I
104TH CONGRESS
2D SESSION
H. R. 4075
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 expend-
itures for the capital-related costs of health care services.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 12, 1996
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 main-
tain the infrastructure requirements of safety net hos-
pitals, and to require States to develop plans for the
allocation and review of expenditures for the capital-
related costs of health care services.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
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SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Essential Health Fa-
cilities Investment Act of 1996’’.
TITLE 
I—ESSENTIAL 
ACCESS
COMMUNITY HOSPITAL PRO-
GRAM
SEC. 101. REVISIONS TO CURRENT PROGRAM.
(a) EXPANSION
OF CURRENT PROGRAM
TO ALL
STATES.—Section 1820(a)(1) of the Social Security Act
(42 U.S.C. 1395i–4(a)(1)) is amended by striking ‘‘not
more than 7’’.
(b) INCREASE IN AUTHORIZATION OF APPROPRIA-
TIONS.—Section 1820(l) of such Act (42 U.S.C. 1395i–
4(l)) is amended—
(1) by striking ‘‘1990, 1991, and 1992’’ and in-
serting ‘‘1997 through 2002’’;
(2) by amending paragraph (1) to read as fol-
lows:
‘‘(1) $50,000,000 for grants to States under
subsection (a)(1) and grants to States and units of
local government under section 1821(a)(1); and’’;
and
(3) 
in 
paragraph 
(2), 
by 
striking
‘‘$15,000,000’’ and inserting ‘‘$40,000,000’’.
(c) EFFECTIVE DATE.—The amendments made by
subsections (a) and (b) shall take effect October 1, 1996.
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SEC. 102. EXTENSION OF PROGRAM TO NETWORKS OF ES-
SENTIAL COMMUNITY PROVIDERS.
(a) IN GENERAL.—Part A of title XVIII of the Social
Security Act (42 U.S.C. 1395 et seq.) is amended by add-
ing at the end the following new section:
‘‘ASSISTANCE FOR ESSENTIAL COMMUNITY PROVIDERS
‘‘SEC. 1821. (a) ESTABLISHMENT OF PROGRAM.—
There is hereby established a program under which the
Secretary—
‘‘(1) shall make grants to States and units of
local government to carry out the activities described
in subsection (d)(1); and
‘‘(2) shall make grants to eligible hospitals and
facilities (or consortia of hospitals and facilities) to
carry out the activities described in subsection
(d)(2).
‘‘(b) ELIGIBILITY
OF STATES
AND COMMUNITIES
FOR GRANTS.—
‘‘(1) REQUIREMENTS FOR APPLICATION.—Sub-
ject to paragraph (2), a State or unit of local gov-
ernment is eligible to receive a grant under sub-
section (a)(1) only if the State or unit of local gov-
ernment submits to the Secretary, at such time and
in such form as the Secretary may require, an appli-
cation containing such information and assurances
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as the Secretary may require, together with assur-
ances that the State or unit of local government—
‘‘(A) has developed, or is in the process of
developing, a community health plan that—
‘‘(i) provides for the creation of a
community health network (as defined in
subsection (f)) in the State or locality,
‘‘(ii) promotes the integration of the
delivery of health care services in the State
or locality,
‘‘(iii) improves access to hospital and
other services (including primary care serv-
ices) for urban residents in the State or lo-
cality, and
‘‘(iv) in the case of a plan of a unit
of local government, is approved by the
State;
‘‘(B) has developed (or intends to develop)
the plan described in subparagraph (A) in con-
sultation with appropriate State and community
hospital associations, public hospitals, and pri-
mary care associations; and
‘‘(C) has designated, or is in the process of
designating, nonprofit or public hospitals and
facilities located in the State or locality as es-
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sential community providers within such com-
munity health networks (with the approval of
the State in the case of designations by units
of local government).
‘‘(2) COORDINATION
BETWEEN
STATE
AND
LOCAL
RECIPIENTS.—A unit of local government
may not receive a grant under subsection (a)(1) if
it is located in a State receiving a grant under such
subsection, except that a unit of local government lo-
cated in an urban area (as defined in section
1886(d)(2)(D)) in such a State may receive such a
grant with the approval of the State.
