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Signed Into Law
Signed June 20, 2025Effective 2025-06-20
HB3505

Regular Session

Relating to the continuation and operation of a health care provider participation district created by certain local governments to administer a health care provider participation program.

Government Affairs & Regulatory Compliance Analysis

HB3505: Government Affairs Overview

HB3505 immediately transitions existing Health Care Provider Participation Districts (HCPPDs) in specific rural Texas counties from Chapter 300A to a new Chapter 300C regulatory framework. Nonpublic hospitals in affected jurisdictions must immediately prepare for mandatory assessments capped at 6% of net patient revenue to fund Medicaid supplemental payments, subject to strict prohibitions against passing these costs to patients.

Rep. Cody Harris·House Bill·Regular Session

Critical
High Cost
Effective:2025-06-20
Enforcing Agencies

District Board of Directors (Local Health Care Provider Participation District) • Health and Human Services Commission (HHSC)

Business Impact

Who HB3505 Affects

This legislation has regulatory implications for the following Texas businesses and organizations:

Regulatory Priority: critical

Significant regulatory changes (effective 2025-06-20). Review with your legal and compliance teams to understand implications.

🏥

Healthcare

Affected business types:

  • Hospitals
  • Healthcare systems
  • Medical practices
  • Health insurance providers
View all healthcare legislation

Key Operational Considerations

  • 1Medicaid Managed Care Agreements: Review current contracts with MCOs. Ensure fee schedules are updated to reflect the uniform rate enhancements funded by your participation in the District.
  • 2Chargemaster Review: IT/Revenue Cycle teams must ensure no automatic pass-through logic is applied to these assessments.

Estimated Cost Impact

highSignificant operational investment may be required.

Enforcing Agencies

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HB3505
Relating to the continuation and operation of a health care provider participation district created by certain local governments to administer a healt...
Critical Urgency
Heavily Contested
House Vote118 - 28
YEA
NAY
81% in favor146 voting
Senate Vote30 - 1
YEA
97% in favor31 voting
29
Total Opposition Votes
Cost Impact
High
Effective
2025-06-20
Enforcing Agencies
District Board of DirectorsHHSC
Primary Author: Rep. Cody Harris
89th Texas Legislature
jdkey.com
01

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

  • Effective Date: June 20, 2025 (Law is currently in effect).
  • Compliance Deadline: Immediate upon Board Authorization. Once the local District Board authorizes the collection, data submission and payment obligations are active.
  • Agency Rulemaking:
  • HHSC: Must adopt rules regarding the reporting of funds and expenditures.
  • District Board: Must hold an annual hearing to set the mandatory payment rate.
  • Regulatory Gray Zone: Until the Board sets the specific rate for the fiscal year, the exact liability remains unknown (0% to 6%), though the legal authority to collect is active.

Immediate Action Plan

  • 1. Jurisdictional Verification: Confirm if your facility is located in a qualifying district (Trinity River border/pop. 80k-90k; Oklahoma border/pop. 45k-55k; or Jim Chapman Lake area).
  • 2. Lock Down Billing: Audit billing systems immediately to ensure the assessment is treated as an operational expense, not a patient surcharge.
  • 3. Prepare Data Packet: Locate your most recent DSHS Annual Survey and Medicare Cost Report. Compare the net patient revenue figures in both to anticipate your potential tax liability.
  • 4. Calendar the Hearing: Identify when the District Board will hold the annual rate-setting hearing. Your CFO or Government Affairs rep must attend to verify the calculation methodology.
  • 5. Update Accruals: Adjust financial statements to accrue for the potential 6% assessment liability effective immediately.

Operational Changes Required

Contracts

  • Medicaid Managed Care Agreements: Review current contracts with MCOs. Ensure fee schedules are updated to reflect the uniform rate enhancements funded by your participation in the District.
  • Vendor Verification: The District may contract with third parties for tax collection. Verify the authority of any third-party vendor submitting invoices for these assessments before remitting payment.

Hiring/Training

  • Billing Compliance Training: Finance and billing staff must be trained on Sec. 300C.0151(e). You are strictly prohibited from adding this mandatory payment as a surcharge or line item on any patient bill.
  • Chargemaster Review: IT/Revenue Cycle teams must ensure no automatic pass-through logic is applied to these assessments.

Reporting & Record-Keeping

  • Data Submission: You must submit a copy of the financial and utilization data previously reported to the Department of State Health Services (DSHS) under Sections 311.032/311.033.
  • Fallback Documentation: If DSHS data is unavailable, the District will default to your Medicare Cost Report from the previous fiscal year. Ensure this report is segregated and ready for inspection.
  • Audit File: Create a specific "Chapter 300C Compliance" file containing assessment notices, proof of payment, and the specific data set used to calculate your liability.

