Department of Health and Human Servces 
OFFICE OF 
INSPECTOR GENERAL 
PUBLIC HEALTH SERVICE' S OVERSIGHT 
OF THE HILL-BURTON PROGRAM 
AUGUST 199  OFFCE OF INSPECfOR GENRA 
The mision of the Offce of Inspector General (OIG), as mandated by Public Law 95-452, as
amended, is to protect the integrity of the Department of Health and Human Servces
' (HHS)
programs as well as the health and welfare of beneficiaries served by those programs. This 
statutory mission is carred out through a nationwide network of audits, investigations, and
inspections conducted by three OIG operating components: 
the Offce of Audit Servces, the
Offce of Investigations, and the Offce of Evaluation and Inpections. The OIG also informs 
the Secretary of HHS of program and management problems and recommends courses to 
correct them. 
OFFCE OF AUDIT SERVICE 
The OIG's Offce of Audit Servces (OAS) provides all auditing servce for HHS, either by
conducting audits with its own audit resources or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors in 
carryng out their respective responsibilties and are intended to provide independent 
assessments of HHS programs and operations in order to reduce waste, abuse, and
mismanagement and to promote economy and effciency throughout the Department. 
OFFCE OF INTIGATIONS 
The OIG's Offce of Investigations (01) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 
and of 
unjust enrichment by providers. The investigative efforts of 01 lead to criminal convictions 
administrative sanctions, or civil money penalties. The 01 also oversees State Medicaid fraud 
control units which investigate and prosecute fraud and patient abuse in the Medicaid 
program. 
AN 
OFFICE OF EVALUATION  INSPECfONS 
The OIG's Office of Evaluation and Inspections (OEI) conducts short-term management and
program evaluations (called inspections) that focus on issues of concern to the Department 
the Congress, and the public. The fmdings and recommendations contained in these inspection 
report generate rapid, accurate, and up-to-date information on the efficiency, vulnerabilty, 
and effetivenes of departmental programs. This report was prepared in the Chicago
Regional Offce under the diection of Wiliam C. Moran, Regional Inspector General and
Natalie Con, Deputy Regional Inspector General. Project staff: 
HEUARlE 
REGION 
John M. Traczyk (Project Leader) 
Ruth Folchman

Thomas F. Komaniecki

Margaret Shell

To obtain a copy of this report, call the Chicago Regional Offce at (31  ) 353-4124.  Department of Health and Human Servces 
OFFICE OF 
INSPECTOR GENERAL 
PUBLIC HEALTH SERVICE' S OVERSIGHT 
OF THE HILL-BURTON PROGRAM 
AUGUST 199 OEI-05- EXECUTIVE 
SUMMAR 
PUROSE 
This inspection examines the processes used by the Public Health 
Servce (PHS) to
evaluate and monitor the uncompensated care obligations of health care facilties 
assisted by the Hil-
Burton program. 
BACKGROUN 
The Hospital Survey and Construction Act, commonly known as the Hil-Burton Act 
authorized Federal grants, loans and loan guarantees to assist States and communities 
in constructing needed hospital and public health centers. 
To be eligible for Hil-Burton funds, the applicant had to be a public or not-for-profit
entity. The Hil-Burton Act required that the applicant maintain this status for a 
period of 20 years. These facilties were to make available a reasonable volume of 
free servces to persons unable to pay (uncompensated care obligation). 
Since 1946, more than $4 bilion in Hil-Burton funds have aided nearly 6 900 hospitals 
and other health care facilities in 4 000 communities across the United States. As of 
April 1991, 2 610 Hil-Burton facilties remain obligated and must provide a reasonable 
amount of uncompensated care each year. The cooperation of facilties 
that have 
received Hill-Burton grants is important to achieving the Department's strategic goal 
to improve access to health care for all Americans. 
METHODOWGY 
We intervewed PHS headquarters' staff and staff in the 8 regional offices which 
account for 92 percent of the remaining Hil-Burton workload. We gathered and 
analyzed financial and other data provided by PHS headquarters and regional 
offices. 
FIINGS 
Fif-
three percent of Hil-Burton facilties currently obligated are not providing
sufcient uncompensated care to meet their annual obligation. 
Reliance on self-reported data and inadequate record retention compromise 
PHS monitoring efforts. 
Complaint investigations resolve individual problems but do not ensure facilty 
compliance with the Hil-Burton requirement to provide uncompensated care.  The PHS lacks authority to directly enforce compliance with Hil-Burton 
reguations. 
Facilties transferrng ownership after 20 years may cause the Hil-Burton 
program to lose a portion of the uncompensated care available. 
Nearly $50 milion recovered from Hil-Burton facilties was not available to pay 
for free medical care. 
RECOMMATIONS 
We are recommending the followig improvements to further strengthen the processes
used by PHS. The PHS should: 
develop methods for independent verification of information provided by 
facilties during substantial compliance audits and complaint 
investigations. 
expand their investigation when a complaint alleging noncompliance is 
Guide to Conducting Substantial Compliance 
substantiated or revise the 
to ensure that auditors clearly understand that an 
Reviews and Audits 
expanded compliance review should be conducted on facilities found to 
have substantiated complaints. 
ensure that regional offces maintain records for a minimum of 5 years 
after the close of a substantial compliance audit or complaint 
investigation. 
seek legislative authority to enforce compliance through administrative 
remedies. 
seek legislation that would allow for recovery of the uncompensated care 
obligation if a deficit remains at the time of a post 20 year transfer. 
seek legislation that would allow for the return of monies recovered 
from facilties back into PHS grant programs. 
The PHS has informed us that it has taken action on five of our recommendations. 
They will not seek legislative authority to enforce compliance until they have had time 
to study why facilities are in deficit and to develop alternatives that would assist 
facilties in achieving compliance. If progress is not made in developing alternatives to 
assist facilities in achieving compliance at the end of 1 year, PHS will seek legislative 
authority to enforce compliance through administrative remedies as suggested in this 
report.  ......................... .................
... .. ... .. .. 
. . . . . . . . . . . .. 
. . . . . . ..  ..  ..  ..  ...   ...   ...   ...   ...   ...   ...   ...   ...   ...   .... .  ....   . ..   .....   . ..   .... .  ...    ....    ....    ....    ....    ....    ....    ....   ....    ...   ..  ..  ..  ..  ..  ..  ..  ..  ..  . ..  ..  ..  ..  . .. ..  . .. 
TABLE OF CONTENTS

