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. 

OFFICE OF EVALUATION AN 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: 

REGION HEUARlE 

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 

substantiated or revise the Guide to 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. 

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 

Nearly $50 milon recovered from Hil-Burton 

facilities was not available to pay for 

free medical care. .............................................. 9


RECOMMATIONS 

APPENICE 

A: PHS Comments
 . . .. AB: 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 

found, then a facilty receives fu 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 notfor-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 HilBurton 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 HilBurton 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 HilBurton 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 

a 5-year period. ' 

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 , PHS issued a revised Guide to Conducting Substantial Compliance 

Reviews and Audits. We have examined the revised guidelines. We find no clear 

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. 

Findig #4: The PHS lacks authority to diec 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.€

Findig #5: Facities trferrg 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 

obligation shall be extended until the deficit is made up."z However, 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 

public was lost. A review of the seven facilties that transferred 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 forprofit 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 

grant application, the government is entitled to recover the amount of the grant. 

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 HilBurton 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 the Gui to Condtig Substantl Compliance Revews 

and Aud to ensure that auditors clearly understad that an expanded 

compliance review should be conducted on facities found to have substatiated€

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 records for a minimum of 5 year afer the 

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. 
sek legilatie authority to enforce compliance though administrtie 

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. 

sek legilation that would alow for the retu of monies recovered from 

facities back into PHS grt progr. 

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. 
AGENCY COMM€

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. 

OIG REPONSE TO COMM 

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 

PUBUC HETH SERVICE 

COMM ON TH DRA REPORT 
(

&. 

....or'r "€

Date 

From 

Subjec 

DEPARMET OF HETH HUMA SERVICES Fu He 

Memorandum 

Jl 2 8 19 

Assistant Secretary for Health 

Office of Inspector General (OIG) Draft Reports " PHS' Oversight 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 

compliance through administrative remedies. RiSA has an initi tive underway which should address many of the issues 

un d e r 1 y i n g t his r e co 88 end a t ion. If, 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 -

PUBLIC RRTR SERVICE (PH COMMS ON 'I OFFICE OP 

INSPECTOR GBN (OIG' DRA REPORTS "PUBLIC HE'l 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€

The PHS has reviewe the tw OIG reports on oversight of the !tll-Buron proqram. The bulk of our coments concern the report 

dealing with PHS oversight. 

We have only one technical coment on the report dealing with 

Office for Civil Rights' oversight. We recomend that the third 

paragraph, first sentence on page 1 be revised to read " (T)he 

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 

hospi tals and public health centers. 

OUr comments on each of the recomendations directed to PHS, and 

technical comments, follow: 

OIG Recommendation 

PHS should €

Develop methods for independent verification of infor.tion 

provided by facilities during substantial compliance audits 

and complaint investigations. 

PHS Comment€

We agree that we can broaden our infor.tion gathering through 

coordination with other Pederal organizations that may conduct 

site visits of Hill-Buron obligated facilities. To that end, 

PHS' Health Resources and Services Adnistration (HRSA) will 

coordinate these efforts with the Office for Civil Rights, the 

Health Care Pinancing Adnistration, and other relevant 

organizations. 

OIG Recommendation 

Expand their investigation when a comlaint alleging 

noncompliance is substantiated or revise the "Guide to 

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., 

PHS C01ent€

We concur. HRA is cuently revisinq the comlaint investiqation maual. One chanqe in the revised maual will 

the reqirement to expand compliance reviews when complaints aqainst a facili ty have been substantiated. BRSA expects to have 

the revision completed in January 1993. 

In addition, HRSA is now trackinq whether comlaint decisions are€

resolved in favor of the complainant or the facility. This€

procedure became effective in Karch 1992.€

OIG Recnmendation 

Ensure that reqional offices maintain records for a miim 

of 5 years after the close of a substatiated comliance 

audi t or comlaint investiqation. 

PHS C01ent€

We concur. As the OIG report acknowledqes, BR has already€

became effective in Karch 1992.€ established a policy to retain records for 5 €years. This policy 

OIG Recommendation€

Seek leqislative authority to enforce comliance throuqh€ admnistrative remedies.€

PHS Comment€

We concur in principle but believe that ths is not appropriate€

at this time.€

There are leqitimte reasons why some facilities have received€ little, if any, credit for uncompensated care:€

lack of community need, e patients are fully covered 

by third-party insurance or under a qovernental proqram, 

or there is a lack of financially eliqible applicants; 

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 

reqired by the requla tions to estAlish credit. 

HRSA is studyinq these facilities to deter.ne 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 

deterrent from deliberate noncompliance. No legal action has 

been necessary to date. 

Lastly, it is possible that the actions proposed in this report 

( e. fines or loss of Medicare/Mecaid fundig) could result 

in the closure of some facili ties, thereby resulting in the total 

loss of health services in those comities. 

