Local Option Exemption from Ad Valorem Taxation for Physician Charity Care

Testimony by Texas Medical Association

Senate Bill 1543, Senate Joint Resolution 52
Senate Finance Committee

April 3, 2017

The 50,000-plus physician and medical student members of the Texas Medical Association sincerely appreciate Senator West for offering this legislation and the Senate Finance Committee for conducting this public hearing.

For centuries, physicians have provided free or reduced-price care to patients who needed their medical services but could not afford to pay for them. This past year, our research estimates that the average Texas physician provides $76,620 worth of charity care each year.

In some cases, these are voluntary acts of charity. In other instances, such as in hospital emergency rooms, physicians provide care first and inquire about ability to pay later, as mandated by federal EMTALA laws. 

Physicians who provide charity care are providing a service that is valuable directly to the patient and indirectly to Texas taxpayers. In outpatient settings, for example, providing good ambulatory care can prevent bad outcomes for the patient that could become costly inpatient care at taxpayer expense.  

Our research indicates that the value of charity care physicians provide is declining, primarily due to increasing costs of running a practice and reductions in payments for services they provide to patients covered by commercial insurance, Medicare, and Medicaid. As profit margins shrink, so does the physician’s ability to give away free care.

Few real options are available that address this problem head-on. There is no federal tax deduction for the value of donated personal services. Texas’ franchise tax deduction for charity care, though potentially helpful to large or incorporated groups provides little or no benefit to physicians in solo practice, simple partnerships, or other small practices. 

Again, we appreciate the property tax reduction proposed in this legislation and the intentions of Sen. West. It is a helpful attempt to solve some of this problem. Unfortunately, it presents several challenges, such as passage of a constitutional amendment, and then local action and implementing regulations by each local taxing authority. We have questions as to how the system would work and how much effort would be required of both physicians and local jurisdictions.  As currently worded, it could have the unintended consequence of reducing or discouraging Medicaid provider participation.

While we take no formal position on this legislation, we do recommend that you focus on actions that could have much more certain, immediate, comprehensive, and widespread impact. These are suggestions with which Senator West and the committee are extremely familiar: 

  • Improve physician payment and simplify the overwhelming administrative burden for physicians in the Medicaid program.
  • Improve the financing and operation of indigent health care provided by counties and hospital districts, with a goal to fund physician outpatient care, and to simplify the eligibility, application, and payment request processes for physicians and their patients.
  • Provide funding or encourage counties and/or hospital districts to provide funding for local charitable programs like Project Access that help to fund services and connect uninsured patients to needed care.


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Last Updated On

April 24, 2018

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