[Federal Register Volume 70, Number 189 (Friday, September 30, 2005)]
[Rules and Regulations]
[Pages 57368-57375]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-19306]



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Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Part 505



Medicare Program; Health Care Infrastructure Improvement Program; 
Selection Criteria of Loan Program for Qualifying Hospitals Engaged in 
Cancer-Related Health Care; Forgiveness of Indebtedness; Interim Final 
Rule and Proposed Rule

Federal Register / Vol. 70, No. 189 / Friday, September 30, 2005 / 
Rules and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 505

[CMS-1287-IFC]
RIN 0938-AO03


Medicare Program; Health Care Infrastructure Improvement Program; 
Selection Criteria of Loan Program for Qualifying Hospitals Engaged in 
Cancer-Related Health Care

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Interim final rule with comment period.

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SUMMARY: This interim final rule with comment period sets forth the 
criteria for implementing a loan program for qualifying hospitals 
engaged in research in the causes, prevention, and treatment of cancer 
as specified in section 1016 of the Medicare Prescription Drug, 
Improvement and Modernization Act of 2003 (MMA) (Pub. L. 108-173). 
Specifically, this rule establishes a loan application process by which 
qualifying hospitals including specified entities may apply for a loan 
for the capital costs of health care infrastructure improvement 
projects.

DATES: Effective Date: This interim final rule with comment period is 
effective November 29, 2005.
    Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on November 29, 2005.
    In commenting, please refer to file code CMS-1287-IFC. Because of 
staff and resource limitations, we cannot accept comments by facsimile 
(FAX) transmission.
    Deadline for submission of loan requests: To be assured 
consideration, applications must be received at the appropriate address 
from November 29, 2005 through 5 p.m. on December 29, 2005.

ADDRESSES: Comments: You may submit comments in one of three ways (no 
duplicates, please):
    1. Electronically. You may submit electronic comments on specific 
issues in this regulation to http://www.cms.hhs.gov/regulations/ecomments. (Attachments should be in Microsoft Word, WordPerfect, or 
Excel; however, we prefer Microsoft Word.)
    2. By mail. You may mail written comments (one original and two 
copies) to the following address only: Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Attention: CMS-1287-
IFC, P.O. Box 8020, Baltimore, MD 21244-8020.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to one of the following addresses. If you 
intend to deliver your comments to the Baltimore address, please call 
telephone number (410) 786-9994 in advance to schedule your arrival 
with one of our staff members.

Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201; or 7500 Security Boulevard, Baltimore, MD 21244-
1850.

    (Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for persons wishing to retain a proof of filing by stamping 
in and retaining an extra copy of the comments being filed.)
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Applications: Applications must be submitted to the following 
address: Centers for Medicare and Medicaid Services, Center for 
Medicare Management, Hospital and Ambulatory Policy Group, Division of 
Acute Care, Attention: Loan for Cancer Hospitals, Mail Stop C4-08-06, 
7500 Security Boulevard, Baltimore, Maryland 21244-1850.

FOR FURTHER INFORMATION CONTACT: Tzvi Hefter, (410) 786-4487.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 1016 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) (Pub. L. 108-173) amended title XVIII 
of the Social Security Act (the Act) to establish section 1897 of the 
Act, the Health Care Infrastructure Improvement Program. Section 1897 
of the Act authorizes the Secretary to establish a loan program that 
provides loans to qualifying hospitals for payment of the capital costs 
of eligible projects.
    Section 1897(c) of the Act as amended by section 6045 of the 
Emergency Supplemental Appropriations Act for Defense, the Global War 
on Terror, and Tsunami Relief, 2005 (Tsunami Relief Act of 2005) (Pub. 
L. 109-13) defines a qualifying hospital as a hospital or entity that 
is engaged in research in the causes, prevention, and treatment of 
cancer; and is designated as a cancer center for the National Cancer 
Institute (NCI) or is designated by the State legislature as the 
official cancer institute of the State and such designation by the 
State legislature occurred before December 8, 2003. Section 1897(c)(3) 
of the Act also specifies that an entity has the same meaning as 
specified in section 501(c)(3) of the Internal Revenue Code of 1986 and 
is exempt from tax under section 501(a) of the Code; has at least one 
existing memorandum of understanding or affiliation agreement with a 
hospital located in the State in which the entity is located; and 
retains clinical outpatient treatment for cancer on site as well as lab 
research and education and outreach for cancer in the same facility.
    Section 1897(d) of the Act specifies that an eligible project is a 
project of a qualifying hospital that is designed to improve the health 
care infrastructure of the hospital, including construction, 
renovation, or other capital improvements.
    Section 1897(f) of the Act states that the Secretary may forgive a 
loan provided to a qualifying hospital, under terms and conditions that 
are analogous to the loan forgiveness provision for student loans under 
part D of title IV of the Higher Education Act of 1965, (20 U.S.C. 
1087a et seq.). However, the Secretary shall condition such forgiveness 
on the establishment by the hospital of--(1) an outreach program for 
cancer prevention, early diagnosis and treatment that provides services 
to a substantial majority of the residents of the State or region, 
including residents of rural areas; (2) an outreach program that 
provides services to multiple Indian tribes; and (3) unique research 
resources (such as population databases); or an affiliation with an 
entity that has unique research resources.
    Furthermore, before the Tsunami Relief Act of 2005, section 
1897(g)(1) of the Act appropriated $200,000,000 to carry out the loan 
program. The funds allocated for the loan program are to remain 
available during the period beginning on July 1, 2004, and ending on 
September 30, 2008. However, the Congress rescinded $58,000,000 leaving 
$142,000,000 available for the loan program. The statute also states 
that not more than $2,000,000 can be used for the administration of the 
loan program for each of the fiscal years (that is, 2004

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through 2008). No administrative funding was used in fiscal year 2004.
    In addition, section 1897(i) of the Act as amended by section 
6045(b) of the Tsunami Relief Act of 2005 states that there shall be no 
administrative or judicial review of any determination made by the 
Secretary under this section.

