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Legislative Priorities

The 150 hospital members of TORCH provide health care to 3.5 million rural Texans. These rural hospitals serve as the rural health care safety net in Texas — often when no other care is available.

In fact, rural hospitals provide emergency care for 85 percent of the state. These same rural hospitals operate with lower patient volume and serve patients that are older and poorer. Rural hospitals see higher levels of patients on Medicare, Medicaid or without any insurance.

The ability to effectively and efficiently provide this care is driven by state and national governmental policies.

Rural hospital priorities for the upcoming 83rd session of the Texas Legislature will be posted soon.

The following were priorities for TORCH and its member hospitals during the most recent 82nd session of the Texas Legislature:

High Priorities

Physician Recruitment/Corporate Practice of Medicine

Allowing rural hospitals to employ physicians is critical to future recruitment and access to health care services. Current Texas state law is interpreted to prohibit corporations, including hospitals, from employing physicians, even when physicians request to be employed. This antiquated law, which exists in only a few states, has become a barrier to the recruitment of physicians into rural Texas communities as more and more physicians are demanding employment over the challenges of starting their own practice.

HB 3485 overwhelmingly passed in the 81st session which would have allowed many rural physicians the option to be a hospital employee. However, the bill was vetoed because of confusion over some tort related language. The Legislature must again pass a change in this law for rural hospitals.

Medicaid Reimbursement

Medicaid reimbursement to Texas rural hospitals has, at the very least, covered the cost for providing these services. Historically, the Texas Legislature has mandated in budget riders that Medicaid reimburse rural hospitals for their actual costs. However, a growing push for Medicaid services to be rolled into managed care HMO-style plans could circumvent that requirement and result in rural hospitals being forced to accept less than actual cost for their services to Medicaid patients.

Also, Medicaid HMO payments cannot be used in UPL calculations meaning federal payments to rural hospitals to offset underfunded care will also be substantially reduced.

Medicaid payments to rural hospitals through an HMO must still cover costs and be paid in a manner that does not lead to a reduction in federal UPL payments.

Texas rural hospitals are less than 1.5 percent of the state Medicaid budget (less than 2.5 percent of health care-related payments). Reduced payments to rural hospitals will not help the state budget shortfall but will potentially cause great harm to the rural hospital safety net.

Rural Hospital Pharmacy Supervision

The current patient medication “double-check” process in Texas rural hospitals where a pharmacist, nurse or other provider double-checks the work of a pharmacy technician is a safe and reliable system. Patient safety is a top priority with Texas rural hospitals. Any unreasonable attempt to layer over the present system with more intense pharmacist review — when pharmacists are scarce in rural Texas — is burdensome, unnecessary and unrealistic.

The 81st session of the Legislature directed the Texas State Board of Pharmacy to continue with reasonable supervision requirements and delayed any possible requirements for more intensive medication review for at least two years. With a continuing pharmacist shortage in rural Texas, and in view of no documentation of serious medication errors in rural hospitals, additional supervision or drug review requirements would impose an undue burden on rural hospitals and add costs to patients. Pharmacy operations in rural Texas hospitals are safe and effective – the current system should remain in place.

Aging Hospital Infrastructure

Rural Texas health care will soon be facing a crisis with aging and outdated hospital facilities in a number of counties and hospital districts without adequate local resources to update or replace them. The core structure of many rural hospitals is 40-plus years old and eventual more stringent life safety codes and other requirements could jeopardize continued operations without major improvements. TORCH has identified more than 20 Texas counties and/or hospital districts with a total tax base of less than $400 million meaning it would be almost impossible to raise taxes enough to replace their hospitals.

A Rural Safety-net Hospital Infrastructure Fund should be established by the state to assist rural communities with replacing aging and antiquated hospitals (similar to the state’s courthouse preservation fund which assists local communities with matching funds). State assistance would also afford an opportunity for replacement facilities to incorporate the most advanced health information systems and energy efficiency technology.

Should such a program be created during the 82nd session, appropriation of funding would not be necessary until 2013, but would accelerate program start-up, processing of applications and bidding of projects.

Other Important Issues for Texas Rural Hospitals

Third-party Payer Outsourcing

Many Texas health insurance companies are increasingly outsourcing to off-site facilities for services such as laboratory tests and pathology work when the same services are also offered by the community hospitals where the patient receives care. Such outsourcing saves little in cost in many cases but adds to the health care system complexity for patients, drains rural hospitals of revenue and weakens the rural health care infrastructure. Third party health insurance payers should be required to contract with local rural hospitals for ancillary services unless it can be demonstrated that it adds substantial cost.