PAGE 
EXCU SUMY

INODUCfON . 
FIINGS 
. . . . . . . . . . . . . . . . . . . 5 
Fifty-three percent of Hil-Burton facilties 
currently obligated are not providing suffcient 
uncompensated care to meet their annual

compliance level. 
............................................... 5

Reliance on self-reported data and inadequate

record retention compromise PHS monitoring efforts  . . . . . . . . . . . . . . . . . . . . 5

Complaint investigations resolve individual 
problems but do not ensure facilty compliance 
with the Hil-Burton requirement to provide 
uncompensated care. ............................................ 7

The PHS lacks authority to directly enforce

compliance with Hil-Burton regulations  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Facilties transferrng ownership after 20 years 
may cause the Hil-Burton program to lose a 
portion of the uncompensated care available. 
.......................... 8 
milon 
Nearly $50  recovered from Hil-Burton 
facilities was not available to pay for 
free medical care. .............................................. 9

RECOMMATIONS 
APPENICE 
A: PHS Comments
 . . .. A
B: 
OCR Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . .. B- INTRODUCTION
PUROSE 
This inspection examines the processes used by the Public Health Servce (PHS) to 
evaluate and monitor the uncompensated care obligations of health care facilties 
assisted by the Hil-Burton program. 
BACKGROUN 
In 1946, Congress passed the Hospital Survey and Construction Act, commonly known 
as the Hil-Burton Act. Since 1946, more than $4 bilion in Hil-Burton funds have 
aided nearly 6 900 hospitals and other health care facilities in 4 000 communities 
across the United States. These other health care facilties include public health 
centers, nursing homes, chronic disease hospitals and other tyes of facilities. The 
Hil-Burton program provided funds to facilities through 1978. As of April 1991, 2 610 
facilities continued to be obligated under the Hil-
Burton program. 
To be eligible for Hil-Burton funds, the applicant had to be a public or not-for-profit 
entity. The Hil-Burton Act required that the applicant maintain this status for a 
period of 20 years. These facilties were to make available a reasonable volume of 
free servces to persons unable to pay (uncompensated care obligation). 
Each Hil-Burton assisted facility is required to develop an uncompensated care 
allocation plan, indicating the tye of servces available to persons unable to pay. 
These facilities must also publish a notice of their obligation to provide free medical 
care in a local newspaper, post notices within their facilty, and provide individual 
notices of the availabilty of free care to all patients. Hil-Burton recipients are 
required to report to the Department of Health and Human Servces (HHS) the level 
of uncompensated servces they have provided at least once every 3 years. 
The amount of uncompensated care a Hil-Burton recipient must provide is calculated 
by PHS. The obligation is prorated over 20 years, dating from the completion of 
construction of any facilty built with Hil-Burton funds. If a facilty does not provide 
the required level of uncompensated servces in a given year, it must make up the 
deficit, even if it takes longer than 20 years. Facilties that provide more 
than the 
required level of uncompensated servces may have the 
excess credited to future years 
of obligation. This means that a facilty may fulfil its uncompensated servces 
obligation in less than 20 years. 
For a person to be eligible for Hil-Burton coverage, they must not be covered under a 
third part insurer or government program and fall into one of two income categories. 
Persons whose income falls below the povert line 
are entitled to receive services 
without charge. Hil-Burton facilities are not required to provide uncompensated  servces to persons whose incomes are more than the poverty level. If a facilty 
chooses to provide servces to persons whose incomes are greater but not more than 
double the povert level, they may do so at no charge or at a reduced charge. 
Facilties may be certified under the public facilty compliance alternative. To qualify 
as a public facility, the facilty must be owned by a unit of State or local government. 
It must receive, on average, 10 percent of its operating revenue from State or local 
government or provide uncompensated servces in an amount not less than twce its 
annual compliance level. Currently, there are 591 facilties certified under this 
alternative, many of which are located in impoverished areas of cities and provide a 
substantial amount of free care. 
The PHS monitors Hil-Burton facilties to assure that the obligations are discharged 
and that the correct amounts of uncompensated care have been rendered. They also 
conduct routine compliance monitorig, handle complaints and monitor facilties for 