II. Provisions of the Interim Final Rule With Comment Period

    Section 1897 of the Act authorizes the Secretary to establish a 
loan program that provides loans to qualifying hospitals for payment of 
the capital costs of qualifying projects. Section 1897 of the Act also 
provides that criteria be established for--(1) selecting among 
qualifying hospitals that apply to participate in the loan program; and 
(2) forgiving indebtedness. This interim final rule with comment period 
establishes the loan program and the selection criteria for qualifying 
hospitals to participate in the loan program. We will publish a 
separate rule making document to describe the criteria for loan 
forgiveness.

A. Overview of the Loan Program

    The statute provides specific definitions for a qualifying hospital 
and entity. However, in addition to being a ``hospital'' as defined in 
section 1861(e) of the Act or an ``entity'' as defined in section 
1897(c)(3) of the Act, the applicant must meet the criteria described 
in section 1897(c)(2) of the Act in order to be considered a qualifying 
hospital.
    To be designated as a cancer center for the NCI of the National 
Institutes of Health (NIH), the hospital must have been awarded a P30 
Cancer Center Support Grant (CCSG) from NCI to fund the scientific 
infrastructure of the cancer center, see http://www.cancer.gov/cancercenters/description.html.
    NCI designates two types of cancer centers: cancer centers, and 
comprehensive cancer centers. NCI describes ``cancer centers'' as those 
that have a scientific agenda that is primarily focused on basic 
science, population-based research or clinical research, or any two of 
the three components.
    NCI describes ``comprehensive cancer centers'' as those that 
integrate research activities across three major areas: Laboratory, 
clinical, and population-based research. Hospitals that have been 
awarded a CCSG and are designated by NCI as either a cancer center or a 
comprehensive cancer center before December 8, 2003, will be considered 
qualifying hospitals. We chose the December 8, 2003 date for the NCI 
CCSG designation because it is the date of enactment of the MMA and 
consistent with the statutory date for State legislature designation of 
the official cancer institute of the State.
    To be designated as the official cancer institute of the State, the 
entity must be designated by the State legislature as ``the official 
cancer institute of the State.'' Section 1897 of the Act specifies that 
designation by the State legislature must have occurred before December 
8, 2003.
    In this rule, we have added Subchapter H--Health Care 
Infrastructure Improvement Program to comply with section 1897 of the 
Act. Specifically, we have added part 505--''Establishment of the 
Health Care Infrastructure Improvement Program.'' We have added subpart 
A--Loan Criteria. Section 505.1 sets forth the ``Basis and Scope'' of 
part 505 which implements section 1016 of the MMA which amends Title 
XVIII of the Act to add section 1897. Section 1897 of the Act, as 
amended by section 6045 of the Tsunami Relief Act of 2005, authorizes 
the Secretary to establish a loan program by which qualifying hospitals 
may apply for a loan for the capital costs of the health care 
infrastructure improvement projects.
    In Sec.  505.3, for purposes of subpart A, we have set forth the 
following definitions:
    <bullet> Eligible project means the project of a qualifying 
hospital that is designed to improve the health care infrastructure of 
the hospital, including construction, renovation, or other capital 
improvements.
    <bullet> Entity is an entity described in section 501(c)(3) of the 
Internal Revenue Code of 1986 and exempt from tax under section 501(a) 
of the code. An entity also has at least one existing memorandum of 
understanding or affiliation agreement with a hospital located in the 
State in which the entity is located and retains clinical outpatient 
treatment for cancer on site as well as lab research, education, and 
outreach for cancer in the same facility.
    <bullet> Qualifying hospital means a hospital as defined at section 
1861(e) of the Act (42 U.S.C. 1395x(e)) or an entity (as defined in 
this section) that is--
    (1) Engaged in research in the causes, prevention, and treatment of 
cancer; and is either
    (2) Designated as a cancer center for the National Cancer 
Institute; or
    (3) Designated by the State legislature as the official cancer 
institute of the State before December 8, 2003.

