16754 Federal Register / Vol. 60, No. 62 / Friday, March 31, 1995 / Rules and Regulations

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Public Health Service

42 CFR Part 124

RIN: 0905–AE33

Medical Facility Construction and

Modernization; Requirements for

Provision of Services to Persons

Unable to Pay

AGENCY: Public Health Service, DHHS.

ACTION: Final rule.

SUMMARY: This document revises the

rules currently governing how certain

health care facilities, assisted under

Titles VI and XVI of the Public Health

Service Act, fulfill the assurance, given

in their applications for assistance, that

they would provide a reasonable

volume of services to persons unable to

pay. Public comment on the current

rules and operational experience with

them indicated the need to revise the

current requirements with respect to

nursing homes, many of which are

unable under current requirements to

meet their obligation to provide such

services. The rules below should permit

qualified facilities to satisfy their

uncompensated services assurance.

DATES: These rules are effective on May

1, 1995.

Applicability For facilities certified

under 42 CFR 124.516(b)(1), these rules

are applicable on the later of May 1,

1995 or the beginning of the facility’s

next fiscal year. For all other facilities,

these rules are applicable on May 1,

1995.

FOR FURTHER INFORMATION CONTACT: Mr.

Eulas Dortch, 301–443–5656.

SUPPLEMENTARY INFORMATION: On April

4, 1994, the Secretary of Health and

Human Services proposed amending the

rules governing what is popularly

known as the Hill-Burton

uncompensated services program. 59 FR

15693. As explained more fully below,

the Notice of Proposed Rulemaking

(NPRM) proposed to expand the income

eligibility limits applicable to patients

served by obligated nursing homes, to

help such facilities meet their existing

uncompensated services obligations.

The Public Health Service strongly

encourages all grant recipients to

provide a smoke-free workplace and

promote the non-use of all tobacco

products. This is consistent with the

PHS mission to protect and advance the

physical and mental health of the

American people.

Regulatory Background

Health care facilities covered by the

program received construction

assistance under two titles of the Public

Health Service Act, Title VI (the ‘‘HillBurton Act’’, 42 U.S.C. 291, et seq.) and

Title XVI (42 U.S.C. 300q, et seq.).

Under both titles, facilities receiving

such construction assistance have been

required, as a condition of receiving the

construction assistance, to provide an

assurance that ‘‘there will be available

in the facility or portion thereof to be

constructed or modernized a reasonable

volume of services to persons unable to

pay therefor * * *.’’ 42 U.S.C. 291c(e).

See also 42 U.S.C. 300s–1(b)(1)(K)(ii).

This assurance is known as the

‘‘uncompensated services assurance.’’

Regulations governing compliance

with the uncompensated services

assurance were first issued in 1947, and

have been revised several times. On

May 18, 1979, comprehensive

regulations governing compliance with

the assurance were issued at 44 FR

29372. Among other things, the 1979

regulations: established a minimum

level of uncompensated services

facilities were required to provide; set

an annual compliance level of

uncompensated services to be provided

and required facilities to make up any

deficit in meeting the annual

compliance level through provision of

more uncompensated services in later

years; required facilities to allocate their

uncompensated services either under a

plan meeting certain requirements or on

a first-request, first-served basis;

required facilities to notify the public of

the existence of their uncompensated

services programs through public notice

and provision of personal notice to

individuals served by the facilities; and

required facilities to keep records

documenting compliance and to

periodically report concerning

compliance. The 1979 regulations also

for the first time established national

eligibility criteria, based on income:

Individuals whose annual income was

at or below the poverty level (known as

‘‘Category A individuals’’) were

automatically eligible for

uncompensated services; individuals

whose annual income was at or below

two times the poverty level (known as

‘‘Category B individuals’’) were also

eligible for uncompensated services,

unless the facility decided to limit its

services to Category A individuals only.

However, the 1979 regulations also

provided that amounts to which an

individual was entitled under a thirdparty insurance or governmental

program could not be credited towards

a facility’s uncompensated services

quota.

On December 3, 1987, the Secretary

revised the 1979 regulations at 52 FR

46022. As pertinent here, the 1987

regulations effected a technical revision

of the 1979 regulations, making explicit

what had formerly been implicit in

those regulations; i.e., that coverage of

an indigent under a third-party

insurance or governmental program

precludes eligibility for uncompensated

services. 42 CFR 124.505(a)(1) (1988).

This policy simply reflects the longstanding agency view of the

uncompensated services program as a

program of last resort, designed to serve

persons who have no source of

payment, such as Medicaid or private

insurance, for medical care.