events that might change the terms under which the facility received Hil-Burton 
assistance. 
Monitorig Hil-Burton facilties involves a desk review of patient accounts, patient 
eligibilty information, individual notices and facilty published allocation plans. 
letter is sent to the facility at the end of its fiscal year informing them of PHS's intent 
to assess their compliance with Hil-Burton uncompensated servces obligations. The 
letter requests that the facilty submit information concerning its Hil-Burton free care 
program within 90 days of the close of its fiscal year. 
The PHS uses the information provided by the facilty to verify the amount of 
uncompensated care the facility claims to have provided. This is done by reviewing a 
random sample of 10 approved patient accounts. If fewer than two mistakes are 
fu 
found, then a facilty receives  credit for the amount of uncompensated care 
claimed. If two or more mistakes are found, then PHS will review a random sample 
of 100 approved patient accounts. A percentage of correct determinations will then 
be applied to the amount of uncompensated care claimed. The PHS also reviews 
copies of the facilty' s policies, notices and other information on how its 
uncompensated care program operates. 
The Federal Government can recover Hil-Burton grant funds under certain 
circumstances. These circumstances include situations where the facilty is sold or 
transferred to an ineligible entity, or ceases to be used for an eligible purpose at any 
time within 20 years following the completion of construction. 
Sales and transfers of obligated facilties also affect their obligation to provide 
uncompensated care. When the sale or transfer is to an eligible not-for-
profit entity, a 
waiver can be granted. When a waiver is granted, the purchasing or controllng not-
for-profit entity agrees to assume any remaining uncompensated care liability of the 
original Hil-Burton grantee. If the sale is to a for-profit entity within the 20 year 
obligation period, a waiver can be granted if an irrevocable trust is established to  provide for uncompensated care. Twenty years following the completion of 
construction, for-profit entities or nonprofit entities purchasing or assuming control of
Hil-Burton facilities are not required to provide any remaining uncompensated care 
obligations. 
Facilties may terminate their Hil-Burton obligation for one of several reasons: 
They have provided the required level of uncompensated servces. 
There has been a recovery of fuds due to the sale or transfer of the grant 
assisted facility to an ineligible entity, or due to the cessation of use for eligible 
purposes during the 20-year period of obligation.
They have met another requirement that allows their release from obligation.
The Secretary has established seven strategic goals for HHS. One strategic goal is to 
improve access to health care for all Americans. The effective implementation of the 
Hil-Burton program is an important element in achieving this strategic goal.  MEODOLOY
We intervewed PHS headquarters' staff and staff in 8 regional offices that account for 
92 percent of the current Hil-Burton workload. Regional offce staff in Boston, New 
York, Philadelphia, Atlanta, Chicago, Dallas, Kansas City, and San Francisco were 
intervewed. We asked them to provide information on how they evaluate and 
monitor the uncompensated care obligations of health care facilties assisted by Hil-
Burton program grants. We did not inquire as to procedures and policies pertaining 
to Hil-Burton loan guarantees or other programs under PHS jurisdiction. 
We received information from PHS that identified all obligated facilties. We also
received information that identified those facilties within their 20 year obligation
period and those facilties that received waivers or were released from the Hil-Burton
program. The databases provided information concerning the tye of facilty, 
ownership and current status in the Hil-Burton program. We also received written 
reports, financial and other information about facilties from regional office 
investigative and audit fies and from PHS headquarters. 
We spoke with regional offce staff responsible for monitoring facilties with 
outstanding Hil-Burton obligations. We spoke with staff responsible for monitoring 
changes in ownership and management that might result in a recovery of Hil-Burton 
funds. We also spoke with personnel responsible for determining the amount of 
uncompensated care credit facilties would receive. The method described by regional 
staff for conducting substantial compliance audits and complaint investigations were 
compared to operating procedure manuals issued by PHS. 
The figures used throughout this report refer to facilities currently obligated under the 
Hil-
Burton program. 
Our review was conducted in accordance with the 
 Interim Standards for Inspections