B. Qualifying Hospital Criteria for the Loan Program

    The statute provides the following two sets of criteria for 
establishing the loan program: (1) Selecting among qualifying 
hospitals; and (2) forgiving indebtedness (that is, deciding if the 
loan funds may be forgiven). The statute also specifies conditions 
under which a loan may be forgiven. These conditions are based upon the 
qualifying hospital's establishment of the following:
    <bullet> An outreach program for cancer prevention, early 
diagnosis, and treatment that provides services to a substantial 
majority of the residents of a State or region, including residents of 
rural areas;
    <bullet> An outreach program for cancer prevention, early 
diagnosis, and treatment that provides services to multiple Indian 
tribes; and
    <bullet> Unique research resources (such as population databases); 
or an affiliation with an entity that has unique research resources.
    Since the statute outlines specific criteria in which to forgive 
loans, we believe that it is consistent with the Congressional intent 
to give priority to qualifying hospitals that meet at least some of the 
statutory conditions for loan forgiveness when selecting qualifying 
hospitals for the loan program.
    Although the statute does not require that these provisions be 
adopted as criteria for receiving funds under the loan program, these 
criteria are specified in statute for qualifying for loan forgiveness. 
Therefore, we recognize that it is not possible to forgive the 
qualifying hospital's debt if it had not initially been selected to 
receive funds under the loan program.
    As previously stated, we will publish a separate rule-making 
document on the forgiveness of indebtedness. We are seeking specific 
comment on what additional criteria we should establish for any 
qualifying hospitals that do not meet these initial criteria, in the 
event that after granting loans to the initial applicants there are 
residual funds up to the $140 million maximum available for loan funds.
    In Sec.  505.5(a), we set forth the ``qualifying criteria'' 
requirements. To qualify for the loan program, the applicant must--
    <bullet> Meet the definition of a qualifying hospital as set forth 
in Sec.  505.3 of this part; and
    <bullet> Request a loan for the capital costs of an eligible 
project as defined in Sec.  505.3 of this part. The capital costs for 
which a qualifying hospital may obtain a loan are limited to the 
reasonable costs incurred by the hospital, and capitalized

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on the Medicare cost report, for any facility or item of equipment that 
it has acquired the possession or use of at the time the loan funding 
is awarded.

C. Selection Criteria

    In Sec.  505.5(b), we set forth the ``selection criteria'' 
requirements. In selecting loan recipients, we will prioritize 
qualifying hospitals that meet the following criteria:
    <bullet> The hospital is located in a State which based on 
population density is defined as a rural State. A rural State is one of 
ten States with the lowest population density. The ten States are 
prioritized beginning with the State with the lowest population 
density. Population density is determined based on the most recent 
available U.S. Census Bureau data.
    <bullet> The hospital is located in a State with presence of 
multiple Indian tribes in the State. After prioritizing based on 
paragraph (b)(1), States are further prioritized based on the States 
with the most Indian tribes. The number of Indian tribes in the State 
is based on the most recent data available published in ``Indian 
Entities Recognized and Eligible to Receive Services from the United 
State Bureau of Indian Affairs'' (68 FR 68180) published on December 5, 
2003.
1. Rural States
    We recognize that conducting outreach to Indian tribes in sparsely 
populated, rural areas presents additional barriers and challenges. 
According to the Health Resources and Services Administration's (HRSA) 
History of the Rural Health Care Services Outreach Grant Program 
(2004), the rural population of the U.S. differs significantly from the 
urban population in such parameters as age, income, education, and 
health status. The HRSA report can be found at http://www.ruralhealth.hrsa.gov/funding/outreachhistory.asp. The HRSA report 
also states that generally, non-metropolitan populations have higher 
rates of poverty and unemployment and have fewer years of education 
than their metropolitan counterparts. Also according to the HRSA 
report, rural residents also experience poorer health status. 
Furthermore, the same report maintains that there are higher rates of 
chronic disease, infant mortality, accidental injuries related to 
farming activities, occupational hazards, and trauma mortality in rural 
areas as compared to metropolitan areas. In accordance with the HRSA 
report, lack of access to health care in rural communities compounds 
the effect of these health problems and that long distances between 
rural and urban communities and inadequate public transportation 
systems for rural areas further worsen these conditions.
    Additionally, cancer care requires a sophisticated set of surgical 
and medical resources; however currently those resources are more 
commonly found in large urban settings. Finally, the HRSA report found 
that greater proportions of rural cancer patients are diagnosed at 
later stages than urban patients and are less likely than urban 
patients to receive state-of-the-art cancer treatments.
    These factors illustrate some of the difficulties faced when trying 
to develop new and innovative cancer care outreach systems in rural 
communities.
    Given the inherent barriers in conducting outreach in rural areas 
and the statutory priority placed on a qualifying hospital establishing 
an outreach program that services a substantial majority of the 
residents of a State, including residents of rural areas, we are 
prioritizing applicant entities located in rural States. One way to 
identify States that are rural is based on population density. Using 
population density as a measure of rural status is consistent with 
another section of the statute, which directs the establishment of a 
rural community hospital demonstration in States with low population 
densities (see section 410A of the MMA).
    Section 410A of the MMA established a Rural Community Hospital 
Demonstration Program where the Secretary was given the authority to 
determine rural areas and select States with low population densities. 
In implementing section 410A of the statute, the Secretary determined 
the ten States with the lowest population density. Using Census Data 
released in 2004, the ten States with the lowest population density 
are: Alaska, Idaho, Montana, Nebraska, Nevada, New Mexico, North 
Dakota, South Dakota, Utah, and Wyoming.
    Since the loan forgiveness criteria in section 1016 of the MMA also 
focus on rural populations (that is, establishing outreach programs 
that provide services to residents of rural areas) and in order to be 
consistent, for purposes of implementing section 1016 of the MMA, we 
have chosen to use the same criteria we used to implement section 410A 
of the MMA to determine States with low population density. Therefore, 
we are requiring that qualifying hospitals be located in 1 of the 10 
States with the lowest population density in order to receive funding 
under section 1897 of the Act.
2. Indian Tribes
    The statute places a priority for loan forgiveness on qualifying 
hospitals that conduct outreach to multiple Indian tribes. Therefore, 
we believe it is important that funds under section 1897 of the Act be 
directed to qualifying hospitals in States that have a significant 
presence of Indian tribes. To identify States that have a significant 
presence of Indian tribes, we looked to the list of ``Indian Entities 
Recognized and Eligible to Receive Services from the United States 
Bureau of Indian Affairs.'' The most recent notice was published in the 
Federal Register on December 5, 2003 (68 FR 68180) by the Department of 
the Interior, Bureau of Indian Affairs.
    The statute places a top priority for loan forgiveness on hospitals 
that are conducting outreach programs, specifically, on outreach 
programs that provide services to multiple Indian tribes. Since the 
Congress provided special recognition in the loan forgiveness criteria 
to qualifying hospitals providing outreach services to multiple Indian 
tribes, we believe it is appropriate to focus on this same criteria in 
prioritizing which qualifying hospitals should be granted a loan. 
Therefore, we have based the second loan selection criterion on the 
presence of multiple Indian tribes, that is, that the qualifying 
hospital be located in a State with a large number of Indian tribes. We 
do not believe, in light of our understanding of the congressional 
intent, that it would be appropriate to initially provide for loans 
under section 1897 of the Act to qualifying hospitals in States which 
do not have a significant Indian tribe presence.
    Therefore, in light of this priority on hospitals providing 
outreach to Indian tribes, the second criterion we are using to further 
rank qualifying hospitals is based on the number of Indian tribes 
within a State. Qualifying hospitals located in 1 of the 10 States with 
the lowest population densities (States that meet the first criterion) 
will be ranked subsequently according to the number of Indian tribes, 
in which the States with the most Indian tribes are given top priority. 
We believe hospitals and entities located in States with many Indian 
tribes, spread over a large, sparsely populated area, should be given 
first priority for loans under section 1897 of the Act, given the focus 
in the statute on rural populations and Indian tribes.
    Table 1 below, shows the 10 least densely populated States, and 
ranks them according to the number of Indian tribes.