Correction to New Physician Loan Repayment Program

The 81st Session of the Legislature created a new smokeless tobacco tax-funded physician loan repayment program for rural and underserved areas (HB 2154); however, some rural areas in Texas are excluded from the program. The enabling legislation limited the program to Health Professional Shortage Areas (HPSA). Unfortunately there are several extremely rural counties in Texas that are not designated as a HPSA because they were never reviewed for consideration or the population is so low meaning one or two health providers bumps them from HPSA status. Texas Education Code, Section 61.532 needs to be amended so the program automatically includes any rural county with a population of 25,000 or less, as well as any county with one or no physician. The program should also be expanded to cover other health professions in rural Texas where severe shortages exist.

Expanded Borrowing Authority Needed for Public Rural Hospitals

Most public hospitals currently have authority to borrow only through general obligation or revenue bonds and have no authority to bank borrow. This is complicated and costly for the purchase of capital items and smaller projects.  Some specific government-owned hospitals have been given bank borrowing authority through local bills. All public (hospital district and county) hospitals should be authorized by the Legislature to borrow from banking institutions for short term needs (less than 5 years) and to pledge hospital assets or revenue for that purpose. 

Federal Health Reform

The passage of federal health care legislation will force the Texas Legislature to begin making decisions with regard to implementation at the state-level. Many of the decisions regarding the availability of affordable health insurance, provider reimbursement and cost-savings initiatives will have a long-lasting and profound financial impact on rural providers. Many policies related to the Affordable Care Act will need to be made before the next regular legislative session. Therefore, there will be a considerable number of decisions to make in a very short period of time. This compressed timeline is typically a bad omen for rural providers are often subjected to "one-size-fits-all" policies that fail to take into account the unique needs that rural providers have.

SPA Act Inclusion of Certain Hospitals

The Texas Health Spa Act exempts some hospitals but unintentionally includes others. The law is "to protect the public against fraud, deceit, imposition, and financial hardship and to foster and encourage competition, fair dealing and prosperity in the field of health spa operations and services." The Act was clearly intended to counteract "fly by night" gyms and spas. It exempts wellness centers operated by nonprofit hospitals from having to register as a "health spa." However, there is no exception for government-owned hospitals. The unintended requirement for government owned hospitals to register is just another layer of unnecessary regulation for an entity that is already licensed by the state.

Correctional Health Care Use of Rural Hospitals

Correctional Managed Health Care currently contracts with a number of rural hospitals (mostly in West Texas through Texas Tech) to provide some services not available within local prison units. In recent years, there has been discussion on curtailing escalating inmate health care costs, including privatization. Not only should UTMB and Texas Tech be encouraged by the Legislature to use rural hospitals as much as possible, but any future contracting with private entities for inmate care should require those entities attempt to sub-contract with rural hospitals for inpatient and other services. Use of rural hospitals by correctional care helps keep many of these hospitals open for business.

Increasing Fees

Texas rural hospitals are disproportionately impacted by fees charged by state agencies and those hospitals continue to see increases in their cost of “doing business” with the state. Understandably, state agencies attempt to recover the cost of services through fees, however, more thought must be given to the impact that these fees have on rural providers. Small hospitals with low patient volume typically have a narrower financial margin, yet they often pay the exact same amounts as their large urban counterparts. Tiering or fee structures that based on patient volumes and in appropriate ratios are a better way to assess payments.


The redistricting process often disadvantages rural areas and causes rural health care provider to lose critical representation at the state and federal level. We would ask that the committees that are responsible for directing the redistricting process in both the House and Senate commit to maintaining the highest legal representation possible in rural areas. Rural Texas consists of 3.5 million residents and even though it hasn’t grown at the same rate as urban Texas, it still exceeds the total population of at least 22 different states. Rural Texas is also the source of food, fuel, and fiber for the remainder of Texas and much of the country.

There will certainly be additional issues on which TORCH intends to take a position in accordance with the proposals submitted during the course of the legislative session. TORCH has built strong relationships with elected officials at the state and federal level, as well as a reputation for providing accurate, useful information for policymakers. As an advocate for rural and community hospitals, we promise to demonstrate the effects of proposed legislation on hospitals, their staff and their communities and to do so in a manner that reflects our collective intention of making Texas stronger.

Thank you for reviewing this list of priorities and please contact us if you have any follow-up questions.

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Happy National Rural Health Day from TORCH!