issued by the President's Council on Integrty and Effciency.  FINDINGS

Findig #1: Fif-thee percent of Hi-Buron facities cuentl obligated are not
provdig sufcient uncompensted cae to meet their anua 
compliance level. 
As of April 1991, 2 610 facilities were to provide approxiately $350 milion 
uncompensated care to the American public. These facilities received almost $1.7 
bilion in Federal assistance to aid in constructing needed hospitals and other health 
care facilties. According to PHS data, 1 318 facilties have not provided sufficient 
uncompensated care to indigent persons to fulfil their obligation under the Hil-
Burton program. The total amount of uncompensated care owed by these 1 318 
facilties exceeds $816.6 milion. 
Many (1 169) of these 1 372 facilties have provided some uncompensated care. A few 
have provided no evidence that they are operating an uncompensated care program 
for those unable to pay. As of October 1, 1990, there were 203 facilties that received 
zero certifications from PHS. A zero certification means that a facilty failed to 
provide any uncompensated care creditable toward completion of its Hil-Burton 
obligation. Some of the facilities, that have received zero credit, are nursing homes 
and rehabiltation facilties. Some facilities are unable to fulfill their uncompensated 
care obligation because they cannot attract persons unable to pay to their facilty. 
Other facilties have no problem attracting indigent patients, they provide 
uncompensated servces to all 
without taking an application or have a philanthropic 
organization that pays for much of the care; consequently, they have difficulty meeting 
their annual uncompensated care obligation. Recently, PHS organized a task force to 
assess the problems faced by these facilities in meeting the requirement of the 
regulations. 
Findig #2: Reliance on self-reported data and inadequate record retention 
compromi PHS monitorig effort. 
Self-Reported Data 
Each year PHS requests that all facilties in deficit submit an Uncompensated Servces 
Assurance Report (USAR). The primary purpose of the USAR is to track the status 
of uncompensated servce programs operated by facilities in deficit. It enables PHS to 
provide early feedback where problems may be indicated. The USAR is also used by 
Total deficit calculated from PHS data provided on July 13, 199. This total breaks down 
as follows $1,835,476 due from 10 facilities beyond their 20 year period and $814 833,098 due from 
facilties within their 20 year obligation period.  PHS to review and approve:
facilty plans to make up deficits, and
claims of facilty financial inabilty.
The USAR is also used to solicit information concerning changes in facilty
management that might trigger the recovery of Hil-Burton funds.
The USAR is primarily a PHS headquarters' monitoring tool used for providing 
technical assistance to facilties and is seldom, if ever, used by regional PHS staff who 
feel the USAR information is often obsolete or inaccurate. The information on free 
medical care reported by a facilty on the USAR can differ substantially from the 
actual performance, which is determined by PHS regional staff when conducting a 
substantial compliance audit of the facilty s records. 
Substantial compliance audits involve a desk review of patient accounts, patient 
eligibilty information, individual notices and facilty published allocation plans. 
Information for these reviews is provided by the facilties and onsite reviews are rare. 
A letter is sent to the facility at the end of its fiscal year informing them of PHS' 
intent to assess their compliance with Hill-Burton uncompensated servces obligations. 
The letter requests that the facilty submit information concerning its Hil-Burton 
uncompensated care program within 90 days of the close of its fiscal year. 
The facilty provides financial information that PHS uses to verify the amount of 
uncompensated care the facilty claims to have provided. The facilty also provides 
PHS with copies of its policies, notices and other information on how its 
uncompensated care program operates. There are no instructions in PHS procedure 
manuals that require compliance auditors to verify the authenticity of the documents 
and information provided by the facility. The PHS does not require affdavits or other 
sworn statements attesting to the authenticity of the documents being submitted. No 
random calls are made to applicants to verify their actual application and no contacts 
are made with patients whose applications for Hill-Burton assistance were denied. 
Self-reported information is also used by PHS to resolve complaints. Many complaints 
of Hil-Burton violations are received and investigated by telephone and involve little 
or no documentation. The PHS case files may contain the complaint and a written 
record of the telephone contact. Other investigations are resolved by asking the 
facility to provide biling and other information about the patient filng the complaint. 
These investigations and substantial compliance audits are vulnerable because they
depend almost exclusively on information supplied by the 
facilty. There is no