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                                    Table 1.--Least Densely Populated States
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                                                                                                   Population
  Rank for purposes of Section 1016 of the                                   Number of Indian   density--average
                    MMA                                  State                    tribes         population per
                                                                                                  square mile
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1..........................................  Alaska.......................                229                1.2
2..........................................  New Mexico...................                 23               15.7
3..........................................  Nevada.......................                 19               21.3
4..........................................  South Dakota.................                  9               10.2
5..........................................  Montana......................                  7                6.4
6..........................................  Utah.........................                  7               29.1
7..........................................  Nebraska.....................                  6               22.7
8..........................................  North Dakota.................                  4                9.2
9..........................................  Idaho........................                  4               16.8
10.........................................  Wyoming......................                  2               5.2
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Source: ``Indian Entities Recognized and Eligible to Receive Services from the United State Bureau of Indian
  Affairs.'' The most recent notice was published in the Federal Register on December 5, 2003 (68 FR 68180).
U.S. Census Bureau, Population Division, Population Estimates Program, Population Density for States and Puerto
  Rico, July 1, 2004, http://www.census.gov/popest/gallery/maps/popdens_2004.html.

D. Application and Selection Criteria (Sec.  505.11)

1. Application Requirements
    Qualifying hospitals interested in applying for the loan program 
must complete the loan application form which is available at http://www.cms.hhs.gov/providers/hipps. The qualifying hospital must provide 
all appropriate supporting documentation for each answer made on the 
loan application. The appropriate official (that is, a Chief Financial 
Officer, Chief Executive Officer or equivalent) of the qualifying 
hospital must provide signatures for each place indicated on the 
application. In accordance with the foregoing discussion, we believe 
qualifying hospitals located in States with multiple (or a significant 
number) of Indian tribes and low population density, should be given 
first priority for loans under section 1897 of the Act.
2. Submission of Application
    We will begin to accept applications on September 30, 2005. All 
applications must be received by CMS no later than 5 p.m. on December 
29, 2005. The request must be mailed or delivered by courier service. 
Facsimile (fax) or other electronic means are not acceptable. The 
request must be typed or clearly printed in ink. Qualifying hospitals 
must mail or deliver an original copy of their loan application to the 
following address: Centers for Medicare & Medicaid Services, Center for 
Medicare Management, Hospital and Ambulatory Policy Group, Division of 
Acute Care, Attention: Loan for Cancer Hospitals Mail Stop C4-08-06 
7500 Security Boulevard Baltimore, Maryland 21244-1850.
    Applicants may want to send their application by a delivery method 
that guarantees a signed receipt, which indicates delivery and date of 
delivery of their loan request. The address listed above is applicable 
for both United States mail and courier service delivery.
3. Evaluation Process
    When we receive applications from qualifying hospitals, we will 
first evaluate the applicants to determine whether they meet the 
minimum qualifications as specified in section 1897 of the Act (that 
is, they are NCI designated cancer centers or designated as the 
official cancer institute of the State). We will then rank applicant 
entities based on the criteria as specified in Sec.  505.5. We will 
continue to evaluate the request for funds under the loan program from 
any applicants in the highest ranking State, and subsequently move to 
the next highest ranking State, until the funds allocated under the 
loan program are exhausted.
    If there are multiple qualified applicants from the State with 
requests for funds under the loan program that exceed the amount of 
funds remaining, we will pro-rate all loan requests of entities in that 
State to determine the loan amount for each applicant.
4. Capital Costs Criteria
    Section 1897 of the Act provides for making loans to a qualified 
hospital to pay for the capital costs of projects. Projects are defined 
as those designed to improve the health care infrastructure of the 
hospital, including construction, renovation, or other capital 
improvements. Therefore, the capital costs for which a qualifying 
hospital may obtain funds under the loan program will be based on the 
reasonable costs incurred by the hospital. In addition, the capital 
costs are to be appropriately capitalized on the Medicare cost report, 
for any facility or item of equipment that it has acquired the 
possession or use of at the time of application for the loan program. 
In determining the reasonableness of the amount of the loan for any 
particular facility or item for purposes of the loan program, the 
hospital and CMS will follow Medicare reasonable cost principles as 
specified in Medicare regulations and program operating instructions. 
Payment based on reasonable cost principles is a long-standing and 
established methodology used by Medicare and we believe it is 
appropriate to apply it to the loan program.
    Accordingly, a qualifying hospital that has acquired or built a 
facility and/or has acquired equipment as an eligible project defined 
at Sec.  505.3 and the acquisition costs of the asset(s) are 
appropriately reported on its Medicare cost report following Medicare 
reasonable cost principles, could apply for a loan not to exceed the 
net book value of the asset(s) as of the date of its application to CMS 
for the loan program. Since CMS has been directed to implement section 
1897 of the Act, we believe that it is appropriate to apply the 
standard Medicare interest rate specified in 45 CFR 30.13(a), 
established by the Secretary of the Treasury, and published quarterly 
in the Federal Register, which we use for our Medicare program, to the 
loan program.
    Alternatively, if a qualifying hospital had not acquired the 
possession or use of the asset(s) by the date of the application for 
the funds available under the loan program, the reasonable cost of the 
asset(s) could nevertheless be the basis for the hospital to apply for 
funds available under the loan program if the hospital has entered into 
a contractual obligation via a binding written agreement before 
December 8, 2003 (the date of enactment of the

