4494r (County Hospital Authority Act)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-0603
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0603.pdf

Original opinion text

December 30, 1986

Eonorable'R. J. Thornton
Hale County Attorney
Third Floor, Courthouse
Plainview, Texas
79072

Opinion No.

~~-603

Re: Status of Hale County under the
Indigent Health Care and Treatment
Act,
article
4438f. V.T.C.S.

Dear Mr. Thornton:
You ask the following question involving an interpretation of the
statutory language in the Indigent Realth Care and Treatment Act:

1. Is Hale County a county without a public
   hospital or a county under a hospital authority?
   2.
   If Aale county is un+er a hospital
   authority, would section
   10.02(c)
   or
   section
   10.02(d) provide the proper income and resources
   eligibility standards?

The Bale County Eospltal Authority was created under the County
Hospital Authority Act, which is codified as article 4494r. V.T.C.S.
The governing body of a hospital authority created under that act is
authorized to lease to a corporation, among other entities, w
hospital or part of a hospital owned by the hospital authority to be
operated as a hospital by the lessee under terns and conditions that
are satisfactory to the governing body,and the lessee. See V.T.C.S.
art. 4437e-1, §ll, 2; art. 4494r, 955, 14.
The Bale County Bospital Authority leased Central Plains Regional
Bospital to a corporation in February, 1984, for a term of 25 years.
A copy of the lease agreement furnished to us contains traditional
elements of a lease and makes It clear that the hospital authority
remains the owner of the hospital and the corporation is a lessee of
the hospital. The lease specifies a rental fee and provides that,
unless there is further agreement, possession of the hospital reverts
to the hospital authority at the end of the 25 year term. It contains
provisions for early termination of the agreement by the hospital
authority under certain circumstances. Title to capital additions
vests in the hospital authority, which retains the power to disapprove
construction of certain capital additions. The hospital authority has
access to the property at all reasonable times for purposes of
inspection of the property. In the event the hospital authority
desires to sell any of its interest in the property or the agreement,

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Honorable R. J. Thornton - Page 2

(JM-603)

the lessee has the first option to purchase It. In summary, it
appears that the agreement confers a leasehold interest and the right
to operate the hospital to the corporation with the hospital authority
remaining the owner and lessor of the hospital.
Under the state certificate of need program which expired in
1985, expansion or modification of a health facility or its services
required a certificate of need granted by the Texas Bealth Facilities
CoImaission. See V.T.C.S. art. 4418h. 93.01, 53.03-3.15 (expired). We
are advised that a certificate of need for the hospital In question
was transferred to the corporation which agreed to operate the
hospital as the lessee. In our opinion, the transfer of the certificate of need does not alter ownership of the facility. Under the
lease agreement, the corporation assumed responsibility for expansion
or modification of the hospital in its capacity as lessee. As lessor
of the facility, the hospital authority retained ownership of the
hospital while transferring authority for capital improvements and
expansions to the corporation.
In answer to your first question, we conclude that, under the
express provisions of the Indigent Health. Care and Treatment Act,
article 4438f. V,T.C.S.. Hale County is not a county without a public
hospital and is instead a county. with a public hospital owned by a
hospital authority and leased by it to a corporation that operates the
hospital. Section 1.02(10) of the act defines a public hospital as "a
hospital owned, operated. or leased by a governsiental.entity."
(Emphasis added). According to section 1.02(6). a governmental entity
"includes a county,'city, town, hospital authority, or other political
subdivision of the state, but does not include a hospital district."
The dominant consideration in construing a statute is the legislative intent. Minton v. Frank. 545 S.W.2d 442. 445 (Tex. 1976). The
words of the statute are the best evidence of legislative intent and,
where a statute is plain and unambiguous, it will be enforced
according to its words. Anderson v. Penix, 161 S.W.2d 455, 459 (Tex.
1942); Sabine Pilots Association v. Lykes Brothers Steamship, Inc.,
346 S.W.2d 166, 169 (Tex. Civ. App. - Austin 1961. no writ). In our
opinion. the language in section 1.02(6) and section 1.02(10) is clear
and unambiguous. Consequently, we conclude that Title 3 of the
Indigent Health Care and Treatment Act, which relates to an area
served by a public hospital, applies to health care services and
assistance for persons who reside in Bale County. Each governmental
entity that owns, operates, or leases a public hospital shall provide
sufficient funding to the hospital to provide the health care
assistance required by the act. Since the public hospital is owned
and leased by a hospital authority, the governmental entity that
created or authorized the creation of the authority shall provide
sufficient funding to the public hospital or hospital authority to
provide the health care assistance required by the Indigent Eealth
Care Act. -See V.T.C.S. art. 4438f. 510.02(a), 512.03.