independent validation of the information being supplied. Dependence on this self-
reported information may compromise PHS's compliance and complaint processes. Recrd Retention 
Inadequate record retention policies do not permit independent validation of Hil-
Burton investigations and audits. We were unable to validate whether self-reported 
information may have resulted in any erroneous 
decisions concerning compliance with
Hil-Burton requirements. We attempted to pull a sample of recently completed 
substantial compliance audits to independently verify the information provided to PHS 
by facilities. We could not conduct a verification of recently closed Hil-Burton cases 
because documents and other information used by some regional offces to determine 
facility compliance had been purged. Many of the documents we requested were 
purged by some regional offces less than a year after the compliance 
audits were 
conducted. During the course of our inspection, PHS instituted a new record 
retention policy that requires all compliance and complaint records be maintained for 
year period. ' 
a 5-
Findig #3: Complait inestigations resolve indidua problems but do not ensure
facity compliance with the Hi-Buron requiement to provide
uncompensted cae. 
Since October 1, 1985, PHS has received 340 complaints against Hil-Burton obligated
facilities. Of these, 313 or 92 percent have been closed, and 27 are pending action. 
Of the 313 closed complaints, 177 were dismissed, and 136 required decisions to be 
rendered based upon the results of investigations or were settled by negotiation 
between the parties. The PHS does not maintain in their records whether the 
decision 
was resolved in favor of the complainant or the 
facility. 
Complaints are analyzed and prioritized to determine whether they can be 
resolved 
informally, require investigation without an onsite visit
, or require on site investigation.
Informal resolutions usually involve a telephone call to a facilty requesting details of a 
particular patient's denial of uncompensated care. Investigations without an onsite 
visit usually involve examing documents and other evidence presented by the patient 
and the facility. Investigations requirng an onsite visit are usually arranged in 
advance. Ths ensures that documents and staff pertinent to the 
investigation will be
available durig the onsite visit. 
Investigations are conducted using PHS prescribed procedures for recording, 
investigating and resolving complaints. When a violation is found 
to have occurred 
PHS will work with the facilty to resolve the complaint. If the facilty refuses to take 
corrective action, PHS can request the Department of Justice (DOJ) to take legal 
action to force the facility to take corrective action. 
The narrow focus of PHS complaint investigations does not provide assurance that a 
uncompensated care program is being properly operated by a facilty. 
The 
investigative procedures used by PHS differ considerably from those used by HHS 
agencies such as the Health Care Financing Administration (HCFA) and the Office  for Civi Rights (OCR). According to PHS procedures, PHS only investigates to
determe whether the complainant was wrongflly denied uncompensated care. 
Unlike other HHS agencies, PHS does not expand its investigations when an allegation 
of noncompliance is found to exist. The investigations do not verify whether other 
individuals were improperly denied uncompensated care during the same period. 
Consequently, PHS investigations do not determine if the violation was an isolated 
occurrence or a pattern of noncompliance which should require additional action. 
In December 1991  Guide to Conducting Substantial Compliance 
, PHS issued a revised 
We have examined the revised guidelines. We find no clear 
Reviews and Audits. 
instructions to auditors to expand the size of compliance samples so that a more 
indepth review can be conducted for the time frame surrounding substantiated 
complaints. 
diec 
Findig #4: (cid:1)The PHS lacks authority to  enforce compliance with Hi-Buron 
reguations. 
Noncompliant facilities are sent a letter of findings specifyng the corrective actions to
be taken. If corrective action is not taken within a certain time frame then the facility
will receive zero credit for any of the uncompensated care servces they claim to have
provided during the period under review. Facilties that fail to submit required
documents and other evidence to support their claim for uncompensated care credit
are also considered to be out of compliance and receive zero credit. The PHS wil
review those facilities during the next audit 
cycle.
When an obligated facilty refuses to cooperate with PHS in bringing its 
uncompensated care program into compliance, PHS is without adequate recourse. 
The only remedy readily available to PHS is the threat of zero credit for the 
free care 
program a facilty operates. Unlike other HHS agencies that can levy fines and/or 
suspend receipt of government funds, the PHS has no administrative authority or 
other powers to compel compliance. The only remedial action available to PHS is to 
litigate with noncompliant facilties through DO!. There has never been a case
referred to DO! for litigation.
trferrg 
Findig #5: Facities (cid:1) owership afer 20 year may caus the Hi-Burton 
progr 
to los a porton of the uncompensted cae avaable.
According to regulations published in 1987, if a facility fails to provide sufficient 
uncompensated care to meet its annual compliance level, the facilty must make up 
the deficit in subsequent years. The regulations state that a facilty's "period of 
"z However
obligation shall be extended until the deficit is made up. , according to 
2 42 CFR  124.503 (b) advice given by the Offce of General Counsel in 1986, if a facilty transfers ownership 
after the 20 year recovery period, no action may be taken to recover the 
uncompensated care deficit even if the facility was in deficit at the time 
of transfer. 
Consequently, the American public has lost milions of dollars intended to provide free 
medical care for persons unable to pay. 
Currently, more than half of the facilties required to operate uncompensated care 
programs are not providing sufficient servces to persons unable to pay to fulfil their 
obligation under the Hil-Burton program. If these facilties were to transfer after 20 
years, the American public would lose a portion of the free medical care available. 
In 1990, nearly a milion dollars worth of uncompensated care owed to the American 
A review of the seven facilties that transferred 
public was lost.  ownership in 1990 
after their 20 year recovery period showed that all seven facilties were not providing 
sufficient uncompensated care to persons unable to pay to fulfill their obligation under
the Hil-Burton program at the time of transfer. These facilties had remaining 
uncompensated care obligations totallng $865 699 at the time of their transfer. In 
1990 alone the American public lost more than $850 000 in free medical care. If all of 
the facilities currently operating in deficit were to transfer ownership at the end of 
their 20 year obligation more than $1 bilion in free medical care will be lost by the 
year 2000.

