I

105TH CONGRESS

1ST SESSION H. R. 735

To amend the Internal Revenue Code of 1986 and title XVIII of the Social

Security Act to establish a program of assistance for essential community

providers of health care services, to establish a program to update and

maintain the infrastructure requirements of safety net hospitals, and

to require States to develop plans for the allocation and review of expenditures for the capital-related costs of health care services.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 12, 1997

Mr. STARK introduced the following bill; which was referred to the Committee

on Ways and Means, and in addition to the Committee on Commerce,

for a period to be subsequently determined by the Speaker, in each case

for consideration of such provisions as fall within the jurisdiction of the

committee concerned

A BILL

To amend the Internal Revenue Code of 1986 and title

XVIII of the Social Security Act to establish a program

of assistance for essential community providers of health

care services, to establish a program to update and maintain the infrastructure requirements of safety net hospitals, and to require States to develop plans for the

allocation and review of expenditures for the capitalrelated costs of health care services.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the ‘‘Essential Health Fa3 cilities Investment Act of 1997’’.

4 TITLE I—ESSENTIAL ACCESS

5 COMMUNITY HOSPITAL PRO6 GRAM

7 SEC. 101. REVISIONS TO CURRENT PROGRAM.

8 (a) EXPANSION OF CURRENT PROGRAM TO ALL

9 STATES.—Section 1820(a)(1) of the Social Security Act

10 (42 U.S.C. 1395i–4(a)(1)) is amended by striking ‘‘not

11 more than 7’’.

12 (b) INCREASE IN AUTHORIZATION OF APPROPRIA13 TIONS.—Section 1820(l) of such Act (42 U.S.C. 1395i–

14 4(l)) is amended—

15 (1) by striking ‘‘1990, 1991, and 1992’’ and in16 serting ‘‘1998 through 2003’’;

17 (2) by amending paragraph (1) to read as fol18 lows:

19 ‘‘(1) $50,000,000 for grants to States under

20 subsection (a)(1) and grants to States and units of

21 local government under section 1821(a)(1); and’’;

22 and

23 (3) in paragraph (2), by striking

24 ‘‘$15,000,000’’ and inserting ‘‘$40,000,000’’.

25 (c) EFFECTIVE DATE.—The amendments made by

26 subsections (a) and (b) shall take effect October 1, 1997.
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1 SEC. 102. EXTENSION OF PROGRAM TO NETWORKS OF ES2 SENTIAL COMMUNITY PROVIDERS.

3 (a) IN GENERAL.—Part A of title XVIII of the Social

4 Security Act (42 U.S.C. 1395 et seq.) is amended by add5 ing at the end the following new section:

6 ‘‘ASSISTANCE FOR ESSENTIAL COMMUNITY PROVIDERS

7 ‘‘SEC. 1821. (a) ESTABLISHMENT OF PROGRAM.—

8 There is hereby established a program under which the

9 Secretary—

10 ‘‘(1) shall make grants to States and units of

11 local government to carry out the activities described

12 in subsection (d)(1); and

13 ‘‘(2) shall make grants to eligible hospitals and

14 facilities (or consortia of hospitals and facilities) to

15 carry out the activities described in subsection

16 (d)(2).

17 ‘‘(b) ELIGIBILITY OF STATES AND COMMUNITIES

18 FOR GRANTS.—

19 ‘‘(1) REQUIREMENTS FOR APPLICATION.—Sub20 ject to paragraph (2), a State or unit of local gov21 ernment is eligible to receive a grant under sub22 section (a)(1) only if the State or unit of local gov23 ernment submits to the Secretary, at such time and

24 in such form as the Secretary may require, an appli25 cation containing such information and assurances
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1 as the Secretary may require, together with assur2 ances that the State or unit of local government—

3 ‘‘(A) has developed, or is in the process of

4 developing, a community health plan that—

5 ‘‘(i) provides for the creation of a

6 community health network (as defined in

7 subsection (f)) in the State or locality,

8 ‘‘(ii) promotes the integration of the

9 delivery of health care services in the State

10 or locality,

11 ‘‘(iii) improves access to hospital and

12 other services (including primary care serv13 ices) for urban residents in the State or lo14 cality, and

15 ‘‘(iv) in the case of a plan of a unit

16 of local government, is approved by the

17 State;

18 ‘‘(B) has developed (or intends to develop)

19 the plan described in subparagraph (A) in con20 sultation with appropriate State and community

21 hospital associations, public hospitals, and pri22 mary care associations; and

23 ‘‘(C) has designated, or is in the process of

24 designating, nonprofit or public hospitals and
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1 facilities located in the State or locality as es2 sential community providers within such com3 munity health networks (with the approval of

4 the State in the case of designations by units

5 of local government).

6 ‘‘(2) COORDINATION BETWEEN STATE AND

7 LOCAL RECIPIENTS.—A unit of local government

8 may not receive a grant under subsection (a)(1) if

9 it is located in a State receiving a grant under such

10 subsection, except that a unit of local government lo11 cated in an urban area (as defined in section

12 1886(d)(2)(D)) in such a State may receive such a

13 grant with the approval of the State.

14 ‘‘(c) ELIGIBILITY OF HOSPITALS, FACILITIES, AND

15 CONSORTIA FOR GRANTS.—

16 ‘‘(1) IN GENERAL.—A hospital or facility is eli17 gible to receive a grant under subsection (a)(2) only

18 if the hospital or facility—

19 ‘‘(A) is located in a State or locality receiv20 ing a grant under subsection (a)(1);

21 ‘‘(B) is designated as an essential commu22 nity provider by the State or unit of local gov23 ernment or is a member of a community health

24 network;
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1 ‘‘(C) submits an application to the State or

2 unit of local government at such time and con3 taining such information and assurances as the

4 Secretary may require; and

5 ‘‘(D) has received certification by the State

6 or unit of local government that the receiving of

7 such grant by the hospital or facility is consist8 ent with the community health plan of the

9 State or unit or local government and that the

10 State or unit or local government has approved

11 the application submitted under subparagraph

12 (C).

13 ‘‘(2) TREATMENT OF CONSORTIA.—A consor14 tium of hospitals or facilities each of which is part

15 of the same community health network is eligible to

16 receive a grant under subsection (a)(2) if each of its

17 members would individually be eligible to receive

18 such a grant.

19 ‘‘(d) ACTIVITIES FOR WHICH GRANT MAY BE

20 USED.—

21 ‘‘(1) GRANTS TO STATES OR LOCAL GOVERN22 MENTS.—A State or unit of local government shall

23 use a grant received under subsection (a)(1) to carry

24 out activities relating to planning and implementing

25 its community health plan.
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1 ‘‘(2) GRANTS TO HOSPITALS, FACILITIES, AND

2 CONSORTIA.—A hospital or facility shall use a grant

3 received under subsection (a)(2) to finance the costs

4 it incurs in becoming part of a community health

5 network and in serving as part of such a network,

6 including costs related to—

7 ‘‘(A) the development of primary care serv8 ice sites;

9 ‘‘(B) the development of integrated infor10 mation, billing, and reporting systems;

11 ‘‘(C) planning and needs assessments;

12 ‘‘(D) the recruitment and training of

13 health professionals and administrative staff;

14 and

15 ‘‘(E) conducting health promotion outreach

16 activities for medically underserved populations

17 in its service area.

18 ‘‘(e) DESIGNATION OF ESSENTIAL COMMUNITY PRO19 VIDERS.—A State or unit of local government may des20 ignate a hospital or facility as an essential community pro21 vider only if—

22 ‘‘(1) the hospital or facility is a member of (or

23 is in the process of becoming a member of) a com24 munity health network (as defined in subsection (f));
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1 ‘‘(2) in the case of a facility other than a hos2 pital—

3 ‘‘(A) the facility is a federally-qualified

4 health center (as defined in section

5 1861(aa)(4)), or

6 ‘‘(B) the facility would be a federally-quali7 fied health center but for its failure to meet the

8 requirement described in section 329(f)(2)(G)(i)

9 of the Public Health Service Act or the require10 ment described in section 330(e)(3)(G)(i) of

11 such Act (relating to the composition of the fa12 cility’s governing board), but only if the facility

13 provides assurances to the State or unit of local

14 government that consumers have significant

15 input into the governance of the facility; and

16 ‘‘(3) in the case of a hospital—

17 ‘‘(A) the hospital is designated as an es18 sential access community hospital by the Sec19 retary under section 1820(i)(1),

20 ‘‘(B) the hospital is designated as a rural

21 primary care hospital by the Secretary under

22 section 1820(i)(2),

23 ‘‘(C) the hospital is described in section

24 1886(d)(5)(F)(i)(II), or
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1 ‘‘(D) the hospital receives an additional

2 payment amount under section 1886(d)(5)(F)

3 based on the formula described in clause (vii)(I)

4 of such section.

5 ‘‘(f) COMMUNITY HEALTH NETWORK DEFINED.—In

6 this section, the term ‘community health network’ means

7 a public or nonprofit entity that meets the following re8 quirements:

9 ‘‘(1) The entity provides primary care services

10 and acute care services to a medically underserved

11 community (as defined in section 799(6) of the Pub12 lic Health Service Act) in the entity’s service area,

13 either directly through its members or through con14 tracts with other entities (under such limited cir15 cumstances as the Secretary may permit in regula16 tions).