At the end of one year, if there is not proqress in the 

development of alternatives to assist facilities in achieving 

compliance, HR will seek legislative authority to enforce 

compliance though admnistrative remedes. 

OIG Recommenqation 

Seek legislation that would allow for recovery of the uncomnsated care obligation if a deficit reins at the 

time of a post year transfer. 

PHS Coment 

We agree to contact the Office of the General Counsel (OG ) to 

discuss the issues relevant to the enactment of such legislation 

and the applicable legal imlications. In prelimary 

discussions to date, OG has expressed strong concerns about the 

constitutional implications of retroactive application of this 

new legislation. 

OIG Recommendation 

Seek legislation that would allow for the €

recovered from facilities back into PHS grant programs.€

retur of monies 

PHS Coment 

We concur. HR will initiate actions to develop a reqest for 

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 clarification. Hill-Buron are not reqired to provide uncomensated services€facilities€

persons whose incomes are more 

these facilities choose to provide services to th €the poverty€ levl. €

incomes are greater but not more than double the poverty€ pesons whose€

level, they may do so at no charge or at a reuced charge.€

Paae 2. Daraara states, " Honitoring facilities involves a desk review of patHill-Buon 

individual notices and facility published allocation plans.€ ent accounts,

This sentence should be modified to include the review of€

Hill-Buron patient € eligibility same statement is included on page informt 6, on. Since ths€ report, it € should also be mofied paagraph 2 of the€ aCCordgly. OIG€

Paae 2. DaraaraD.t states, " If the sale is to a for- entity, a waiver can be granted if an profit established to provide for uncompensated irrvocable trust is

care. TWnty years following the comletion of 

enti ties purchasing or constrction, for-profit facili ties are not assumng control of Hill-Buron reqred to provide any uncompensated care obligations. reining

These two sentences should be moified as sale is to a for- follows If the profit entity within the 20- period, a waiver can be granted if an irrevocable year obligation established to proide for trst uncomnsated care. TWnty years following the comletion of construction, for- nonprofi t entities profit or

Buron facilities are not puchasing or assumg contrl of Hill- uncomsated car obligations. reqired to provide any remining

Paae facili ties na numer 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€na numer states, " Each year PHS mails Uncompensa ted Services Assurance Report approximtely one-third of the 2, (USAR) for.s to

600 facilities with 

A -€
outstandinq Hill-Buron obligations. The prim purose of the USA, accordq to PHS, is to red facilities of their 

obliqation to provide free car to peons unable to pay. 

Facili ties unable to comlete their anual obliqation are reqired to complete and retur the OSA. 

We suqqest that OIG substitute the followinq lanquaqe to 

accurately reflect the use and purose of the OSAR: 

Each year PHS reqests tht all facilities in deficit subt an Uncomnsated Services Assurance Report (USAR). The primry purse of the USA is to track the status of 

uncompensated services claim 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. 

The rationale beind ths suqqested chqe is that when 

detects deficiencies in facilities' uncomsated services 

proqrams, the facilities can correct them in a timely maer 

instead of wai tinq up to 3 years until a review is conducted 

at which tim they may lose all credit for a correctale

deficiency . 

A -€
APPENDIX 

OFFCE FOR CI RIGHT COMM ON TH DRA REORT 
. .

DEPAITMENT OF HEALTH a. HUMAN SERVICES Off' Of t,. 88ta 

qlnc: fOt CI .'ngton. 

DATE 12 JUN 1992 

FROM€ Edward Mercado

Director .--e Oft 1ce 

SUBJECT: Draft Report: "Pulic Health Service' s Oversiqht ot the Hill-Burton Program" 

Richard P. Kusserow€

Inspector General€

Heal th 

The Off1ce for 

Service' 8 oversiqbt Civil R1gh s reviewed your draft report on Pulic 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 outlinin e Bill-Burton r.sponsibilJ.i.. ot all involved Departntal c:omponent., includinq OC 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 who are unel. to pay. An add1:t.ional rec018fdation tor dealinq vi th this finding i. tor PH to encourag. recipients to inati =t. a vi90Z"WI outrach PZ"u to 4is1:ribut. information about the facility' uncoen.ated care be ref.rred. obli9ation to hospital. fro. Whidb indigant patients .19h

- The raport con'tin a rec:oDlendation that unanounced site vi.ita be conducted. It -1. our exerience tht 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 to coc(rcinat. vi th OC and BClA in o!:tainin pertinent 1ntormtion. Such an interchange of intonation would be ot value to all three aCJanci.. and would r.duce the overlap in responsibilitie8 and activities. 

- In addition, PH ana OC .hould establish a mechanism throuqh which OCR is intormed when tacilities ara found to be out of 

compliance tor the uncompensated care o liqation. The.. cas.. may have potential civil rights violations which tall 

under OCR' . authorities.€

Thank you tor the opportunity to review and comment on this draft€ report .