Findig #6: Nearly $50 mion recered from Hi-Buron facities wa not avaiable 
to pay for free medica cae. 
As of March 31, 1991 , PHS had completed 195 recovery actions. Nearly $50 milion in 
interest and principle has been recovered and returned to the general 
treasury. In 
contrast, as of that date, 14 trusts, valued at more than $21 milion, have been 
established by hospitals that changed their status from a not-for-
profit facilty to a for-
profit facilty. Unlike the 195 recovery actions, these 14 trusts continue to ensure free 
medical care for persons unable to pay. 
Whenever a Hil-Burton facilty has a transfer of ownership or management
, it is 
considered to have a "change of status." When this happens within the 20 year 
obligation period, an evaluation must be made whether the transferee or new owner 
would have been qualified to fie an application under Hil-Burton. If the facilty
transferred to any person, agency or organization not qualified to fie a Hil-Burton 
, the government is entitled to recover the amount of the grant. 
grant application
However, if the facilty agrees to establish an irrevocable trust, then a waiver may also 
be granted. The amount of the irrevocable trust is the greater of twce the amount 
the remaining uncompensated servces obligation or what would have been due under 
recovery. 
When an eligible entity assumes control and agrees t  assume the Hil-Burton 
obligations, a waiver can be granted and no recovery is necessary. The waiver is 
granted because the change in control of the Hil-Burton facilty is to another public  or not-for-profit facilty that would have been eligible under the Hil-Burton program. 
Hill-Burton fuds recovered from facilties are deposited into the general treasury and 
are not available for free medical care. This differs from funds recovered through the 
waiver process. When a waiver is granted to the new operator of a Hil-Burton 
assisted facilty, the operator either agrees to fulfill the remaining uncompensated care 
obligation, or to establish a trust to provide medical care to those unable to pay.  RECOMMENDATIONS
We believe the following recommendations wil improve PHS efforts to monitor Hil-
Burton compliance. The PHS should: 
develop method for independent verication of inormation provided by 
facities durg substatial compliance audits and complait investigations. 
Independent verification of information and procedures used by a 
facilty, coupled with occasional unannounced onsite visits, would ensure 
that facilties comply with their Hil-Burton obligations. Unannounced 
visits would also serve to validate a facilty s system of notices 
recordkeeping practices and day-to-day operations. Advance notices 
provide time for facilties to create or clean up their records; enable staff 
to be tutored to ensure proper responses; and, can result in changes in 
procedures that ostensibly show compliance. The PHS should explore 
coordination with HCF A, OCR and others in obtaining independent
verification. Both HCF A and OCR have pertinent information about 
facilties that have received Hill-Burton assistance. Both have 
experience in developing independent verification of information. 
exand their inestigation when a complait alegig noncompliance 
substatiated or reve  Gui to Condtig Substantl Compliance Revews 
the 
and  to ensure that auditors clearly understad that an expanded 
Aud 
found to have substatiated
compliance review should be conducted on facities 
complaits. 
Exanding either the investigation or compliance review to focus on time 
periods surrounding substantiated complaints provides greater assurance
that the problem was an isolated problem and not indicative of more
serious noncompliance problems.
ensure that regional offce maita  minimum of 5 year afer the 
records for a 
clos of a substatial compliance audit or complait investigation. 
During the course of our inspection, PHS issued a new policy requiring 
year retention of all compliance audit and investigative records. This 
is consistent with the retention periods used by other HHS agencies.  trtie 
sek legilatie authority to enforce compliance though adminis
remedes. 
Garnishment of some Medicare/Medicaid funds, levyng fines or 
withholding of Federal grants and other Federal funds until a facility 
brings its uncompensated care program into compliance are examples of 
administrative remedies that would strengthen PHS' s ability to enforce 
compliance with the Hil-Burton uncompensated care requirements. 
sek legilation that would alow for recery of the uncompensted cae 
obligation if a deficit remai at the tie of a post 20 year tranfer. 
This would allow for the recovery of funds from facilties transferring 
after the 20th year. These funds would also be used in some manner to 
provide uncompensated care. 
retu 
sek legilation that would alow for the  of monies recovered from 
grt progr. 
PHS 
facities back into 
This would allow for the continued funding of health related programs. 
These funds could be used to sponsor immunization programs, well baby 
programs and other community health servces.  COMM
AGENCY 
The PHS has inormed us that it has taken action on five of our six recommendations. 
They felt that seeking legislative authority to enforce compliance was inappropriate at 
this time because legitimate reasons may exist to explain why some facilties have 
received little or no credit for uncompensated care. The PHS is currently studying this 
issue and would like to develop alternatives that would assist facilities in achieving
compliance. If progress is not made in developing alternatives to assist facilities in 
achieving compliance at the end of one year, PHS will seek legislative authority to 
enforce compliance through administrative remedies as suggested in this report. 
The report has been modifed to reflect technical comments received from PHS and 
OCR. The full text of the PHS's comments can be found in Appendix A. The full 
text of the OCR's comments is contained in Appendix B. 
COMM 
OIG REPONSE TO 
We agree that legitimate reasons may exist that explain why a facilty is unable to 
fulfill their uncompensated care obligation. The PHS should work to develop 
appropriate alternatives for such facilties. We would encourage PHS not to delay in 
seeking legislative authority to administrative remedies since such remedies should be 
available for use on recalcitrant facilities.  APPENDIX A 
HETH 
PUBUC  SERVICE 
REPORT 
COMM  ON  TH DRA  (' 