17 ‘‘(2) The entity consists of—

18 ‘‘(A) at least one hospital that is located in

19 an urban area (as defined in section

20 1886(d)(2)(D)) and that has been designated

21 as an essential community provider under sub22 section (e);

23 ‘‘(B) at least 3 facilities (other than hos24 pitals) that have been designated as essential

25 community providers under subsection (e); and
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1 ‘‘(C) at the election of the entity’s mem2 bers, any other entities that provide primary

3 care or other health care services.

4 ‘‘(3) The members of the entity have entered

5 into an agreement under which—

6 ‘‘(A) each member agrees to provide appro7 priate emergency and medical support services

8 to other members,

9 ‘‘(B) each member agrees to accept refer10 rals from other members,

11 ‘‘(C) each hospital member has arrange12 ments to provide staff privileges to physicians

13 providing care for other members, and

14 ‘‘(D) each member has in effect (or is in

15 the process of establishing) agreements with

16 other members to share in the member’s com17 munication system, including (where appro18 priate) the electronic sharing of patient data,

19 medical records, and billing services.

20 ‘‘(g) LIMIT ON AMOUNT OF GRANT TO HOSPITAL OR

21 FACILITY.—A grant made to a hospital or facility under

22 subsection (a)(2) may not exceed $200,000, except that

23 the total amount of a grant awarded to a consortia of hos24 pitals or facilities under such subsection may not exceed

25 $1,000,000.’’.
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1 (b) FUNDING FOR GRANTS TO HOSPITALS THROUGH

2 CURRENT EACH PROGRAM.—Section 1820(l) of the So3 cial Security Act (42 U.S.C. 1395i–4(l)) is amended—

4 (1) in the heading, by striking ‘‘Appropria5 tions’’ and inserting ‘‘Appropriations for EACH

6 Program and Essential Community Provider Pro7 gram’’;

8 (2) by striking ‘‘and’’ at the end of paragraph

9 (1);

10 (3) by striking the period at the end of para11 graph (2) and inserting ‘‘; and’’; and

12 (4) by adding at the end the following new

13 paragraph:

14 ‘‘(3) $80,000,000 for grants to hospitals under

15 section 1821(a)(2).’’.

16 (c) INCLUDING INTERNS AND RESIDENTS PROVIDING

17 SERVICES AT ESSENTIAL COMMUNITY PROVIDERS IN DE18 TERMINING PAYMENT FOR INDIRECT COSTS OF MEDICAL

19 EDUCATION.—Section 1886(d)(5)(B) of the Social Secu20 rity Act (42 U.S.C. 1395ww(d)(5)(B)) is amended by add21 ing at the end the following new clause:

22 ‘‘(v) In determining such adjustment, the Sec23 retary shall count services of interns and residents

24 under a medical residency training program that is

25 conducted at a facility designated as an essential
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1 community provider under section 1821, but only

2 if—

3 ‘‘(I) the hospital is designated as an essen4 tial community provider under such section;

5 ‘‘(II) the hospital incurs all, or substan6 tially all, of the costs of the training program;

7 and

8 ‘‘(III) the facility is a member of a com9 munity health network (as described in section

10 1821(f)) to which the hospital belongs.’’.

11 (d) EFFECTIVE DATE.—The amendments made by

12 this section shall take effect October 1, 1997.

13 SEC. 103. STUDY OF EFFECTIVENESS OF PROGRAMS.

14 (a) STUDY.—The Secretary of Health and Human

15 Services shall conduct a study of the effectiveness of the

16 essential access community hospital program under sec17 tion 1820 of the Social Security Act and the program for

18 assistance for essential community providers under section

19 1821 of such Act (as added by section 102(b)) in increas20 ing the access of medically underserved populations to pri21 mary health care and other health care services.

22 (b) REPORT.—Not later than 2 years after the date

23 of the enactment of this Act, the Secretary of Health and

24 Human Services shall submit a report to Congress on the

25 study conducted under subsection (a).
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1 TITLE II—CAPITAL FINANCING

2 ASSISTANCE FOR SAFETY NET

3 PROVIDERS

4 Subtitle A—Amendments of

5 Internal Revenue Code of 1986

6 SEC. 201. GROSS RECEIPTS TAX ON HOSPITALS.

7 (a) IN GENERAL.—Subchapter A of chapter 1 of the

8 Internal Revenue Code of 1986 is amended by adding at

9 the end the following new part:

10 ‘‘PART VII—HOSPITAL CAPITAL FINANCING

11 ASSISTANCE TAX

‘‘Sec. 59B. Imposition of tax.

12 ‘‘SEC. 59B. IMPOSITION OF TAX.

13 ‘‘(a) GENERAL RULE.—In addition to any other tax

14 imposed by this subtitle, there is hereby imposed a tax

15 of 0.5 percent of the hospital gross receipts of any person

16 for the taxable year.

17 ‘‘(b) HOSPITAL GROSS RECEIPTS.—For purposes of

18 this section, the term ‘hospital gross receipts’ means gross

19 receipts received or accrued during the taxable year from

20 the operation of any hospital, other than payments re21 ceived under a State plan for medical assistance under

22 title XIX of the Social Security Act.

23 ‘‘(c) PERSON.—The term ‘person’ includes persons

24 exempt from tax under section 501(a), the United States,
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1 any State or political subdivision thereof, the District of

2 Columbia, and any agency or instrumentality of the fore3 going.

4 ‘‘(d) NOT TREATED AS TAX FOR CERTAIN PUR5 POSES.—The taxes imposed by this section shall not be

6 treated as taxes imposed by this chapter for purposes of

7 determining—

8 ‘‘(1) the amount of any credit allowable under

9 this chapter, or

10 ‘‘(2) the amount of the minimum tax imposed

11 by section 55.’’

12 (b) TAXES INCLUDED IN ESTIMATED TAX.—Sub13 paragraph (A) of section 6655(g)(1) of such Code is

14 amended by striking ‘‘plus’’ at the end of clause (iii), by

15 redesignating clause (iv) as clause (v), and by inserting

16 after clause (iii) the following new clause:

17 ‘‘(iv) the tax imposed by section 59B,

18 plus’’.

19 (c) CLERICAL AMENDMENT.—The table of parts for

20 subchapter A of chapter 1 of such Code is amended by

21 adding at the end thereof the following new item:

‘‘Part VII. Hospital capital financing assistance tax.’’

22 (d) EFFECTIVE DATE.—The amendments made by

23 this section shall apply to taxable years beginning after

24 September 30, 1997.
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1 Subtitle B—Capital Financing

2 Assistance for Safety Net Providers

3 SEC. 211. ESTABLISHMENT OF CAPITAL FINANCING ASSIST4 ANCE PROGRAM.

5 (a) IN GENERAL.—The Social Security Act is amend6 ed by adding at the end the following new title:

7 ‘‘TITLE XXI—CAPITAL FINANCING ASSIST8 ANCE FOR SAFETY NET PROVIDERS

9 ‘‘Subtitle A—General Provisions

10 ‘‘PAYMENTS TO HOSPITALS AND FACILITIES

11 ‘‘SEC. 2101. (a) IN GENERAL.—The Secretary, with

12 the approval of the Capital Financing Trust Fund Board

13 of Trustees described in section 2104(d) (hereafter in this

14 title referred to as the ‘Trust Fund Board’), shall make

15 payments during fiscal year 1998 through 2003, from

16 amounts in the Capital Financing Trust Fund established

17 under section 2104(a) (hereafter in this title referred to

18 as the ‘Trust Fund’), for capital financing assistance to

19 eligible hospitals and facilities whose applications for as20 sistance have been approved under this title.

21 ‘‘(b) GENERAL ELIGIBILITY REQUIREMENTS FOR AS22 SISTANCE.—

23 ‘‘(1) REQUIREMENTS FOR HOSPITALS.—
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1 ‘‘(A) IN GENERAL.—A hospital shall be

2 generally eligible for capital financing assist3 ance under this title if the hospital—

4 ‘‘(i) is designated as an essential ac5 cess community hospital by the Secretary

6 under section 1820(i)(1);

7 ‘‘(ii) is designated as a rural primary

8 care hospital by the Secretary under sec9 tion 1820(i)(2);

10 ‘‘(iii) is described in section

11 1886(d)(5)(F)(i)(II); or

12 ‘‘(iv) receives an additional payment

13 amount under section 1886(d)(5)(F) based

14 on the formula described in clause (vii) (I)

15 of such section.

16 ‘‘(B) OWNERSHIP REQUIREMENTS.—In

17 order to qualify for assistance under this title,

18 a hospital must—

19 ‘‘(i) be owned or operated by a unit of

20 State or local government;

21 ‘‘(ii) be a quasi-public corporation, de22 fined as a private, nonprofit corporation or

23 public benefit corporation which is formally

24 granted one or more governmental powers
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1 by legislative action through (or is other2 wise partially funded by) the State legisla3 ture, city or county council; or

4 ‘‘(iii) be a private nonprofit hospital

5 which has contracted with, or is otherwise

6 funded by, a governmental agency to pro7 vide health care services to low income in8 dividuals not eligible for assistance under

9 title XVIII or title XIX of this Act, where

10 revenue from such contracts constitute at

11 least 10 percent of the hospital’s operating

12 revenues over the prior 3 fiscal years.