This policy has created major

compliance problems for many HillBurton-obligated nursing homes. HHS

determined that, of the 287 nursing

homes with outstanding uncompensated

services obligations under the general

compliance standards of the regulations,

243 have deficits; the majority of these

have received no uncompensated

services credit. These deficits persist

despite many attempts by HHS to

provide technical assistance to nursing

homes to bring them into compliance.

The fundamental problem is that, in

most of these nursing homes, the only

individuals who meet the incomeeligibility requirements for receipt of

uncompensated services are also

covered by their state’s Medicaid

program; hence, they are by definition

ineligible for uncompensated services

under § 124.505(a)(1). Thus, in states in

which the Medicaid eligibility limits

exceed the Hill-Burton eligibility limits

and which cover most or all medical

services, nursing homes are chronically

unable to fulfill their uncompensated

services obligations.

Proposed Rules

HHS established a task force to

analyze nursing home compliance

issues and develop strategies for dealing

with compliance problems. Based on

the task force findings and its own

survey of regional offices of the Health

Care Financing Administration, which

administers the Medicaid program, HHS

proposed to triple the income eligibility

limit for individuals in nursing homes,

to create a broader pool of eligible

individuals for such facilities. The

NPRM accordingly proposed to

establish a third income eligibility level

(Category C) for nursing home services

only. See, proposed § 124.505(a)(2)(iii).

A Category C individual would be an

individual whose annual income is

greater than two times, but does not
Federal Register / Vol. 60, No. 62 / Friday, March 31, 1995 / Rules and Regulations 16755

exceed three times, the poverty level.

The regulations already define which

facilities are ‘‘nursing homes’’ within

the scope of the regulation. See,

§ 124.502(h). In addition, the NPRM

proposed certain technical and

conforming amendments to other

sections of the regulations. The

principal one was the proposed change

to § 124.506(a)(1)(v), to provide that if a

nursing home provides services on a

reduced charge basis to both Category B

and Category C individuals, it may not

employ a discount method that gives

Category C individuals greater discounts

than those given to Category B

individuals.

Public Comment and Department’s

Response

The Department received seven

comments on the NPRM, two from

nursing home associations and five from

representatives of individual nursing

homes. While most of the commentors

applauded the proposed revisions as a

step in the right direction, they made a

number of suggestions for other policies

that would, in their view, better address

the chronic deficit problem faced by so

many nursing homes. These comments

and the Department’s responses thereto

are set out below.

1. The most common criticism was

that the proposed remedy fails to

address what the commentors in general

see as the chief problem: The

inadequacy of Medicaid

reimbursements. The commentors

generally noted that their facilities run

large losses attributable to the

differential between Medicaid

reimbursement and actual costs, and

suggested that facilities be permitted to

write off this differential as

uncompensated services. An Ohio

facility that advocated this approach

noted that, in Ohio, all persons with

incomes up to the cost of nursing home

services qualify for Medicaid, so that

there are no non-Medicaid eligible

patients who would qualify for

uncompensated services. A variation of

this approach was the suggestion that a

compliance alternative be created for

facilities with a Medicaid patient census

of at least 70%.

The Department does not agree that it

should treat as uncompensated services

amounts in excess of ‘‘reasonable costs’’

(the amount reimbursed by Medicaid).

To do so would result in facility credit

for unreasonable charges and a

reduction in the amount of

uncompensated services to persons

unable to pay. Rather, it wishes to look

at the effect of the rules below, together

with the recently adopted charitable

facility alternative, on reducing the

incidence of intractable deficits. For the

same reasons, it is not prepared to craft

a compliance alternative for majorityMedicaid facilities along the lines

suggested. These facilities, by virtue of

their high volume Medicaid levels, have

an inherently smaller compliance level

under the 3 percent compliance option.

However, the Department intends to

continue to study this issue.

With respect to the Ohio situation, it

is likely that such facilities will qualify

under the recently published charitable

facility alternative. See, 59 FR 44634

(Aug. 30, 1994). Such facilities may be

able to satisfy their obligations and

make up their deficits under that

alternative, as long as they collect no

monies (other than those required to be

collected under governmental programs)

from Hill-Burton eligible patients.

2. One provider association, while

supportive of the proposed rules,

suggested that the Department adopt

additional compliance alternatives for

facilities in states which have medically

needy programs and which,

accordingly, are likely to be unable to

benefit from the proposed increase in

the income eligibility level. The

association suggested that (1) services

uncovered by Medicaid be identified

and considered eligible for inclusion as

uncompensated services, such as

additional hours of nursing care,

therapies, or other activities; (2) healthrelated services provided to eligible

non-residents on the nursing facility

premises be counted as uncompensated

services; and (3) services provided by

nursing homes off-premises under

Medicaid home and community-based

waivers be counted as uncompensated

services.