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Honorable R. J. Thornton - Page 3

(JM-603)

Your second question relates to the standards for determining
eligibility for health care assistance under Title 3 of the act.
Under the facts which are presented to us, it appears that the
standard that the hospital used to meet a Hill-Burton obligation
should be adopted by the hospital to determine eligibility under
Title 3.
Section 10.02 of the Indigent Bealth Care Act provides, in part:
(b) A person is eligible for assistance under
this title if the person resides within the area
that a public hospital has a legal obligation to
serve and:
(1) meets the basic income and resources
requirements established by the department under
Section 1.06 of this Act and in effect at the time
the assistance is requested; or
meets a less restrictive income and
(7-I
resources standard adopted by the public hospital
serving the area in which the person resides.
(c) If a public hospital used an incoaie and
standard during the operating year that
ended before January 1, 1985, that was less
restrictive than the income and resources requirements established by the department under Section
1.06 of this Act, the public hospital shall adopt
that standard to determine eligibility under this
title.
resources

(d) If a public hospital did not use an income
and resources standard during the operating year
that ended before January 1, 1985, but had a EillBurton obligation during part of that year, the
hospital shall adopt the standard the hospital
used to meet the Hill-Burton obligation to determine eligibility under this title.
V.T.C.S. art. 4438f, 510.02(b)-(d). Section 1.06 directs the Texas
Department of Human Services to establish standards for use in
determining eligibility under the act.
Basically, the legislature has provided that under Title 3 a
person is eligible for assistance who meets the income and resources
requirements established by the Department of Buman Services or a less
restrictive standard adopted by a public hospital. V.T.C.S. art.
4438f. 510.02(b). Under subsection (f), of section 10.02 a public
hospital may adopt a less restrictive standard at any time and under
subsection (c), a public hospital that used a less restrictive

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Honorable R. J. Thornton - Page 4

(JM-603)

standard during the operating year that ended before January 1, 1985
must adopt that less restrictive standard for the purpose of
determining eligibility. In addition, a public hospital that had a
Hill-Burton obligation during part of the operating year that ended
before January 1. 1985. and did not use an Income and resources
standard during that year, is required to adopt the standard the
hospital used to meet its Hill-Burton obligation. See subset. (d).
You advise us that your hospital’s Eill-Burton obligation was not
paid off until sometime in February 1984. Hence, it appears that the
hospital had a Eill-Burton obligation during at least part of the year
ending before January 1, 1985. Whether the hospital used an income
and resources standard during the operating year that ended before
January 1. 1985 is a factual determination that this agency is not
equipped to make in the opinion process. Assuming, however, that the
hospital did not use such a standard during that period, section
10.02(d) of article 4438f specifies the use of the standards used to
meet the Hill-Burton obligation for determining eligibility under the
Indigent Eealth Care Act. If section 10.02(d) is not applicable to
your hospital under the facts, we conclude that it is a public
hospital which must adopt income and resources standards that are not
more restrictfve than the standards established by the Department of
Buman Services and not more restrictive than standards that the public
hospital used during the year ending before January 1, 1985.
SUMMARY
Under the provisions of the Indigent Eealth
Care and Treatment Act, article 4438f. V.T.C.S.,
Hale County is a county with a public hospital
owned by a hospital authority and leased by it to
a corporation which operates the hospital.
A
public hospital that had a Bill-Burton obligation
during part of the operating year that ended
before January 1, 1985, and did not use an income
and resources eligibility standard for health care
assistance during that year, is required by
article 4438f. section 10.02(d) to adopt the
standard used by the hospital to meet its HillBurton obligation.

Attorney General of Texas
JACK HIGETOWBR
First Assistant Attorney General

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Honorable R. J. Thornton - Page 5

MARY KRLLER
Executive Assistant Attbrney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Nancy Sutton
Assistant Attorney General

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(JM-603)