13 ‘‘(2) REQUIREMENTS FOR NON-HOSPITAL FA14 CILITIES.—A facility that is not a hospital shall be

15 generally eligible for capital financing assistance

16 under this title if the facility is designated as an es17 sential community provider under section 1821.

18 ‘‘(c) MEETING ADDITIONAL SPECIFIC CRITERIA.—

19 Hospitals and facilities that are generally eligible for as20 sistance under this title under subsection (b) may apply

21 for the specific programs described in this title and must

22 meet any additional criteria for participation in such pro23 grams.
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1 ‘‘(d) ASSISTANCE AVAILABLE.—Capital financing as2 sistance available under this title shall include loan guar3 antees, interest rate subsidies, matching loans and direct

4 grants. Hospitals and facilities determined to be generally

5 eligible for assistance under this title may apply for and

6 receive more than one type of assistance under this title.

7 ‘‘APPLICATION FOR ASSISTANCE

8 ‘‘SEC. 2102. (a) IN GENERAL.—No hospital or facil9 ity may receive assistance for a qualifying project under

10 this title unless the hospital or facility—

11 ‘‘(1) has filed with the Secretary, in a form and

12 manner specified by the Secretary, with the advice

13 and approval of the Trust Fund Board (as described

14 in section 2104(d)), an application for assistance

15 under this title;

16 ‘‘(2) establishes in its application (for its most

17 recent cost reporting period) that it meets the cri18 teria for general eligibility under this title);

19 ‘‘(3) includes a description of the project, in20 cluding the community in which it is located, and

21 describes utilization and services characteristics of

22 the project and the hospital or facility, and the pa23 tient population that is to be served;
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1 ‘‘(4) provides assurances that the undertaking

2 of the project is in conformity with the State’s cap3 ital allocation plan established pursuant to section

4 1890;

5 ‘‘(5) describes the extent to which the project is

6 intended to include the financial participation of

7 State and local governments; and all other sources

8 of financing sought for the project; and

9 ‘‘(6) establishes, to the satisfaction of the Sec10 retary and the Trust Fund Board, that the project

11 meets the additional criteria for each type of capital

12 financing assistance for which it is applying.

13 ‘‘(b) CRITERIA FOR APPROVAL.—The Secretary, with

14 the approval of the Trust Fund Board, shall determine

15 for each application for assistance under this title—

16 ‘‘(1) whether the hospital or facility meets the

17 general eligibility criteria under section 2101(b);

18 ‘‘(2) whether the hospital or facility meets the

19 specific eligibility criteria of each type of assistance

20 for which it has applied, including whether the hos21 pital or facility meets any criteria for priority con22 sideration for the type of assistance for which it has

23 applied;
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1 ‘‘(3) whether the capital project for which as2 sistance is being requested in a qualifying project

3 under this title; and

4 ‘‘(4) whether funds are available, pursuant to

5 the limitations of each program, to fully fund the re6 quest for assistance.

7 ‘‘(c) PRIORITY OF APPLICATIONS.—In addition to

8 meeting the criteria otherwise described in this title, at

9 the discretion of the Trust Fund Board, the Secretary

10 shall give preference to those qualifying projects that—

11 ‘‘(1)(A) are necessary to bring safety net facili12 ties into compliance with accreditation standards or

13 fire and life safety, seismic, or other related Federal,

14 State or local regulatory standards;

15 ‘‘(B) improve the provision of essential services

16 such as emergency medical and trauma services,

17 AIDS and infections disease, perinatal, burn, pri18 mary care, and other services which the Trust

19 Fund’s Board may designate; or

20 ‘‘(C) will result in the provision of access to es21 sential health services (as designated by the Board

22 of the Trust Fund) to indigent and other needy per23 sons within the hospital’s or facility’s service area

24 that would otherwise be unavailable;
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1 ‘‘(2) include specific anticipated State or local

2 governmental or other non-Federal assurances of fi3 nancial support;

4 ‘‘(3) are unlikely to be financed without the as5 sistance provided under this title; and

6 ‘‘(4) are conducted by entities designated as es7 sential community providers under section 1821.

8 ‘‘(d) SUBMISSION OF APPLICATIONS.—Applications

9 under this Act shall be submitted to the Secretary through

10 the Trust Fund Board. If two or more applicants join in

11 the project, the application shall be submitted by all par12 ticipating hospitals and facilities jointly. Such applications

13 shall set forth all of the descriptions, plans, specifications,

14 and assurances as required by this Act and contain other

15 such information as the Trust Fund Board shall require.

16 ‘‘(e) OPPORTUNITY FOR APPEAL.—The Trust Fund

17 Board shall afford a hospital or facility applying for a loan

18 guarantee under this section an opportunity for a hearing

19 if the guarantee is denied.

20 ‘‘(f) APPLICATIONS FOR AMENDMENTS.—Amend21 ment of an approved application shall be subject to ap22 proval in the same manner as an original application.

23 ‘‘PUBLIC SERVICE RESPONSIBILITIES

24 ‘‘SEC. 2103. (a) IN GENERAL.—Any hospital or facil25 ity accepting capital financing assistance under this title

26 shall agree—
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1 ‘‘(1) to make the services of the facility or por2 tion thereof to be constructed, acquired, or modern3 ized available to all persons the construction, acqui4 sition, or modernization is intended to serve (as

5 identified in the hospital’s or facility’s application

6 under this title and the State’s capital allocation

7 plan established under section 1890); and

8 ‘‘(2) to provide a significant volume of services

9 to persons unable to pay therefore, consistent with

10 other provisions of this Act.

11 ‘‘(b) ENFORCEMENT.—The Director of the Office of

12 Civil Rights of the Department of Health and Human

13 Services shall be given the power to enforce the public

14 service responsibilities described in this section.

15 ‘‘CAPITAL FINANCING TRUST FUND

16 ‘‘SEC. 2104. (a) CREATION OF TRUST FUND.—There

17 is established in the Treasury of the United States a trust

18 fund to be known as the Capital Financing Trust Fund,

19 consisting of such amounts as may be appropriated or

20 credited to such Trust Fund as provided in this section.

21 ‘‘(b) TRANSFERS TO TRUST FUND.—There are here22 by appropriated to the Trust Fund amounts equivalent to

23 the taxes received in the Treasury under section 59B of

24 the Internal Revenue Code of 1986 (relating to hospital

25 capital financing assistance tax).
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1 ‘‘(c) EXPENDITURES FROM TRUST FUND.—Amounts

2 in the Trust Fund shall be available only—

3 ‘‘(1) for making expenditures to carry out this

4 title;

5 ‘‘(2) for grants to non-hospital facilities and

6 consortia under section 1821(a)(2) for fiscal years

7 1998 through 2003, except that not more than

8 $80,000,000 may be available for such grants for

9 any fiscal year; and

10 ‘‘(3) for providing grants to States under sec11 tion 1890(d) for carrying out capital allocation

12 plans.

13 ‘‘(d) BOARD OF TRUSTEES; COMPOSITION; MEET14 INGS; DUTIES.—

15 ‘‘(1) IN GENERAL.—There shall be created a

16 Captial Financing Trust Fund Board of Trustees

17 composed of the Secretary of Health and Human

18 Services, the Secretary of the Treasury, the Assist19 ant Secretary for Health, and the Administrator of

20 the Health Care Financing Administration (all serv21 ing in their ex officio capacities), and 5 public mem22 bers who shall be appointed for 4 year terms by the

23 President, from the following categories—

24 ‘‘(A) one chief health officer from a State;
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1 ‘‘(B) one chief executive officer of a hos2 pital or facility that meets the general eligibility

3 criteria of this title;

4 ‘‘(C) one representative of the financial

5 community; and

6 ‘‘(D) two additional public or consumer

7 representatives.

8 ‘‘(2) DUTIES.—The Board of Trustees shall

9 meet no less than quarterly and shall have the re10 sponsibility to approve implementing regulations, to

11 establish criteria, and to recommend and approve ex12 penditures by the Secretary under the programs set

13 forth in this title.

14 ‘‘(3) MANAGING TRUSTEE.—The Secretary of

15 the Treasury shall serve as the Managing Trustee of

16 the Trust Fund, and shall be responsible for the in17 vestment of funds. The provisions of subsections (b)

18 through (e) of section 1817 shall apply to the Trust

19 Fund and the Managing Trustee of the Trust Fund

20 in the same manner as they apply to the Federal

21 Hospital Insurance Trust Fund and the Managing

22 Trustee of that Trust Fund.

23 ‘‘ADMINISTRATION

24 ‘‘SEC. 2105. (a) IN GENERAL.—The Administrator

25 of the Health Care Financing Administration shall serve
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1 as Secretary of the Board of Trustees and shall administer

2 the programs under this title.