Generally, the Department agrees that

health services provided by a HillBurton facility that are not covered by

Medicaid should count as

uncompensated services, and it has

traditionally accepted them as such.

However, since Medicaid patients are

not liable for additional hours of care

provided which exceed established

Medicaid standards, such costs are not

considered to be uncompensated

services. With respect to the second

proposal, there is no problem under the

present regulations with counting,

toward a facility’s uncompensated

services quota, health services provided

on-premises to eligible nonresidents of

the facility. Thus, facilities may include

such services in their allocation plans.

However, the association’s third

proposal is not one that the Department

can accept, since services which are

reimbursed by Medicaid are, by

definition, ineligible for Hill-Burton

credit.

3. A couple of facilities objected to the

proposed rules on the grounds that

expanding the income eligibility limits

would create a larger pool of eligibles

and thus be devastating to facilities that

are already in financial straits. One

facility asked in particular that it be

allowed to write off necessary building

maintenance and improvement

expenses as uncompensated services, as

it is unable to afford to serve more

persons below cost than it already does.

These facilities appear to

misapprehend the requirements of the

current uncompensated services

regulations. Under the current

regulations, facilities that are financially

unable to meet their uncompensated

services obligation may apply to have it

deferred until they are financially able

to make it up. See 42 CFR

124.503(b)(1)(i) and 124.511(c).

However, except to the extent building

maintenance and improvement

expenses are factored into a facility’s

indirect cost rate that forms part of the

basis for its charges for services, such

expenses are not creditable as

‘‘uncompensated services,’’ because

they are not ‘‘services’’ within the

meaning of the statute.

4. A couple of commenters stated that

the proposed increase in income

eligibility limits would be problemmatic

for other reasons: (1) Because such

individuals would be covered under the

proposed Health Security Act; and (2)

because the proposed limit exceeds the

costs of nursing home services in certain

states. The Department, however, does

not share the commenters’ concerns in

this regard. Should health care reform

become law, this program (like others)

will have to be reviewed for consistency

with the operation of the reform statute

enacted, but this is not an issue that can

productively be addressed before

enactment of such a statute. With

respect to the second comment, the

Department thinks that the income limit

will not be a problem in such states, as

a facility cannot, in any event, receive

credit for more than it charges.

5. No comments were received

concerning the conforming and

technical amendments proposed.

However, the recent adoption of the

charitable facility compliance

alternative has necessitated a

conforming amendment to that section

(see § 124.516 below). Otherwise,

however, no changes to the proposed

technical and conforming amendments

have been made.

6. Dates. Note that, with respect to

facilities certified under the alternative

in the newly adopted § 124.516(b)(1),

this amendment is applicable on May 1,

1995 or the beginning of the facility’s
16756 Federal Register / Vol. 60, No. 62 / Friday, March 31, 1995 / Rules and Regulations

next fiscal year, whichever is later.

Thus, it is the Department’s intention

that the three-year base in § 124.516 will

operate prospectively only with respect

to the amendment to the charging

restriction of § 124.516(b)(1). For

example, a nursing home applying for

certification under § 124.516(b)(1) in

1996 would only have to demonstrate

that it had not charged persons with

incomes up to three times the poverty

level for that part of the three-year

period in which the amendment below

applied to it, not for the entire threeyear period.

It should be noted that the changes

adopted below will not have the same

automatic effect for other nursing

homes. Rather, unless a nursing home

has failed to adopt an allocation plan, it

will generally not be required to provide

uncompensated services to Category C

individuals unless it takes an

affirmative action to do so, through

publication of a revised allocation plan

covering Category C individuals. See,

§ 124.506(a)(1)(v) below. However, to

facilitate prompt coverage of such

individuals, a facility need not wait

until the effective date of these

amendments to publish a revised

allocation plan under § 124.506(c), but

may do so any time after publication of

these amendments, with the effective

date of the revised allocation plan being

at least 60 days following publication.

Regulatory Flexibility Act and

Executive Order 12866

The rules below do not change the

existing procedural and reporting

requirements for obligated facilities. The

Department has determined that the

impact will not approach the annual

$100 million threshhold for major

economic consequences as defined in

Executive Order 12866. Therefore, a

regulatory impact analysis is not

required.

Consistent with the provisions of the

Regulatory Flexibility Act (5 U.S.C.

605(b)), the Secretary certifies that this

rule will not have a significant

economic impact on a substantial

number of small entities.

Paperwork Reduction Act of 1980

The rules below contain no

information collection or reporting

requirements which are subject to

review by the Office of Management and

Budget (OMB) under the Paperwork

Reduction Act of 1980.

List of Subjects in 42 CFR Part 124

Grant programs—health, Health

facilities, Loan programs—health, Low

income persons.