[[Page 57372]]

MMA) in order to ensure that the funds are being used in accordance 
with the program.
    The amount of the loan cannot exceed the cost of the asset as of 
the date the application is due to CMS September 30, 2005 based on the 
cost in the binding written agreement and following Medicare reasonable 
cost principles.

E. Terms of the Loan Program

    In Sec.  505.7, we set forth the ``terms and conditions'' of the 
loan program.
    In order to be awarded funds under the loan program, a 
participating entity must meet the criteria of a qualified hospital or 
entity as specified in Sec.  505.3.
1. Loan Obligation (Sec.  505.7(a))
    An authorized official of each qualifying hospital must execute a 
promissory note, loan agreement, or any other approved form that we may 
designate, to ensure compliance with the terms of the loan program.
2. Schedule of Loan (Sec.  505.7(b))
    Each loan recipient will receive a lump sum distribution for which 
payment of principal and interest is deferred for 60 months beginning 
with the day we notify the qualifying hospital of award notification. 
The loan repayment period is 20 years. However, the loan recipient must 
agree to furnish to us cancer care data during the deferment period.
3. Bankruptcy Protection (Sec.  505.7(c))
    In the event a loan recipient should file for bankruptcy protection 
in a court of competent jurisdiction or should otherwise evidence 
insolvency, we may terminate the deferment and require immediate 
payment of the loan. If a loan recipient should file for bankruptcy 
protection in a court of competent jurisdiction or should otherwise 
evidence insolvency after the deferment period we will require 
immediate repayment of the outstanding principal and interest due. 
Those payments may be deducted from any Medicare payments otherwise due 
that hospital.
4. Loan Forgiveness (Sec.  505.7(d))
    As previously mentioned, we are publishing a separate rule making 
document regarding the forgiveness of indebtedness in which we will 
propose criteria as specified in the statute.
5. Default (Sec.  505.7(e))
    Additionally, if a loan recipient fails to make any payment in 
repayment of a loan under the loan program within 10 days of its due 
date, the loan recipient may be considered in default on the loan. 
Under the Federal Debt Collection Act, upon default, all principal and 
interest become due immediately, and we reserve the right to collect on 
any remaining principal and interest due. Those payments may be 
deducted from any Medicare payments otherwise due that hospital.

F. Loan Repayment (Sec.  505.7(f))

    The loan recipient agrees to make payments every month for 20 years 
until the loan, including interest, is repaid. For qualifying hospitals 
that are ineligible for loan forgiveness, payments are due starting on 
the first day of the next month following the deferment period. 
Payments will be made monthly until all of the principal and interest 
owed are paid in full. Interest will be charged on the unpaid principal 
until the full amount of principal has been paid. A loan recipient will 
pay interest at a yearly rate based upon the rate as fixed by the 
Secretary of the Treasury which is published quarterly in the Federal 
Register as specified in 45 CFR 30.13(a). Payments must be mailed to: 
CMS/Division of Accounting Operations, P.O. Box 7520, Baltimore, MD 
21207-0520.

G. Payments

1. Interest Rate and Monthly Payment Changes (Sec.  505.7(g))
    The regulations in 42 CFR part 405 subpart C provide authority for 
us to collect interest on certain payments. Therefore, to the extent 
that payments are due, we are establishing that interest charges and 
payments be made consistent with Sec.  405.378.
2. Loan Recipient's Right To Prepay (Sec.  505.7(h))
    A loan recipient has the right to make payments of principal at any 
time before they are due. A payment of principal only is known as a 
``prepayment.'' A loan recipient may make full prepayment or partial 
prepayment without paying any prepayment charge. When a prepayment is 
made, the qualifying hospital must provide us with written notice.