3 ‘‘(b) LIMITATION AND ADMINISTRATIVE EX4 PENSES.—Not more than 5 percent of the funds annually

5 appropriated to the Trust Fund may be available for ad6 ministration of the Trust Fund or programs under this

7 title.

8 ‘‘ASSISTANCE FOR PUERTO RICO AND OTHER

9 COMMONWEALTHS AND TERRITORIES

10 ‘‘SEC. 2106. (a) IN GENERAL.—

11 ‘‘(1) AMOUNT OF ALLOCATION.—Notwithstand12 ing any other provision of this title, there shall be

13 allocated from the Capital Financing Trust Fund for

14 each of the fiscal years 1998 through 2003 a total

15 of $25,000,000 for assistance under this title for

16 hospitals and facilities located in the Commonwealth

17 of Puerto Rico, the Commonwealth of the Northern

18 Mariana Islands, Guam, the Virgin Islands, and

19 American Samoa.

20 ‘‘(2) REALLOCATION OF AMOUNTS NOT EX21 CEEDED.—To the extent that any funds allocated

22 under paragraph (1) to hospitals and facilities de23 scribed in such paragraph for a year are not ex24 pended for assistance under this title, such funds

25 shall be made available for assistance under this title
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1 during the year for hospitals and facilities not de2 scribed in such paragraph.

3 ‘‘(b) LIMIT ON AMOUNT AVAILABLE FOR GRANTS.—

4 Of the total amount allocated from the Capital Financing

5 Trust Fund during a year for assistance for hospitals and

6 facilities described in subsection (a), not more than 40%

7 may be used for grants under subtitle E.

8 ‘‘Subtitle B—Loan Guarantees

9 ‘‘PROVISION OF LOAN GUARANTEES TO SAFETY NET

10 PROVIDERS

11 ‘‘SEC. 2110. (a) IN GENERAL.—Subject to the an12 nual limitation on the allotment from the Trust Fund de13 scribed in section 2112(a), the Capital Financing Trust

14 Fund will provide a Federal guarantee of loan repayment,

15 including guarantees of repayment of refinancing loans,

16 to non-Federal lenders making loans to qualified hospitals

17 and facilities for replacement (either by construction or

18 acquisition), modernization, and renovation projects and

19 capital equipment acquisitions.

20 ‘‘(b) PURPOSES.—The loan guarantee program shall

21 be designed by the Trust Fund Board with the goal of

22 rebuilding and maintaining the essential health services of

23 hospitals and facilities eligible for assistance under this

24 title.
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1 ‘‘ELIGIBLE LOANS

2 ‘‘SEC. 2111. (a) IN GENERAL.—Loan guarantees

3 under this subtitle are available for loans made to qualify4 ing hospitals and facilities for replacement facilities, the

5 modernization and renovation of existing facilities, and

6 capital equipment acquisitions.

7 ‘‘(b) LOAN GUARANTEE MUST BE ESSENTIAL TO

8 BOND FINANCING.—Qualifying hospitals and facilities

9 must demonstrate that a Federal loan guarantee is essen10 tial to obtaining bond financing from non-Federal lenders

11 at a reasonably affordable rate of interest.

12 ‘‘(c) ADDITIONAL ELIGIBILITY CRITERIA FOR LOAN

13 GUARANTEES.—In order to quality for assistance under

14 this subtitle, a hospital or facility must meet the following

15 criteria:

16 ‘‘(1) The hospital or facility must demonstrate

17 evidence of an ability to meet debt service.

18 ‘‘(2) The assistance, when considered with other

19 resources available to the project, is necessary and

20 will restore, maintain, or improve the financial or

21 physical soundness of the hospital or facility.

22 ‘‘(3) The applicant agrees to assume the public

23 service responsibilities described in section 2103.
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1 ‘‘(4) The project is being operated and man2 aged (or will be operated and managed) in accord3 ance with a management-improvement-and-operating

4 plan which is designed to reduce the operating costs

5 of the project, which has been approved by the Trust

6 Fund Board, and which includes—

7 ‘‘(A) a detailed maintenance schedule;

8 ‘‘(B) a schedule for correcting any past de9 ficiencies in maintenance, repairs, and replace10 ments;

11 ‘‘(C) a plan to upgrade the project to meet

12 cost-effective energy efficiency standards pre13 scribed by the Trust Fund Board;

14 ‘‘(D) a plan to improve financial and man15 agement control systems;

16 ‘‘(E) a detailed annual operating budget

17 taking into account such standards for operat18 ing costs in the area as may be determined by

19 the Trust Fund Board; and

20 ‘‘(F) such other requirements as the Trust

21 Fund Board may determine.

22 ‘‘(5) The application includes stringent provi23 sions for continued State or local support of the pro24 gram, both with respect to operating and financial

25 capital.
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1 ‘‘(6) The terms, conditions, maturity, security

2 (if any), and schedule and amount of repayments

3 with respect to the loan are sufficient to protect the

4 financial interests to the United States and are oth5 erwise reasonable and in accord with regulation, in6 cluding a determination that the rate of interest

7 does not exceed such annual percentage on the prin8 cipal obligation outstanding as the Trust Fund

9 Board determines to be reasonable, taking into ac10 count the range of interest rates prevailing in the

11 private market for similar loans and the risks as12 sumed by the United States.

13 ‘‘(7) The hospital or facility must meet such

14 other additional criteria as the Secretary may im15 pose.

16 ‘‘(d) STATE OR LOCAL PARTICIPATION.—Projects in

17 which State or local governmental entities participate in

18 the form of first guarantees of part or all of the total loan

19 value shall be given a preference for loan guarantees under

20 this subtitle.

21 ‘‘GUARANTEE ALLOTMENTS

22 ‘‘SEC. 2112. (a) IN GENERAL.—Not more than

23 $150,000,000 shall be annually allocated from the Trust

24 Fund for purposes of the loan guarantee program estab25 lished by this subtitle.
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1 ‘‘(b) LOAN GUARANTEES FOR RURAL HOSPITALS

2 AND FACILITIES.—At least 10 percent of the dollar value

3 of loan guarantees made under this program during any

4 given year shall be allocated for eligible rural hospitals and

5 facilities, to the extent a sufficient number of applications

6 made by such hospitals and facilities is approved.

7 ‘‘(c) SPECIAL RULE FOR REFINANCING LOANS.—Not

8 more than 20 percent of the amount allocated each year

9 to the loan guarantee program established by this subtitle

10 may be allocated to guarantee refinancing loans during the

11 year.

12 ‘‘TERMS AND CONDITIONS OF LOAN GUARANTEES

13 ‘‘SEC. 2113. (a) IN GENERAL.—The principle

14 amount of the guaranteed loan, when added to any Fed15 eral grant assistance made under this title, may not exceed

16 95 percent of the total value of the project, including land.

17 ‘‘(b) GUARANTEES PROVIDED MAY NOT SUPPLANT

18 OTHER FUNDS.—Guarantees provided under this subtitle

19 Act may not be used to supplant other forms of State or

20 local support.

21 ‘‘(c) RIGHT TO RECOVER FUNDS.—The United

22 States shall be entitled to recover from any applicant the

23 amount of payments made pursuant to any loan guarantee

24 under this subtitle, unless the Trust Fund Board for good

25 cause waives its right of recovery, and, upon making any

26 such payment, the United States shall be subrogated to
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1 all of the rights of the recipients of the payments with

2 respect to which the guarantee was made.

3 ‘‘(d) MODIFICATION OF TERMS.—Loan guarantees

4 made under this subtitle shall be subject to further terms

5 and conditions as the Trust Fund Board determines to

6 be necessary to assure that the purposes of this Act will

7 be achieved, and any such terms and conditions may be

8 modified by the Trust Fund Board to the extent that it

9 determines such modifications to be consistent with the

10 financial interest of the United States.

11 ‘‘(e) TERMS ARE INCONTESTABLE ABSENT FRAUD

12 OR MISREPRESENTATION.—Any loan guarantee made by

13 the Trust Fund Board pursuant to this subtitle shall be

14 incontestable in the hands of an applicant on whose behalf

15 such guarantee is made, and as to any person who makes

16 or contracts to make a loan to such applicant in reliance

17 thereon, except for fraud or misrepresentation on the part

18 of such applicant or other person.

19 ‘‘PREMIUMS FOR LOAN GUARANTEES

20 SEC. 2114. (a) IN GENERAL.—The Trust Fund

21 Board shall determine a reasonable loan insurance pre22 mium which shall be charged for loan guarantees under

23 this subtitle, taking into account the availability of the

24 rseserves created under section 2112. Premium charges

25 shall be payable in cash to the Trust Fund (either in full

26 upon issuance or annually in advance). In addition to the
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1 premium charge herein provided for, the Trust Fund is

2 authorized to charge and collect such amount as it may

3 deem reasonable for the appraisal of a property or project

4 offered for insurance and for the inspection of such prop5 erty or project.

6 ‘‘(b) PAYMENT IN ADVANCE.—In the event that the

7 principal obligation of any loan accepted for insurance

8 under this subtitle is paid in full prior to the maturity

9 date, the Trust Fund Board is authorized in its discretion

10 to require the payment by the borrower of an adjusted

11 premium charge in such amount as the Board determines

12 to be equitable, but not in excess of the aggregate amount

13 of the premium charges that the hospital or facility would

14 otherwise have been required to pay if the loan had contin15 ued to be insured until maturity date.