&. 
....or'r "
DEPARMET OF HETH  HUMA SERVICES  Fu He 
Memorandum 
8 19 
Jl 2 
Date 
Assistant Secretary for Health 
From 
Office of Inspector General (OIG) Draft Reports " PHS' Oversight
Subjec 
of the Rill-Burton Program, " and " Office for Civil Rights
Oversight of the Hill-Burton Program 
Inspector General, OS 
At t ached are PHS' co mmen ts on the s ubj ect OIG dra ft rep or t s . 
Concerning the report on PHS' oversight of the Rill-Burton 
program, we provide responses to each of the recommendations, as
well as technical comments. We have one technical comment on the 
report dealing with the Office for Civil Right  s (OCR) oversight. 
We concur with the recommendations directed to PHS and have taken 
or plan to take actions to implement them. The Health Resources
and Services Administration 
(HRSA) will coordinate information 
gathering with other organizations such as OCR and the Realth 
Care Financing Administration; revise its complaint investigation 
manua 1 to req ui re expanded comp li ance re views once a comp la i n t 
has been substantiated; maintain records for a minimum of 
5 years; review with the Office of the General Counsel issues
relevant 
to the recovery of uncompensated care obligations 
these remain at the time of a post 20-year transfer of ownership;
and seek legislative authority to return funds recovered from 
facilities back into PHS grant programs. 
For reasons delineated in the attached comments, we do not 
believe that now is the appropriate time to implement the 
recommendation calling for legislative authority to enforce 
remedies. 
compliance through administrative  RiSA has an
initi 
tive underway which sihoounld.  aIdfd,r ess many of the issues 
un d e r 1 y i n g t his r e co 88 end a t  a t the end 0 f  ear, the 
results of this initiative prove unsatisfactory, RiSA will take 
act ion s to i 8 P 1 e 8 e n t t his r e c 0 mm end a t ion. 
o. Mason, M.  Dr. 
Attachment 
A -
 'I 
PUBLICG RBRTNR  SERVICE (PH  COMMS ON  HEOF'FlI CE OP 
INSPECTOR  (OIG' DRA REPORTS "PUBLIC  SERVICE'S 
OVSIGH' OP TH HILL-BURTON PR  " OEI- 00260. AN 
OPPICE POR CIVIL RIGH'S  LL-B  TON 
.. EI- 5-9 -0 261
General Comments
reviewe the tw 
The PHS has  OIG reports on oversight of the
!tll-Buron  coments 
proqram. The bulk of our  concern the report 
oversight. 
dealing with PHS 
coment on the report 
We have only one technical  dealing with 
Rights' oversight. We recomend that the third 
Office for Civil 
" (T)he 
paragraph, first sentence on page 1 be revised to read 
Hill-Burton Act authorized Pederal grants to assist States and 
comuni ties in constructing needed hospitals and other health 
care facilities.  This revised statement correctly notes that
the Hill-Buron 
program funded health care facilities other than 
and public health centers. 
hospi tals 
OUr comments on each of the recomendations directed to PHS, and 
follow: 
technical comments, 
OIG Recommendation 
PHS should 
infor.tion 
Develop methods for independent verification of 
provided by facilities during substantial compliance audits 
and complaint investigations. 
PHS Comment
infor.tion 
gathering through 
We agree that we can broaden our 
coordination with other Pederal organizations that may conduct 
Hill-Buron  end, 
site visits of  obligated facilities. To that 
Adnistration 
(HRSA) will 
PHS' Health Resources and Services 
Rights, the 
coordinate these efforts with the Office for Civil 
Adnistration, 
Health Care Pinancing  and other relevant 
organizations. 
OIG Recommendation 
comlaint alleging 
Expand their investigation when a 
Guide to 
noncompliance is substantiated or revise the "
Conducting Substantial Compliance Reviews and Audits" to
ensure that auditors clearly understand that an expanded
compliance review should be conducted on facilities found to
have substantiated complaints.
A - q., 
C01ent
PHS 
cuently 
revisinq the comlaint
We concur. HRA is 
maual will 
investiqation maual. 
One chanqe in the revised 
the reqirement to expand compliance reviews when complaints
aqainst a facili ty have been substantiated. BRSA expects to have 
1993. 
the revision completed in January 
comlaint 
decisions are
In addition, HRSA is now trackinq whether  facility. 
This
resolved in favor of the complainant or the 
1992.
procedure became effective in Karch 
OIG Recnmendation 
miim 
Ensure that reqional offices maintain records for a 
of 5 years after the close of a substatiated comliance 
or comlaint investiqation. 
audi t 
C01ent
PHS 
BR 
We concur. As the OIG report acknowledqes,  has already
years. This policy 
established a policy to retain records for 5 
1992.
became effective in Karch 
OIG Recommendation
comliance throuqh
Seek leqislative authority to enforce 
admnistrative remedies.
PHS Comment
ths 
We concur in principle but believe that  is not appropriate
at this time.
leqitimte 
There are  reasons why some facilities have received
little,  care:
if any, credit for uncompensated 
lack of community need, e  patients are fully covered 
party insurance or under a qovernental proqram, 
by third-
applicants; 
or there is a lack of financially eliqible 
financial inability to provide uncompensated services at
the reqired 
level; and
some facilities do not charqe patients for services
provided, but lack eliqibili 
ty or billinq documentation 
to estAlish credit. 
reqired by the requla tions 
deter.ne 
HRSA is studyinq these facilities to  the need for
increased technical assistance, and will develop appropriate
alternatives to assist facilities in achievinq compliance.
A - q., 
In addition, the theat of legal action has been an effective 
noncompliance. No legal action has 
deterrent from deliberate 
been necessary to date. 
Lastly, it is possible that the actions proposed in this report 
fines or loss of Medicare/Mecaid fundig) could result 
i(n e.  the closure of some facili ties, thereby resulting in the total 
comities. 
loss of health services in those 
the 
is not proqress in 
At the end of one year, if there 
achieving 
development of alternatives to assist facilities in 
HR will  enforce 
compliance,  seek legislative authority to 
remedes. 
compliance though admnistrative 