H. State and Local Permits (Sec.  505.9)

    In Sec.  505.9, we set forth the ``State and local permit'' 
requirements. Consistent with section 1897 of the Act, the entity must 
agree to the following terms and conditions: The provision of a loan 
under section 1897 shall not--
    <bullet> Relieve the hospital of any obligation to obtain any 
required State or local permit or approval with respect to the project;
    <bullet> Limit the right of any unit of State or local government 
to approve or regulate any rate of return on private equity invested in 
the project; or
    <bullet> Otherwise supersede any State or local law (including any 
regulation) applicable to the construction or operation of the project.

III. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

IV. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment on the proposed rule before 
the effective date of the rule. This procedure can be waived, however, 
when an agency finds good cause that a notice and comment procedure is 
impracticable, unnecessary or contrary to the public interest. We find 
good cause to implement this rule as an interim final rule because the 
delay involved in the prior notice and comment procedure for the loan 
program for the infrastructure for cancer centers would be 
impracticable and contrary to the public interest.
    The Congress enacted section 1897 of the Act to provide a loan 
program for a qualifying hospital to improve the health care 
infrastructure of the hospital. The program is designed to enable a 
number of cancer hospitals to expand or improve their healthcare 
infrastructure, develop enhanced capacity and research resources, and 
serve the medical needs of their populations. We believe that it is not 
in the public interest to delay the loan program and prevent the 
affected parties from having access to such services.
    The Congress provided $142,000,000 for the loan program effective 
July 1, 2004 through September 30, 2008, and not more than $2,000,000 
may be used for the administration of the loan program for each of the 
fiscal years (that is, 2004 through 2008).
    These legislative changes demonstrate that the Congress has 
concerns about the improvement of the cancer-related health care 
hospital infrastructure in the United States. As specified in section 
1897(c)(2) of the Act, in order to receive funds under the loan 
program, an applicant entity is required to--(1) be engaged in research 
into the causes, prevention, and treatment of cancer; (2) be designated 
as a cancer center for the

[[Page 57373]]

NCI, or be designated by the State legislature as the official cancer 
institute of the State before December 8, 2003. Delay in issuing this 
interim final rule with comment period could hinder our programmatic 
objective of improving cancer care and outreach, particularly with 
respect to the residents in rural areas, and Indian tribes. For 
example, this interim final rule with comment period provides funding 
to hospitals in rural areas that engage in research in the causes, 
prevention, and treatment of cancer and that establish an outreach 
program for cancer prevention, early diagnosis, and treatment. 
Beneficiary access to quality cancer care in underserved or rural areas 
is a critical programmatic objective. It is not in the public interest 
to delay finalizing this loan program which is designed to serve this 
purpose.
    The Congress further indicated that the selection criteria for 
making loans consider the extent of medical benefit gained from 
projects to expand or improve the health care infrastructure for which 
this loan program is intended. The funds made available to improve that 
infrastructure are only available for a time-limited period (ending 
September 30, 2008) and nearly 1 year has passed since those funds were 
first made available. It would be impracticable and contrary to the 
public interest to issue a proposed rule and further delay access to 
these time-limited funds.
    In accordance with the foregoing, we believe that it would be 
impracticable and contrary to the public interest to delay 
implementation of the loan program pending the process of publishing 
both a proposed rule and a final rule. Publishing these provisions in 
an interim final rule with comment period will give the public an 
opportunity to submit comments. Publication of this interim final rule 
with comment period will serve the public interest by ensuring that 
providers have access to funds, and that beneficiaries, Indian tribes, 
and residents of rural areas have access to improved cancer outreach 
services, as expeditiously as possible, consistent with Congressional 
intent. Therefore, in order to establish the loan application process 
and selection criteria to award the funds of the time-limited loan 
program, we find good cause to waive proposed rulemaking for the 
revised requirements set forth under the Administrative Procedure Act 
(5 U.S.C. 553(b))and to issue these regulations in final. However, we 
are providing a 60 day period for public comment, as indicated at the 
beginning of this rule.

V. Collection of Information Requirements

    The collection of information requirements at 5 CFR 1320 are 
applicable to requirements affecting 10 or more entities. While this 
regulation contains information collection requirements, because we 
believe that these requirements will affect less than 10 entities, we 
believe that these collection requirements are exempt from OMB for 
review and approval, as specified at 5 CFR 1320.3(c)(4). Consequently, 
this rule does not need to be reviewed by the Office of Management and 
Budget under the authority of the Paperwork Reduction Act of 1995.