16 ‘‘(c) TRUST FUND BOARD MAY WAIVE PREMIUMS.—

17 The Trust Fund Board may in its discretion partially or

18 totally waive premiums charged for loan insurance under

19 this section for financially distressed hospitals and facili20 ties (as described by the Secretary).

21 ‘‘PROCEDURES IN THE EVENT OF LOAN DEFAULT

22 ‘‘SEC. 2115. (a) PAYMENT OF INSURANCE AFTER

23 DEFAULT.—

24 ‘‘(1) TRANSFER OF RIGHTS AND INTERESTS.—

25 The failure of the borrower hospital or facility to

26 make payment due under or provided by the terms
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1 of a loan insured under this subtitle shall be consid2 ered in default under such loan and, if such default

3 continues for a period of 30 days, the lender shall

4 be entitled to receive the benefits of the insurance as

5 hereinafter provided, upon assignment, transfer, and

6 delivery to the Trust Fund Board, within a period

7 and in accordance with rules and regulations to be

8 prescribed by the Trust Fund Board of—

9 ‘‘(A) all rights and interests arising under

10 the loan in default;

11 ‘‘(B) all claims of the lender against the

12 borrower or others, arising out the loan trans13 actions;

14 ‘‘(C) all policies of title or other insurance

15 or surety bonds or other guarantees and any

16 and all claims thereunder;

17 ‘‘(D) any balance of the loan not advanced

18 to the borrower;

19 ‘‘(E) any cash or assets held by the lender,

20 or to which it is entitled, as deposits made for

21 the account of the borrower and which have not

22 been applied in reduction of the principal of the

23 loan indebtedness; and
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1 ‘‘(F) all records, documents, books, papers,

2 and accounts relating to the mortgage trans3 action.

4 ‘‘(2) PAYMENTS BY TRUST FUND.—Upon an

5 assignment, transfer, and delivery described in para6 graph (1), the obligation of the borrower to pay the

7 premium charges for the loan insurance shall cease,

8 and the Trust Fund shall, subject to the cash ad9 justment provided for in subsection (d), issue to the

10 lender a certificate of claim as provided in sub11 section (b), and debentures having total face value

12 equal to the original principal face amount of the

13 loan plus such amount as the borrower may have

14 paid for taxes, special assessments, and water rates,

15 which are liens prior to the mortgage; insurance on

16 the assets; and reasonable expenses for the comple17 tion and preservation of the assets and any loan in18 surance premiums paid after default, less the sum

19 of—

20 ‘‘(A) that part of the amount of the prin21 cipal obligation that has been repaid by the bor22 rower;

23 ‘‘(B) an amount equivalent to 1 percent of

24 the unpaid amount of such principal obligation;

25 and
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1 ‘‘(C) any net income received by the lender

2 from the assets.

3 ‘‘(3) OPTION TO FORECLOSE.—

4 ‘‘(A) IN GENERAL.—In the event of a de5 fault under the loan the lender may, at its op6 tion and in accordance with the regulations of,

7 and in a period of time to be determined by the

8 Trust Fund Board, proceed to foreclose on and

9 obtain possession of or otherwise acquire such

10 assets from the borrower after default, and re11 ceive the benefits of the insurance as herein

12 provided, upon—

13 ‘‘(i) the prompt conveyance to the

14 Trust Fund of title to the assets which

15 meets the requirements of the rules and

16 regulations of the Trust Fund Board in

17 force at the time the loan was insured and

18 which is evidenced in the manner pre19 scribed by such rules and regulations; and

20 ‘‘(ii) the assignment to the Trust

21 Fund of all claims of the lender against

22 the borrower or others, arising out of the

23 loan transaction or foreclosure proceedings,
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1 except such claims that may have been re2 leased with the consent of the Trust Fund

3 Board.

4 ‘‘(B) REPEAL OF OBLIGATION TO PAY PRE5 MIUM.—Upon such conveyance and assignment,

6 the obligation of the borrower to pay the pre7 mium charges for insurance shall cease and the

8 borrower shall be entitled to receive the benefits

9 of the insurance as provided in this subsection,

10 except that in such event the 1 percent deduc11 tion set out above shall not apply.

12 ‘‘(b) CERTIFICATE OF CLAIM; DIVISION OF EXCESS

13 PROCEEDS.—

14 ‘‘(1) VALUE OF CERTIFICATE.—The certificate

15 of claim issued under this section shall be for an

16 amount which the Trust Fund Board determines to

17 be sufficient, when added to the face value of the de18 bentures issued and the cash adjustment paid to the

19 lender, to equal the amount which the lender would

20 have received if, on the date of the assignment,

21 transfer and delivery to the Trust Fund provided for

22 in subsection (a) of this section, the mortgagor had

23 extinguished the mortgage indebtedness by payment

24 in full of all obligations under the loan and a reason25 able amount for necessary expenses incurred by the
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1 lender in connection with the default proceedings, or

2 the acquisition of the mortgaged assets otherwise,

3 and the conveyance thereof to the Trust Fund. Each

4 such certificate of claim shall provide that there

5 shall accrue to the holder of such certificate with re6 spect to the face amount of such certificate, an in7 crement at the rate of 3 percent per annum which

8 shall not be compounded.

9 ‘‘(2) TREATMENT OF EXCESS.—If the net

10 amount realized from the mortgage, and all claims

11 in connection therewith, so assigned, transferred,

12 and delivered, and from the assets covered by such

13 mortgage and all claims in connection with such as14 sets, after deducting all expenses incurred by the

15 Trust Fund in handling, dealing with, acquiring title

16 to, and disposing of such mortgage and assets and

17 in collecting such claims, exceeds the face value of

18 the debentures issued and the case adjustment paid

19 to the mortgagee plus all interest paid on such de20 bentures, such excess shall be divided as follows:

21 ‘‘(A) If such excess is greater than the

22 total amount payable under the certificate of

23 claim issued in connection with such assets, the
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1 Trust Fund shall pay to the holder of such cer2 tificate the full amount so payable, and any ex3 cess remaining thereafter shall be retained by

4 the Trust Fund and credited to the loan insur5 ance program of the Trust Fund.

6 ‘‘(B) If such excess is equal to or less than

7 the total amount payable under such certificate

8 of claim, the Trust Fund Board shall pay to the

9 holder of such certificate the full amount of

10 such excess.

11 ‘‘(c) ACQUISITION OF ASSETS BY CONVEYANCE OR

12 FORECLOSURE.—

13 ‘‘(1) IN GENERAL.—The Trust Fund Board is

14 authorized to—

15 ‘‘(A) acquire possession of and title to any

16 assets, covered by a mortgage insured under

17 this section and assigned to it, by voluntary

18 conveyance in extinguishment of the mortgage

19 indebtedness, or

20 ‘‘(B) institute proceeding for foreclosure on

21 the assets covered by any such insured mort22 gage and prosecute such proceedings to conclu23 sion.

24 ‘‘(2) BIDDING PROCEDURES AT FORE25 CLOSURE.—The Trust Fund Board at any sale
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1 under foreclosure may, in its discretion, for the pro2 tection of the Trust Fund, bid any sum up to but

3 not in excess of the total unpaid indebtedness se4 cured by the mortgage plus taxes, insurance, fore5 closure costs, fees, and other expenses, and may be6 come the purchaser of the assets at such sale. In de7 termining the amount to be bid, the Trust Fund

8 Board shall act consistently with its duties.

9 ‘‘(3) PAYMENT OF EXPENSES.—The Trust

10 Fund Board is authorized to pay from the Trust

11 Fund such sums as may be necessary to defray such

12 taxes, insurance, costs, fees, and other expenses in

13 connection with the acquisition or foreclosure of as14 sets under this section.

15 ‘‘(4) EXERCISE OF RIGHTS PENDING ACQUISI16 TION.—Pending such acquisition by voluntary con17 veyance or by foreclosure, the Trust Fund Board is

18 authorized, with respect to any mortgage assigned to

19 it under the provisions of subsection (a), to exercise

20 all the rights of a mortgagee under such mortgage,

21 including the right to sell such a mortgage, and to

22 take such action and advance such sums as may be

23 necessary to preserve or protect the lien of such

24 mortgage.
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1 ‘‘(d) HANDLING AND DISPOSAL OF ASSETS; SETTLE2 MENT OF CLAIMS.—

3 ‘‘(1) PAYMENT FOR CERTAIN EXPENSES.—Not4 withstanding any other provisions of law relating to

5 the acquisition, handling, or disposal of real and

6 other property by the United States, the Trust Fund

7 Board shall also have power, for the protection of

8 the interests of the Trust Fund, to pay out of the

9 Trust Fund all expenses or charges in connection

10 with, and to deal with, complete, reconstruct, rent,

11 renovate, modernize, insure, make contracts for the

12 management of, or establish suitable agencies for

13 the management of, or sell for cash or credit or lease

14 in its discretion, any assets acquired by it under this

15 section.