OIG Recommenqation 
reins 
Seek legislation that would allow af odre friecciotv ery of the
uncomnsated care obligation if  at the 
time of a post year transfer. 
PHS Coment 
(OG ) to 
We agree to contact the Office of the General Counsel 
discuss the issues relevant to the enactmInen tp roef lismucahr yle gislation 
and the applicable legal imlications. 
OG has 
expressed strong concerns about the 
discussions to date, 
constitutional implications of retroactive application of this 
new legislation. 
OIG Recommendation 
retur 
of monies 
Seek legislation that would allow for the 
recovered from facilities back into PHS grant programs.
PHS Coment 
reqest for 
HR will initiate 
We concur.  actions to develop a 
legislative authority to implement this recommendation.  Technical 
Coments
The introduction on Daae 1 states, " 
Those persons whose
incomes are greater than the poverty line but not more than 
twice the poverty line are entitled to receive services
wi thout charge or in accordance with a schedule of charqes.
This statement needs 
are not reqired  clarification. Hill-Buron facilities
to provide unctomhen s ated services
persons whose incomes are more 
these facilities choose to provide sether pvoveirtcy es to pleevl. s ons 
incomes are greater but not more than double the povertwyhose
level, they may do so at no charge or at a 
reuced 
charge.
Paae 2. Daraara  states, "
Hill-Buon 
facilities involves a desk revHoniitoreingw of pat
individual notices and facility published eanltl oaccactoiuonnt sp,lans.
This sentence should be modified to include the review of
Hill-Buron patient  informt on. Since ths
same statement is inceliglibiliuty ded on page 6, 
paagraph 2 of the
also be mofied 
report, it  should  aCCordgly.  OIG
Paae 2. DaraaraD.t 
states, " 
If the sale is to a for-profit
entity, a waiver can be granted if an 
irrvocable trust is
established to provide for uncompensated 
following the comletion of  care. TWnty 
constrction, for- years
profit
enti ties purchasing or assumng control of 
facili ties  reqred  Hill-Buron
are not  reining
to provide any 
uncompensated care obligations. 
These two sentences should be moified as 
sale is to a for- If the
profit entity within the 2fol0low-s 
period, a waiver can be granted if an irrevocyabelaer  torbsligtation
established to proide for 
following the comletion ofu ncomnsated care. TWnty 
construction, for- years
entities 
nonprofi t  puchasing or assumg conptrrolf it or
Buron  Hill-
facilities are not reqired to 
uncomsated car obligations.  provide any orf emining
na numer 
Pfaaae  cili ties  states, "May (1,
169) of these
have provided some uncompensated care. 
We suggest that this statement be clarified as 
Many (1, 169) of the 1, follows:
372 facilities have Provided some
uncompensa ted care. 
Paae S. find states, " 
na numer  Each year PHS mails
Uncompensa ted Services Assurance Report 
approximtely one-third of the 2, (USAR) for.s to
600 facilities with 
A - prim 
outstandinq Hill-Buron obligationrse. dTh e  purose of
the 
USA, accordq to PHS, cias rt o  facilities of their 
to peons 
obliqation to provide free  unable to pay. 
unable to comlete their anual 
rFaecqiliri etdie tso   retur  obliqation are
complete and  the OSA. 
We suqqest that OIG substitute the followinq lanquaqe to 
accurately reflect the use and purose of the OSAR: 
tht 
reqests 
sEuacbh ty ear PHS  all facilities in deficit
an Uncomnsated Services Assurance Report 
(USAR).
primry purse 
The  of the USA is to track the status of 
claim 
uncompensated services  by facilities and provide
early feedack where problem may be indicated. In 
addi tion, the USA is used to review and approe both plans
designed to mae up deficits and fincial inility
claim. 
chqe is 
The rationale beind ths suqqested  that when 
facilities'  uncomsated services 
detects deficiencies in 
maer 
proqrams, the facilities can correct them in a timely 
instead of wai tinq up to 3 years until a review is conducted 
tim  correctale
at which  they may lose all credit for a 
deficiency . 
A - APPENDIX 
CI 
OFFCE FOR  RIGHT
COMM  TH DRA 
ON  REORT  . .
DEPAITMENT OF HEALTH a. HUMAN SERVICES  t,. 88ta 
Off' Of 
CI
q.'lnncg: tfoOtn . 
12 JUN 1992 
DATE 
FROM Edward Mercado .--e 
Director 
Oft 1ce 
SUBJECT:  Draft Report: "Pulic Health Service' 
s Oversiqht
ot the Hill-Burton Program" 
Richard P. Kusserow
Inspector General
The Off1ce for Civil R1gh s reviewed your draft report on Pulic
Heal th Service' 8 oversiqbt of the Bill-Buon 
prog 
am and renders
the tollowinq coment8/recommendations: 
- In order to put th. contents ot 1:8 Aport in 
the proper
context, lanquaqe 8hould he added  e Bill-Burton 
Doutlienin partntal 
ri.spnonsicbilJ.li.. udinq OC  ot  all involved  c:omponent.,
and BCFA. 
- On paqe 5, Findinq '1 indicates that 80.. nur.ing homes and
rehabilitation tacilitie8 do not tultill their uncompen8ated
care obli atioD8 becuse they are 
unabla to attract patients
unel. to 
who are  pay. An add1:t.ional  tor
bdealienq v i thr theis ffind.inrg i.r toer PdH torec0.1 8fdeationn   courag. recipients
to inati  outrach PZ"u 
=t. a vi90Z"WI 
to 4is1:ribut.
information about the facility'  uncoen.ated care
obli9ation to hospital. fro. Whidb indigant patients .19h
con'tin a 
- The raport  rec:oDlendation that utnhanto unced site
vi.ita be conducted. It - exerience 
1. our  while .uch
visits may provide usetul data, they oft8n cause delay. in
the 
invu't1CJativ8 proce8s beaua8 
the data n8ed84 and
pot.n 
ial intervieweas are not readil  available. w. endorS8
the poaion of this 
rec:o_8nda  ion wh ch encourag.. PH
t1on ctoocrm(rctiinoant..  vi th OC and BClA in o!:tainin  pertinent
intonation 
Such an interchange of 
would be 
value to all three aCJanci.. and would r.duce 
ot  the overlap
in responsibilitie8 and activities. 
PH ana OC .hould establish 
- In addition, 
a mechanism throuqh
which OCR is intormed when tacilities ara found to be out of 
liqation. 
compliance tor the uncompensated care o  The.. 
tall 
cas.. may have potential civil rights violations which 
under OCR' . authorities.
Thank you tor the 
opportunity to review and comment on this draft
report .