VI. Regulatory Impact

A. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 (as amended by Executive Order 13258, which 
merely reassigns responsibility of duties) directs agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year). 
This interim final rule with comment period is a major rule in which 
$142 million is appropriated to carry out the Health Care 
Infrastructure Improvement Program.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
$6 million to $29 million in any 1 year. For purposes of the RFA, all 
hospitals are considered small businesses according to the Small 
Business Administration's latest size standards with total revenues of 
$26 million or less in any 1 year (for further information, see the 
Small Business Administration's regulation at 65 FR 69432, November 17, 
2000). Individuals and States are not included in the definition of a 
small entity. This interim final rule with comment period affects 
qualifying hospitals as defined by section 1897 as--(1) a hospital or 
entity as defined in Sec.  505.3 that is engaged in research in the 
causes, prevention, and treatment of cancer; and (2) designated as a 
cancer center for the National Cancer Institute (NCI) or is designated 
by the State legislature as the official cancer institute of the State 
and such designation by the State legislature occurred before December 
8, 2003. We believe a total of 61 facilities meet the definition of 
qualifying hospitals as specified in Sec.  505.3 (that is, 60 NCI 
cancer centers and 1 State legislature designated cancer institute).
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. None of the 61 eligible 
facilities that we have identified are rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. That threshold 
level is currently approximately $120 million. This interim final rule 
with comment period does not mandate any requirements for State, local, 
or tribal governments, nor will it result in expenditures by the 
private sector of $120 million in any 1 year.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. As specified in section 1897 of the Act, no provisions 
under the loan program will relieve an obligation of State, local 
permits or limit or otherwise supersede any State or local law.

B. Anticipated Effects

1. Effects on Hospitals
    The provisions of this interim final rule with comment period are 
limited to qualifying hospitals. Only 61 facilities

[[Page 57374]]

meet the definition of qualified hospitals as specified in Sec.  505.3. 
Since the capital costs of projects which the loan program is designed 
to pay for are likely to be substantial and expensive, we expect only a 
small percentage of the 61 eligible facilities will actually be granted 
loans under this provision before the funds are exhausted. For the few 
qualifying hospitals that will receive funds under the loan program, we 
expect they will use the money on projects that are designed to improve 
the healthcare infrastructure of the hospital including construction, 
renovation, or other capital improvements and which would result in 
better facilities in which to provide cancer care to our beneficiaries. 
However, we believe that the effect will be limited to those few 
qualifying hospitals that will receive loan funds. Thus, the provisions 
in this IFC will not have a significant economic impact on a 
substantial number of hospitals.
2. Effects on the Medicare and Medicaid programs
    This interim final rule with comment period will have little impact 
on the Medicare trust fund. The Congress provided $142,000,000 for the 
loan program effective July 1, 2004 through September 30, 2008, and not 
more than $2,000,000 may be used for the administration of the loan 
program for each of the fiscal years (that is, 2004 through 2008).

C. Alternatives Considered

    We considered no alternatives to the policies in this interim final 
rule with comment period since the statute authorizes the establishment 
of these policies.

D. Conclusion

    For these reasons, we are not preparing further analyses for either 
the RFA or section 1102(b) of the Act because we have determined that 
this rule will not have a significant economic impact on a substantial 
number of small entities or a significant impact on the operations of a 
substantial number of small rural hospitals.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 505

    Administrative practice and procedure, Health facilities, Loan 
programs, Infrastructure improvement program, Reporting and 
recordkeeping, and Rural areas.

0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services amends 42 CFR chapter IV by adding a new subchapter H 
(consisting of a new part 505) to read as follows:

SUBCHAPTER H--HEALTH CARE INFRASTRUCTURE IMPROVEMENT PROGRAM

PART 505--ESTABLISHMENT OF THE HEALTH CARE INFRASTRUCTURE 
IMPROVEMENT PROGRAM

Subpart A--Loan Criteria
Secs.
505.1 Basis and scope.
505.3 Definitions.
505.5 Loan criteria.
505.7 Terms of the loan.
505.9 State and local permits.
505.11 Loan application requirements and procedures.
Subpart B--[Reserved]

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C 1302 and 1395hh).

Subpart A--Loan Criteria


Sec.  505.1  Basis and scope.

    This part implements section 1016 of the Medicare Prescription 
Drug, Improvement and Modernization Act of 2003 (MMA) which amends 
section 1897 of the Act. Section 1897 of the Act as amended by section 
6045 of the Tsunami Relief Act of 2005 authorizes the Secretary to 
establish a loan program by which qualifying hospitals may apply for a 
loan for the capital costs of the health care infrastructure 
improvement projects. Section 1897 of the Act appropriates $142,000,000 
for the loan program including program administration. The funds are 
available beginning July 1, 2004 through September 30, 2008. This part 
sets forth the criteria that CMS uses to select among qualifying 
hospitals.


Sec.  505.3  Definitions.

    For purposes of this subpart, the following definitions apply:
    Eligible project means the project of a qualifying hospital that is 
designed to improve the health care infrastructure of the hospital, 
including construction, renovation, or other capital improvements.
    Entity is an entity described in section 501(c)(3) of the Internal 
Revenue Code of 1986 and exempt from tax under section 501(a) of the 
code. An entity must also have at least one existing memorandum of 
understanding or affiliation agreement with a hospital located in the 
State in which the entity is located and retains clinical outpatient 
treatment for cancer on site as well as laboratory research, education, 
and outreach for cancer in the same facility.
    Qualifying hospital means a hospital as defined at section 1861(e) 
of the Act (42 U.S,C. 1395x(e)) or an entity (as defined in this 
section) that is engaged in research in the causes, prevention, and 
treatment of cancer; and is either designated as a cancer center for 
the National Cancer Institute; or designated by the State legislature 
as the official cancer institute of the State before December 8, 2003.


Sec.  505.5  Loan criteria.