16 ‘‘(2) SETTLEMENT OF CLAIMS.—Notwithstand17 ing any other provision of law, the Trust Fund

18 Board shall also have the power to pursue to final

19 collection by way of compromise or otherwise all

20 claims assigned and transferred to it in connection

21 with the assignment, transfer, and delivery provided

22 for in this section, and at any time, upon default, to

23 foreclose or refrain from foreclosing on any assets

24 secured by any mortgage assigned and transferred

25 to or held by it.
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1 ‘‘(3) LIMITATIONS ON AUTHORITY.—Sub2 sections (a) and (b) shall not be construed to apply

3 to any contract for hazard insurance, or to any pur4 chase or contract for services or supplies on account

5 of such assets if the amount thereof does not exceed

6 $1,000.

7 ‘‘Subtitle C—Interest Rate Subsidies

8 ‘‘PROVISION OF INTEREST RATE SUBSIDIES

9 ‘‘SEC. 2121. (a) IN GENERAL.—The Secretary, with

10 the approval of the Trust Fund Board, shall make avail11 able interest subsidies to reduce the cost of financing

12 qualifying projects.

13 ‘‘(b) PURPOSES.—The interest subsidy program shall

14 provide a partial Federal subsidy of debt service payment

15 for financing replacement (whether by construction or ac16 quisition), modernization, and renovation projects or cap17 ital equipment acquisitions by undertaking the issuance of

18 bonds.

19 ‘‘ELIGIBLE LOANS

20 ‘‘SEC. 2122. (a) IN GENERAL.—Qualifying hospitals

21 and facilities should have issued or plan to issue bonds

22 for capital projects or be responsible for paying debt serv23 ice on general obligation or revenue bonds issued on the

24 qualifying hospital’s or facility’s behalf. To be eligible,

25 bonds must have been issued after December 31, 1997.
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1 ‘‘(b) NON-FEDERAL PARTICIPATION REQUIRE2 MENT.—In order to obtain assistance under this subtitle,

3 a hospital or facility must receive assistance from non4 Federal sources in an amount not less than the amount

5 of the assistance provided under this subtitle.

6 ‘‘ALLOTMENT OF SUBSIDIES

7 ‘‘SEC. 2123. (a) IN GENERAL.—Interest subsidy

8 grants will be made in the amount of 3 percent for qualify9 ing non-Federal loans.

10 ‘‘(b) QUALIFYING FEDERAL LOANS MADE UNDER

11 THIS ACT.—Interest subsidy grants in an amount of up

12 to 5 percent will be made for qualifying Federal loans

13 made under this title if it is determined by the Trust Fund

14 Board that the project would not be otherwise financially

15 feasible.

16 ‘‘(c) RESERVE FOR RURAL HOSPITALS AND FACILI17 TIES.—At least 10 percent of the total value of all interest

18 subsidies awarded in any given year shall be awarded to

19 rural hospitals and facilities, provided that a sufficient

20 number of applications are approved.

21 ‘‘(d) LIMITATION ON AMOUNT OF SUBSIDIES

22 AWARDED IN A GIVEN STATE.—The aggregate value of

23 interest subsidies made to hospitals and facilities in any

24 State in a given year shall not exceed 25 percent of the

25 total value of all interest subsidies made during that year.
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1 ‘‘(e) AMOUNT ALLOCATED FROM TRUST FUND.—

2 The Trust Fund Board shall make available $220,000,000

3 annually for interest subsidies under this subtitle.

4 ‘‘TERMS AND CONDITIONS FOR SUBSIDIES

5 ‘‘SEC. 2124. (a) STATE OR LOCAL PARTICIPATION.—

6 State or local participation in an amount equal to not less

7 than the Federal subsidy is required.

8 ‘‘(b) ISSUANCE OF FEDERAL COMMITMENTS.—Suc9 cessful applicants will receive a Federal commitment of in10 terest subsidy grant. Applicants will then have 12 months

11 to finalize financing arrangements before unobligated

12 funds would be returned to the subsidy program pool. A

13 commitment, when issued, shall be valid for as long as

14 a hospital or facility continues to meet the eligibility quali15 fications of this title.

16 ‘‘SUBSIDIES FOR LOAN REFINANCING

17 ‘‘SEC. 2125. In addition to providing interest rate

18 subsidies for new loans, the Trust Fund may provide sub19 sidies to assist in refinancing if the hospital or facility

20 presently lacks permanent financing at an affordable cur21 rent market rate.

22 ‘‘Subtitle D—Direct Matching Loans

23 ‘‘PROVISION OF MATCHING LOANS

24 ‘‘SEC. 2131. (a) IN GENERAL.—The Secretary, with

25 the approval of the Trust Fund Board, shall provide direct
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1 matching loans to qualified hospitals and facilities unable

2 otherwise to obtain essential financing.

3 ‘‘(b) PURPOSES.—The purpose of this subtitle is to

4 provide qualifying hospitals and facilities with direct

5 matching loans for essential replacement (whether by con6 struction or acquisition), modernization, and renovation

7 projects and capital equipment acquisitions. These loans

8 are to be primarily provided for the funding of smaller

9 projects where the transaction costs of securing financing

10 from other sources may be disporportionately onerous in

11 relationship to the amounts financed.

12 ‘‘ELIGIBLE PROJECTS

13 ‘‘SEC. 2132. (a) IN GENERAL.—Qualified applicants

14 may seek a project loan of up to $50,000,000. Not more

15 than 75 percent of the cost of the project may come from

16 Federal sources.

17 ‘‘(b) EXCEPTION FOR FINANCIALLY DISTRESSED AP18 PLICANTS.—The Trust Fund Board shall have the discre19 tion to waive the 25 percent match requirement for finan20 cially distressed hospitals and facilities (as described by

21 the Secretary).
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1 ‘‘ALLOTMENT OF LOANS

2 ‘‘Sec. 2133. (a) IN GENERAL.—The Trust Fund

3 Board shall make available $200,000,000 in direct match4 ing loans annually. Funded projects should be divided be5 tween projects designed to achieve compliance with accred6 itation standards, life safety code, and other certification

7 standards, and those related to the provision of new serv8 ices.

9 ‘‘(b) RESERVE FOR RURAL HOSPITALS AND FACILI10 TIES.—No less than 10 percent of the total value of loans

11 made under the program shall be made to rural hospitals

12 and facilities, if there are a sufficient number of approved

13 applications from such hospitals and facilities.

14 ‘‘TERMS AND CONDITIONS OF LOANS

15 ‘‘SEC. 2134. (a) GENERAL TERM.—Loans will be

16 made for a period equal to the construction period plus

17 up to 39 years amortization.

18 ‘‘(b) INTEREST RATE.—The interest rate will be a

19 market rate determined by the Trust Fund Board to be

20 the most recent applicable index for revenue bonds, based

21 on the index published by the Bond Buyer and such other

22 information as the Board finds appropriate.

23 ‘‘USE OF LOANS FOR REFINANCING

24 ‘‘SEC. 2135. In addition to providing loans for new

25 projects, the Trust Fund Board may grant loans under

26 this subtitle to refinance existing loans if the hospital or
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1 facility has been unable to secure permanent financing at

2 an affordable current market rate, except that the amount

3 of assistance provided under this subtitle during a year

4 for refinancing existing loans may not exceed 20 percent

5 of the total amount made available for assistance under

6 this subtitle for the year.

7 ‘‘CREATION OF REVOLVING FUND

8 ‘‘SEC. 2136. In addition to the new amounts made

9 available each year, all loan repayments made by hospitals

10 and facilities shall be held in a revolving fund that may

11 be used for additional loans.

12 ‘‘LOAN DEFAULT

13 ‘‘SEC. 2137. (a) IN GENERAL.—The failure of the

14 borrower hospital or facility to make payment due under

15 or provided by the terms of a loan granted under this sub16 title shall be considered a default under such loan and,

17 if such default continues for a period of 30 days, the Trust

18 Fund Board shall have the right to begin collection pro19 ceedings against the borrower.

20 ‘‘(b) PRIORITY OF FEDERAL INTEREST.—In the case

21 of default, the United States shall be paid prior to State

22 or local bonds.

23 ‘‘(c) SETTLEMENT OF CLAIMS.—Notwithstanding

24 any other provision of law, the Trust Fund Board shall

25 have the power to pursue to final collection by way of com26 promise or otherwise all claims assigned and transferred
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1 to the Trust Fund in connection with an assignment,

2 transfer, and delivery and at any time, upon default, to

3 foreclose or refrain from foreclosing on any assets secured

4 by any defaulted loan held by the Trust Fund.

5 ‘‘Subtitle E—Grants for Urgent Capital Needs

6 ‘‘PROVISION OF GRANTS

7 ‘‘SEC. 2141. (a) IN GENERAL.—The Secretary, with

8 the approval of the Trust Fund Board, shall make direct

9 grants to qualified hospitals and facilities with urgent cap10 ital needs.