Dated: January 12, 1995.

Philip R. Lee,

Assistant Secretary for Health.

Approved: March 24, 1995.

Donna E. Shalala,

Secretary.

For reasons set out in the preamble,

subpart F of 42 CFR part 124 is hereby

amended to read as follows:

Subpart F—Reasonable Volume of

Uncompensated Services to Persons

Unable to Pay

1. The authority citation for 42 CFR

part 124, subpart F, continues to read as

follows:

Authority: 42 U.S.C. 216; 42 U.S.C.

300s(3).

2. The first two sentences of

§ 124.503(b)(4) are revised to read as

follows:

§ 124.503 Compliance level.

(a) * * *

(b) * * *

(4) Affirmative action plan for

precluding future deficits. Except where

a facility reports to the Secretary in

accordance with § 124.509(a)(2)(iii) that

it was financially unable to provide

uncompensated services at the annual

compliance level, a facility that fails to

meet its annual compliance level in any

fiscal year shall, in the following year,

develop and implement a plan of action

that can reasonably be expected to

enable the facility to meet its annual

compliance level. Such actions may

include special notice to the community

through newspaper, radio, and

television, or expansion of service to

Category B, or, with respect to nursing

homes, Category C, persons. * * *

* * * * *

3. Section 124.505 is amended by

revising paragraph (a)(2)(ii) and adding

(a)(2)(iii) to read as follows:

§ 124.505 Eligibility criteria.

(a) * * *

(2) * * *

(ii) Category B—A person whose

annual individual or family income, as

applicable, is greater than but not more

than twice the poverty line issued by

the Secretary pursuant to 42 U.S.C. 9902

that applies to the individual or family.

If persons in Category B are included in

the allocation plan, the facility shall

provide uncompensated services to

these persons without charge, or in

accordance with a schedule of charges

as specified in the allocation plan.

(iii) Category C—With respect only to

persons seeking or receiving nursing

home services, a person whose annual

or family income, as applicable, is more

than twice but not greater than three

times the poverty line issued by the

Secretary pursuant to 42 U.S.C. 9902

that applies to the individual or family.

If persons in Category C are included in

the allocation plan, the facility shall

provide uncompensated services to

these persons without charge, or in

accordance with a schedule of charges

as specified in the allocation plan; and

* * * * *

4. Section 124.506 is amended by

revising paragraph (a)(1)(iii) through

(a)(1)(v), the first sentence of paragraph

(b)(2), and by adding paragraph

(a)(1)(vi), to read as follows:

§ 124.506 Allocation of services; plan

requirement.

(a)(1) * * *

(iii) State whether Category B or, in

the case of nursing homes only,

Category C persons will be provided

uncompensated services, and if so,

whether the services will be available

without charge or at a reduced charge;

(iv) If services will be made available

to Category B persons at a reduced

charge, specify the method used for

reducing charges, and provide that the

method is applicable to all persons in

Category B;

(v) With respect to nursing homes

only, if services will be made available

to Category C persons at a reduced

charge, specify the method used for

reducing charges, provided that such

method may not result in greater

reductions than those afforded to

Category B persons, and provide that

this method is applicable to all persons

in Category C; and

(vi) Provide that the facility provides

uncompensated services to all persons

eligible under the plan who request

uncompensated services.

(b)(1) * * *

(2) If no plan was previously

published in accordance with paragraph

(a)(2) of this section, the facility must

provide uncompensated services

without charge to all applicants in

Category A and Category B, and, with

respect to nursing homes, Category C,

who request service in the facility.* * *

* * * * *

5. Section 124.516 is amended by

revising paragraph (b)(1) to read as

follows:

§ 124.516 Charitable facility compliance

alternative.

(a) * * *

(b) * * *

(1)(i) For facilities that are nursing

homes: It received, for the three most

recent fiscal years, no monies directly

from patients with incomes up to triple

the current poverty line issued by the
Federal Register / Vol. 60, No. 62 / Friday, March 31, 1995 / Rules and Regulations 16757

Secretary pursuant to 42 U.S.C. 9902,

exclusive of amounts charged or

received for purposes of claiming

reimbursement under third party

insurance or governmental programs,

such as Medicaid or Medicare

deductible or coinsurance amounts;

(ii) For all other facilities. It received,

for the three most recent fiscal years, no

monies directly from patients with

incomes up to double the current

poverty line issued by the Secretary

pursuant to 42 U.S.C. 9902, exclusive of

amounts charged or received for

purposes of claiming reimbursement

under third party insurance or

governmental programs, such as

Medicaid or Medicare deductible or

coinsurance amounts; or

* * * * *

[FR Doc. 95–7846 Filed 3–30–95; 8:45 am]

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