    (a) Qualifying criteria. To qualify for the loan program, the 
applicant must meet the following conditions:
    (1) Meet the definition of a ``qualifying hospital'' as set forth 
in Sec.  505.3 of this part.
    (2) Request a loan for the capital costs of an ``eligible project'' 
as defined in Sec.  505.3 of this part. The capital costs for which a 
qualifying hospital may obtain a loan are limited to the reasonable 
costs incurred by the hospital, and capitalized on the Medicare cost 
report, for any facility or item of equipment that it has acquired the 
possession or use of at the time the loan funding is awarded.
    (b) Selection criteria. In selecting loan recipients, CMS 
prioritizes qualifying hospitals that meet the following criteria:
    (1) The hospital is located in a State that, based on population 
density, is defined as a rural State. A rural State is one of ten 
States with the lowest population density. An applicant entity is 
required to be located in one of these ten States. The ten States are 
prioritized beginning with the State with the lowest population 
density. Population density is determined based on the most recent 
available U.S. Census Bureau data.
    (2) The hospital is located in a State with multiple Indian tribes 
in the State. After prioritizing based on paragraph (b)(1) of this 
section, States are further prioritized based on the States with the 
most Indian tribes. The number of Indian tribes in a State is based on 
the most recent data available published in ``Indian Entities 
Recognized and Eligible to Receive Services from the United State 
Bureau of Indian Affairs.'' (68 FR 68180) published on December 5, 
2003.
    (c) CMS will send written notice to qualifying hospitals that have 
been selected to participate in the loan program under this part.


Sec.  505.7  Terms of the loan.

    All loan recipients must agree to the following loan terms:
    (a) Loan obligation. An authorized official of a qualifying 
hospital must execute a promissory note, loan agreement, or a form 
approved by CMS and accompanied by any other

[[Page 57375]]

documents CMS may designate. The loan recipient must provide required 
documentation in a timely manner.
    (b) Schedule of loan. A loan recipient receives a lump sum 
distribution for which payment of principal and interest is deferred 
for 60 months beginning with the day of award notification from CMS. 
The loan repayment period is 20 years.
    (c) Bankruptcy protection. In the event a loan recipient files for 
bankruptcy protection in a court of competent jurisdiction or otherwise 
proves to be insolvent, CMS may terminate the deferment period 
described in paragraph (b) of this section and require immediate 
payment of the loan. If a loan recipient should file for bankruptcy 
protection in a court of competent jurisdiction or should otherwise 
evidence insolvency after the deferment period we will require 
immediate repayment of the outstanding principal and interest due. 
Those payments may be deducted from any Medicare payments otherwise due 
that hospital.
    (d) Loan forgiveness. CMS does not require a loan recipient to 
begin making payments of principal or interest at the end of the 60-
month deferment period if it determines that the loan recipient meets 
the criteria for loan forgiveness under section 1897 of the Act, as 
determined by the Secretary.
    (e) Default. If a loan recipient fails to make any payment in 
repayment of a loan under this subpart within 10 days of its due date, 
the loan recipient may be considered to have defaulted on the loan. 
Upon default, all principal and accrued interest become due 
immediately, and CMS may require immediate payment of any outstanding 
principal and interest due. Those payments may be deducted from any 
Medicare payments otherwise due that hospital.
    (f) Loan repayment. The loan recipient must meet the following 
conditions:
    (1) Make payments every month for 20 years until the loan, 
including interest payments, are paid in full.
    (2) Pay interest on the unpaid principal until the full amount of 
principal has been paid.
    (3) Pay interest at a yearly rate based upon the rate as fixed by 
the Secretary of the Treasury and set forth at 45 CFR 30.13(a).
    (4) If a loan recipient fails to make any payment in repayment of a 
loan under this subpart within 10 days of its due date, that payment 
may be deducted from any Medicare payments otherwise due to the 
recipient.
    (g) Interest rate and monthly payment charges. CMS calculates 
interest charges and payments consistent with Sec.  405.378 of this 
chapter.
    (h) Loan recipient's right to prepay. A loan recipient has the 
right to make payments of principal at any time before they are due. A 
loan recipient may make full prepayment or partial prepayment without 
paying any prepayment charge. If a prepayment is made, the loan 
recipient must provide written notice to CMS at CMS, Division of 
Accounting Operations, P.O. Box 75120, Baltimore, MD 21207-0520.


Sec.  505.9  State and local permits.

    With respect to an eligible project, the provision of a loan under 
this part shall not--
    (a) Relieve the recipient of the loan or any obligation to obtain 
any required State or local permit or approval with respect to the 
project.
    (b) Limit the right of any unit of State or local government to 
approve or regulate any rate of return on private equity invested in 
the project.
    (c) Supersede any State or local law (including any regulation) 
applicable to the construction or operation of the project.


Sec.  505.11  Loan application requirements and procedures.

    (a) The loan application must be received by CMS no later than 5 
p.m. e.d.t. on December 29, 2005.
    (b) The requested information must be typed or clearly printed in 
ink and the loan recipient must mail or deliver an original copy of the 
loan to CMS. The loan application must contain the following 
information:
    (1) Qualifying hospital's name and street address.
    (2) Qualifying hospital's Medicare provider number.
    (3) Name, title, and telephone number of a contact person 
submitting the application.
    (4) Provide all appropriate supporting documentation for each 
answer made on the loan application.

Subpart B--[Reserved]

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: June 28, 2005.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: August 3, 2005.
Michael O. Leavitt,
Secretary.
[FR Doc. 05-19306 Filed 9-23-05; 4:00 pm]
BILLING CODE 4120-03-P