11 ‘‘(b) PURPOSES.—Direct grants shall be available to

12 eligible hospitals and facilities for 3 types of projects:

13 ‘‘(1) Emergency certification and licensure

14 grants would be available to eligible hospitals and fa15 cilities that are threatened with closure or loss of ac16 creditation or certification of a facility or of essential

17 services as a result of life or safety code violations

18 or similar facility or equipment failures. Such grants

19 would provide limited funding for repair and renova20 tion or capital equipment acquisition where failure to

21 fund would disrupt the provision of essential public

22 health services such as emergency care.

23 ‘‘(2) Emergency grants would be available for

24 capital renovation, expansion, or replacement

25 (whether by construction or acquisition) necessary to
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1 the maintenance or expansion of essential safety and

2 health services such as obstetrics, perinatal, emer3 gency and trauma, primary care and preventive

4 health services.

5 ‘‘(3) Planning grants would be available to

6 qualified hospitals and facilities requiring pre-ap7 proval assistance related to management and finance

8 in order to apply for loans, loan guarantees, and in9 terest subsidies under this Act.

10 ‘‘(c) PRIORITY TO FINANCIALLY DISTRESSED PRO11 VIDERS.—Priority for direct grants under this section

12 would be given to financially distressed hospitals and fa13 cilities (as described by the Secretary).

14 ‘‘(d) APPLICATION PROCESS.—The Secretary, with

15 the approval of the Trust Fund Board, shall create an

16 expedited application process for direct grants.

17 ‘‘(e) AMOUNT ALLOCATED FROM TRUST FUND.—

18 The Trust Fund Board shall annually allocate

19 $400,000,000 from the Trust Fund for grants under this

20 subtitle.

21 ‘‘ELIGIBLE PROJECTS

22 ‘‘SEC. 2142. (a) MATCHING GRANTS.—

23 ‘‘(1) LIMITATION ON AMOUNT.—Grants for cap24 ital expenditures by qualified hospitals and facilities

25 will be limited to $25,000,000.
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1 ‘‘(2) MATCHING REQUIREMENT.—At least half

2 of the projects funded in a year must receive at least

3 50 percent of their funding from State or local

4 sources. The remaining projects funded during the

5 year could be financed up to 90 percent with a com6 bination of Federal grants and loans.

7 ‘‘(3) RESERVATION FOR RURAL APPLICANTS.—

8 No less than 10 percent of the grant funds in any

9 given year would be reserved for rural applicants,

10 provided that a sufficient number of applications are

11 approved.

12 ‘‘(b) PLANNING GRANTS.—Applicants who can dem13 onstrate general qualification for the direct matching loan,

14 loan guarantee, or interest subsidy programs under this

15 title or eligibility for mortgage insurance under section

16 242 of the National Housing Act will be eligible for a

17 grant of up to $500,000 to assist in implementation of

18 key budgetary and financial systems as well as manage19 ment and governance restructuring.’’.

20 (b) EFFECTIVE DATE.—The amendment made by

21 subsection (a) shall take effect October 1, 1998.
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1 SEC. 212. ADJUSTMENT TO PAYMENTS FOR CAPITAL-RE2 LATED COSTS UNDER MEDICARE.

3 (a) IN GENERAL.—Section 1886(g)(1)(B) of the So4 cial Security Act (42 U.S.C. 1395ww(g)(1)(B)) is amend5 ed—

6 (1) by striking ‘‘and’’ at the end of clause (iii);

7 (2) by striking the period at the end of clause

8 (iv) and inserting ‘‘, and’’; and

9 (3) by adding at the end the following new

10 clause:

11 ‘‘(v) shall provide for adjustments to take into

12 account the extent to which capital-related costs in13 curred by a hospital are costs with respect to which

14 the hospital received financial assistance under title

15 XXI.’’.

16 (b) EFFECTIVE DATE.—The amendments made by

17 subsection (a) shall apply to cost reporting periods begin18 ning on or after October 1, 1999.

19 SEC. 213. TAX EXEMPT STATUS OF FEDERALLY GUARAN20 TEED STATE OR LOCAL BONDS.

21 (a) IN GENERAL.—Section 149(b)(3)(A) of the Inter22 nal Revenue Code of 1986 is amended—

23 (1) in clause (ii), by striking ‘‘or’’;

24 (2) in clause (iii) by striking the period at the

25 end and inserting ‘‘, or’’; and
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1 (3) by adding at the end the following new

2 clause: ‘‘(iv) any guarantee by the Capital Financing

3 Trust Fund pursuant to title XXI of the Social Se4 curity Act.’’.

5 (b) EFFECTIVE DATE.—The amendments made by

6 subsection (a) shall take effect on October 1, 1998.

7 TITLE III—CAPITAL

8 ALLOCATION PLANS

9 SEC. 301. REQUIRING STATE REVIEW MECHANISMS AS A

10 CONDITION OF PAYMENT FOR CAPITAL-RE11 LATED COSTS UNDER MEDICARE.

12 (a) IN GENERAL.—Section 1862(a) of the Social Se13 curity Act (42 U.S.C. 1395y(a)) is amended—

14 (1) by striking ‘‘or’’ at the end of paragraph (15);

15 (2) by striking the period at the end of paragraph

16 (16) and inserting ‘‘; or’’ and

17 (3) by inserting after paragraph (16) the following

18 new paragraph:

19 ‘‘(17) with respect to expenses for capital-related

20 costs (as defined in section 1886(g)(1)(C)) incurred dur21 ing a year (beginning with 1998) where—

22 ‘‘(A) such expenses are incurred in a State

23 that does not have a capital allocation plan ap24 proved by the Secretary under section 1890, or
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1 ‘‘(B) the State notifies the Secretary that

2 such expenses were incurred in violation of the

3 State’s capital allocation plan under such sec4 tion.’’.

5 (b) CAPITAL ALLOCATION PLANS DESCRIBED.—Title

6 XVIII of the Social Security Act (42 U.S.C. 1395 et seq.)

7 is amended by inserting after section 1889 the following

8 new section:

9 ‘‘CAPITAL ALLOCATION PLANS

10 ‘‘SEC. 1890. (a) APPROVAL BY SECRETARY.—

11 ‘‘(1) IN GENERAL.—For purposes of section

12 1862(a)(17), the Secretary shall approve the capital

13 allocation plan of a State for a fiscal year if the

14 Governor of the State provides the Secretary with

15 information and assurances necessary for the Sec16 retary to find that the plan meets the requirements

17 of this section.

18 ‘‘(2) TERMINATION OR EXTENSION OF AP19 PROVAL PERMITTED.—Notwithstanding paragraph

20 (1), the Secretary may—

21 ‘‘(A) terminate the approval of a plan

22 under this section for a fiscal year if the Sec23 retary determines during the year that the plan

24 is not substantially in compliance with this sec25 tion; or
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1 ‘‘(B) extend the approval of a plan under

2 this section (on a conditional basis) for an addi3 tional period not to exceed 12 months.

4 ‘‘(b) REQUIREMENTS.—

5 ‘‘(1) IN GENERAL.—A State’s capital allocation

6 plan meets the requirements of this section if—

7 ‘‘(A) except as provided in paragraph (2),

8 the Governor designates a single agency of the

9 State government as the State review agency

10 for the development of the plan;

11 ‘‘(B) the Governor designates a single

12 agency of the State government as the State re13 view agency for the enforcement of the plan;

14 ‘‘(C) all capital expenditures of health care

15 services in the State (except as provided in

16 paragraph (4)) are subject to review and ap17 proval under the plan (in accordance with sub18 section (c));

19 ‘‘(D) the State review agency determines

20 whether capital expenditures are in accordance

21 with the plan using the criteria specified in sub22 section (c) and notifies the Secretary if it deter23 mines that any capital expenditures subject to

24 the plan are not in accordance with the plan;

25 and
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1 ‘‘(E) the State review agency provides the

2 Secretary with assurances that the agency is

3 enforcing the plan.

4 ‘‘(2) PERMITTING USE OF REGIONAL REVIEW

5 AGENCIES.—Notwithstanding paragraph (1)(A), a

6 Governor may designate a regional review agency to

7 develop the capital allocation plan for capital ex8 penditures of health care services in a geographic re9 gion in the State, but only if—

10 ‘‘(A) each such geographic region has a

11 population of at least 500,000;

12 ‘‘(B) if the region includes any portion of

13 a metropolitan statistical area, the region in14 cludes all of such metropolitan statistical area;

15 and

16 ‘‘(C) each such regional review agency in

17 the State—

18 ‘‘(i) is a nonprofit corporation or a

19 public regional planning body or single

20 unit of local government,

21 ‘‘(ii) is governed by a board a major22 ity of the members of which are consumers

23 or purchasers of health care services in the

24 region, and
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1 ‘‘(iii) has resource allocation and plan2 ning in the region as its primary purpose.

3 ‘‘(3) PERMITTING USE OF MULTISTATE REVIEW

4 AGENCIES.—The Governors of 2 or more contiguous

5 States may designate a single review agency to carry

6 out the requirements of this section with respect to

7 capital expenditures of health care services in such

8 States, but only if such agency meets the require9 ments described in paragraph (2) for regional review

10 agencies.