Fees & Costs

  • Mandatory Assessment: Budget for an annual liability of up to 6% of aggregate net patient revenue.
  • Payment Schedule: Payments will be assessed annually or quarterly. Adjust cash flow projections to accommodate these lump-sum outflows.
  • Penalties: Delinquent payments incur interest and penalties capped at the maximum rate authorized for other local government debts (typically property tax penalty rates).

Strategic Ambiguities & Considerations

  • Net Patient Revenue Calculation: The statute prioritizes DSHS data but allows Medicare Cost Reports as a fallback. These two sources often yield different "Net Patient Revenue" figures due to varying treatments of bad debt and charity care. If your facility has a discrepancy between these reports, the Board has discretion on which figure to use.
  • Federal Waiver Dependency: The program's existence relies on the federal 1115 Waiver. If CMS alters "hold harmless" rules, the District Board is authorized to unilaterally modify the assessment methodology to remain compliant. This creates a risk of mid-year formula changes.

Need Compliance Guidance on This Legislation?

JD Key Consulting specializes in Texas regulatory compliance strategy. Work directly with James Dickey—former Chairman of the Republican Party of Texas—to understand this bill's impact on your operations and develop an actionable compliance plan.

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Information presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.

02

Legislative Timeline

This bill's path through the Texas Legislature

Filed
Feb 28, 2025
Passed House
May 6, 2025
Passed Senate
May 25, 2025
Signed
Jun 20, 2025
Effective
Jun 20, 2025
TopicsCity GovernmentCity Government--generalCounty GovernmentCounty Government--generalHealth Care ProvidersOpen MeetingsSpecial Districts & AuthoritiesSpecial Districts & Authorities--hospitalState FinancesState Finances--management & ControlMedicaidHealth & Human Services Commission
03

House Authors

Rep. Cody HarrisRepublican · Primary Author

Senate Sponsor

Sen. Bryan HughesRepublican · Primary Sponsor

Bill Text(with markup)

Showing first 50k characters.

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

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Quick Reference

Frequently Asked Questions

Common questions about HB3505

Q

What does Texas HB3505 do?

HB3505 immediately transitions existing Health Care Provider Participation Districts (HCPPDs) in specific rural Texas counties from Chapter 300A to a new Chapter 300C regulatory framework. Nonpublic hospitals in affected jurisdictions must immediately prepare for mandatory assessments capped at 6% of net patient revenue to fund Medicaid supplemental payments, subject to strict prohibitions against passing these costs to patients.

Q

Who authored HB3505?

HB3505 was authored by Texas Representative Cody Harris during the Regular Session.

Q

When was HB3505 signed into law?

HB3505 was signed into law by Governor Greg Abbott on June 20, 2025.

Q

Which agencies enforce HB3505?

HB3505 is enforced by District Board of Directors (Local Health Care Provider Participation District) and Health and Human Services Commission (HHSC).

Q

How significant are the changes in HB3505?

The regulatory priority for HB3505 is rated as "critical". Businesses and organizations should review the legislation to understand potential impacts.

Q

What is the cost impact of HB3505?

The cost impact of HB3505 is estimated as "high". This may vary based on industry and implementation requirements.

Q

What topics does HB3505 address?

HB3505 addresses topics including city government, city government--general, county government, county government--general and health care providers.

Q

What are the key dates for HB3505?

Key dates for HB3505: Effective date is 2025-06-20. Rulemaking: Executive Commissioner must adopt rules to administer the reporting requirements regarding program funds and expenditures (Sec. 300C.0154(c)). (Not specified (implied immediate/as soon as practicable)); Must hold annual public hearings on mandatory payment amounts and spending plans; may adopt rules for administration, collection, and

Q

What are the penalties under HB3505?

HB3505 establishes the following penalties: administrative penalty of Variable (capped at max authorized for other local gov delinquent payments) for Delinquency on mandatory payments assessed by the District.; administrative penalty of Refusal of funds for HHSC determination that acceptance of local funds may violate federal law.. Consult with legal counsel for specific applicability to your situation.

Q

Which Texas businesses are affected by HB3505?

HB3505 primarily affects healthcare providers and medical facilities. These businesses should review the legislation with their legal and compliance teams to understand potential impacts.

Need Strategic Guidance on This Legislation?

JD Key Consulting is an Austin, Texas-based government affairs firm led by James Dickey, former Chairman of the Republican Party of Texas. We specialize in Texas regulatory compliance and legislative strategy for data centers, energy, banking, and manufacturing.

Legislative data provided by LegiScanLast updated: January 11, 2026