11 ‘‘(4) SPECIAL TREATMENT OF SERVICES IN

12 RURAL AREAS PERMITTED.—

13 ‘‘(A) IN GENERAL.—A capital allocation

14 plan need not provide for review of expenditures

15 for services provided in rural areas in a State

16 if the State has developed a rural health plan

17 that meets the requirements of this paragraph.

18 ‘‘(B) REQUIREMENTS FOR RURAL HEALTH

19 PLAN.—A rural health plan must—

20 ‘‘(i) meet criteria developed by the

21 Secretary;

22 ‘‘(ii) have as its major focus the as23 surance of access to health care services by

24 low density rural populations in the State;

25 and
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1 ‘‘(iii) address at least—

2 ‘‘(I) the regionalization of serv3 ices,

4 ‘‘(II) alternatives to traditional

5 facilities,

6 ‘‘(III) the development of new or7 ganizational forms, and

8 ‘‘(IV) the needs for special emer9 gency and other health-services-re10 lated transportation needs.

11 ‘‘(c) CONTENTS OF PLAN DESCRIBED.—

12 ‘‘(1) REQUIREMENTS RELATING TO ALLOCA13 TION OF CAPITAL.—

14 ‘‘(A) IN GENERAL.—Each capital alloca15 tion plan under this subsection shall—

16 ‘‘(i) be developed consistent with cri17 teria developed by the Secretary;

18 ‘‘(ii) be designed to assure that the

19 needs of the State’s residents for health

20 care services are met;

21 ‘‘(iii) include occupancy targets for in22 patient hospital facilities;

23 ‘‘(iv) include utilization targets for

24 services subject to review under the plan;

25 and
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1 ‘‘(v) provide an opportunity for formal

2 review and comment before becoming final.

3 ‘‘(B) SPECIFICS.—Each capital allocation

4 plan must—

5 ‘‘(i) assure access to hospital facilities;

6 ‘‘(ii) identify which facilities (and

7 parts of facilities) would be closed in order

8 to reach the occupancy and utilization tar9 gets for health care services;

10 ‘‘(iii) provide for regionalization of

11 services, where appropriate; and

12 ‘‘(iv) address—

13 ‘‘(I) the special needs and cir14 cumstances of hospitals receiving an

15 additional payment under section

16 1886(d)(5)(F), Federally-qualified

17 health centers, and other institutions

18 and facilities that receive special as19 sistance for providing services to low20 income individuals and other individ21 uals in medically underserved commu22 nities (as defined in section 799(6) of

23 the Public Health Service Act), and

24 ‘‘(II) the provision of trauma

25 care.
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1 ‘‘(2) REQUIREMENTS RELATING TO REVIEW.—

2 ‘‘(A) IN GENERAL.—The capital allocation

3 plan shall—

4 ‘‘(i) require the review of any pro5 posed expenditures for capital expenditures

6 in excess of $1,000,000 in the area covered

7 by the plan;

8 ‘‘(ii) permit the review of expenditures

9 in the area covered by the plan that are

10 not described in clause (i); and

11 ‘‘(iii) provide that a review shall take

12 into consideration at least the following

13 criteria:

14 ‘‘(I) The relationship of the pro15 posed capital expenditure to the plan.

16 ‘‘(II) The need that the popu17 lation to be served has for the pro18 posed services, equipment, or facility

19 provided by the capital expenditure.

20 ‘‘(III) The availability of alter21 native, less costly, or more effective

22 methods for providing such services.

23 ‘‘(IV) The impact of the proposed

24 expenditure on the quality of care and
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1 the costs of health care services pro2 vided to such population.

3 ‘‘(V) The impact of the proposed

4 expenditure on the utilization of the

5 applicant’s other capital resources.

6 ‘‘(VI) The extent to which the

7 proposed services, equipment, or facil8 ity shall eliminate unnecessary or du9 plicative services.

10 ‘‘(VII) The extent to which the

11 proposed services, equipment, or facil12 ity will be available to all residents of

13 the area, regardless of their ability to

14 pay for the use of such services,

15 equipment, or facility.

16 ‘‘(B) SPECIAL RULES FOR DETERMINING

17 AMOUNT OF EXPENDITURES.—In determining

18 the amount of proposed expenditures for a cap19 ital project for purposes of subparagraph (A)(i),

20 there shall be included—

21 ‘‘(i) the cost of any studies, surveys,

22 designs, plans, working drawings, specifica23 tions, and other activities essential to the
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1 acquisition, improvement, expansion, or re2 placement of the capital project with re3 spect to which the expenditure is made;

4 and

5 ‘‘(ii) any proposed expenditures for

6 other capital projects which are found by

7 the review agency to be fundamentally re8 lated to the capital project in question (in

9 accordance with criteria developed by the

10 State using guidelines established by the

11 Secretary).

12 ‘‘(C) PROCEDUREAL REQUIREMENTS.—

13 The capital allocation plan shall meet require14 ments relating to procedures for review as fol15 lows:

16 ‘‘(i) Reviews must be performed under

17 a regular schedule that provides that appli18 cations relating to expenditures for similar

19 capital projects will be considered at the

20 same time, and that provides an oppor21 tunity for additional applicants to seek ap22 proval for carrying out a capital project if

23 the review agency determines (based on the

24 application of an initial sponsor of such a

25 project) that an expenditure for such a
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1 project would be appropriate under the

2 plan.

3 ‘‘(ii) the determinations of the review

4 must be made in public meetings.

5 ‘‘(iii) If local review agencies are es6 tablished under subsection (a)(2), the

7 State review agency must take the results

8 of reviews by such agencies into account.

9 ‘‘(iv) The State review agency must

10 make provision for access by the general

11 public to all applications for review and for

12 written findings of its reviews that state

13 the basis for agency determinations.

14 ‘‘(v) The State review agency must

15 hold at least one public hearing if re16 quested by persons directly affected by the

17 review.

18 ‘‘(vi) Any decision of the State review

19 agency to approve or not to approve a pro20 posed capital expenditure must be based

21 solely on the agency’s review and the

22 record created by the review.

23 ‘‘(vii) An application for a proposed

24 capital expenditure must include a time25 table for completing the project for which
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1 the expenditure is proposed, and any ap2 proval of such an expenditure shall be

3 withdrawn if the State review agency finds

4 that the applicant was not making a good

5 faith effort to meet the timetable or to oth6 erwise meet any applicable condition for

7 approval.

8 ‘‘(viii) The allocation plan must pro9 vide either for an appeals mechanism (con10 sistent with the State’s administrative pro11 cedures act) or for an appeal before an en12 tity (other than the State review agency)

13 designated by the Governor.

14 ‘‘(d) FUNDING ASSISTANCE TO STATES.—

15 ‘‘(1) IN GENERAL.—The Secretary shall make,

16 in each fiscal year beginning with fiscal year 1998

17 from the allotment under paragraph (2) for the

18 State, a grant to each State with an approved cap19 ital allocation plan under this section in an amount

20 equal to 75 percent of the operating costs of carry21 ing out the plan in the State in the fiscal year.

22 Grants under this paragraph shall be payable from

23 the Capital Financing Trust Fund under section

24 2104.
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1 ‘‘(2) AMOUNT OF ALLOTMENT.—The amount of

2 an allotment to each State is equal to the sum of—

3 ‘‘(A) the product of $0.70 and the number

4 of individuals residing in the State who do not

5 reside in an area under the jurisdiction of a re6 gional review agency (as established by the

7 State under subsection (b)(2)); and

8 ‘‘(B) the product of $1.00 and the number

9 of individuals residing in the State who reside

10 in an area under the jurisdiction of a regional

11 review agency.

12 ‘‘(e) DEFINITIONS.—In this subsection:

13 ‘‘(1) The term ‘Governor’ means the chief exec14 utive officer of a State, or his designee.

15 ‘‘(2) The term ‘capital expenditure’ means an

16 expenditure which—

17 ‘‘(A) under generally accepted accounting

18 principles, is not properly chargeable as an ex19 pense of operation and maintenance; or

20 ‘‘(B) is made to obtain by lease or com21 parable arrangement any facility thereof or any

22 equipment for a facility or part.

23 ‘‘(3) the term ‘rural area’ has the meaning

24 given such term in section 1886(d)(2)(D).’’.

25 (c) EFFECT ON ANTITRUST LAWS.—
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1 (1) IN GENERAL.—For purposes of the anti2 trust laws—

3 (A) the establishment by a State of a cap4 ital allocation plan under section 1890 of the

5 Social Security Act (as added by subsection (b))

6 shall be considered as affirmative State policy

7 with respect to individuals and entities in the

8 State providing health care services subject to

9 the plan; and

10 (B) the enforcement by a State of such a

11 plan shall be considered as active State super12 vision with respect to such individuals and enti13 ties.

14 (2) ANTITRUST LAWS DEFINED.—In paragraph

15 (1), the term ‘‘antitrust laws’’ has the meaning

16 given it in subsection (a) of the first sections of the

17 Clayton Act (15 U.S.C. 12(a)), except that such

18 term includes—

19 (A) section 5 of the Federal Trade Com20 mission Act (15 U.S.C. 45) to the extent such

21 section applies to unfair methods of competi22 tion; and

23 (B) any State law similar to the antitrust

24 laws.

Æ