‘‘(c) ELIGIBILITY OF HOSPITALS, FACILITIES, AND
CONSORTIA FOR GRANTS.—
‘‘(1) IN GENERAL.—A hospital or facility is eli-
gible to receive a grant under subsection (a)(2) only
if the hospital or facility—
‘‘(A) is located in a State or locality receiv-
ing a grant under subsection (a)(1);
‘‘(B) is designated as an essential commu-
nity provider by the State or unit of local gov-
ernment or is a member of a community health
network;
‘‘(C) submits an application to the State or
unit of local government at such time and con-
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taining such information and assurances as the
Secretary may require; and
‘‘(D) has received certification by the State
or unit of local government that the receiving of
such grant by the hospital or facility is consist-
ent with the community health plan of the
State or unit or local government and that the
State or unit or local government has approved
the application submitted under subparagraph
(C).
‘‘(2) TREATMENT
OF
CONSORTIA.—A consor-
tium of hospitals or facilities each of which is part
of the same community health network is eligible to
receive a grant under subsection (a)(2) if each of its
members would individually be eligible to receive
such a grant.
‘‘(d) ACTIVITIES
FOR
WHICH
GRANT
MAY
BE
USED.—
‘‘(1) GRANTS TO STATES OR LOCAL GOVERN-
MENTS.—A State or unit of local government shall
use a grant received under subsection (a)(1) to carry
out activities relating to planning and implementing
its community health plan.
‘‘(2) GRANTS TO HOSPITALS, FACILITIES, AND
CONSORTIA.—A hospital or facility shall use a grant
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received under subsection (a)(2) to finance the costs
it incurs in becoming part of a community health
network and in serving as part of such a network,
including costs related to—
‘‘(A) the development of primary care serv-
ice sites;
‘‘(B) the development of integrated infor-
mation, billing, and reporting systems;
‘‘(C) planning and needs assessments;
‘‘(D) the recruitment and training of
health professionals and administrative staff;
and
‘‘(E) conducting health promotion outreach
activities for medically underserved populations
in its service area.
‘‘(e) DESIGNATION OF ESSENTIAL COMMUNITY PRO-
VIDERS.—A State or unit of local government may des-
ignate a hospital or facility as an essential community pro-
vider only if—
‘‘(1) the hospital or facility is a member of (or
is in the process of becoming a member of) a com-
munity health network (as defined in subsection (f));
‘‘(2) in the case of a facility other than a hos-
pital—
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‘‘(A) the facility is a federally-qualified
health 
center 
(as 
defined 
in 
section
1861(aa)(4)), or
‘‘(B) the facility would be a federally-quali-
fied health center but for its failure to meet the
requirement described in section 329(f)(2)(G)(i)
of the Public Health Service Act or the require-
ment described in section 330(e)(3)(G)(i) of
such Act (relating to the composition of the fa-
cility’s governing board), but only if the facility
provides assurances to the State or unit of local
government that consumers have significant
input into the governance of the facility; and
‘‘(3) in the case of a hospital—
‘‘(A) the hospital is designated as an es-
sential access community hospital by the Sec-
retary under section 1820(i)(1),
‘‘(B) the hospital is designated as a rural
primary care hospital by the Secretary under
section 1820(i)(2),
‘‘(C) the hospital is described in section
1886(d)(5)(F)(i)(II), or
‘‘(D) the hospital receives an additional
payment amount under section 1886(d)(5)(F)
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based on the formula described in clause (vii)(I)
of such section.
‘‘(f) COMMUNITY HEALTH NETWORK DEFINED.—In
this section, the term ‘community health network’ means
a public or nonprofit entity that meets the following re-
quirements:
‘‘(1) The entity provides primary care services
and acute care services to a medically underserved
community (as defined in section 799(6) of the Pub-
lic Health Service Act) in the entity’s service area,
either directly through its members or through con-
tracts with other entities (under such limited cir-
cumstances as the Secretary may permit in regula-
tions).
‘‘(2) The entity consists of—
‘‘(A) at least one hospital that is located in
an 
urban 
area 
(as 
defined 
in 
section
1886(d)(2)(D)) and that has been designated
as an essential community provider under sub-
section (e);
‘‘(B) at least 3 facilities (other than hos-
pitals) that have been designated as essential
community providers under subsection (e); and
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‘‘(C) at the election of the entity’s mem-
bers, any other entities that provide primary
care or other health care services.
‘‘(3) The members of the entity have entered
into an agreement under which—
‘‘(A) each member agrees to provide appro-
priate emergency and medical support services
to other members,
‘‘(B) each member agrees to accept refer-
rals from other members,
‘‘(C) each hospital member has arrange-
ments to provide staff privileges to physicians
providing care for other members, and
‘‘(D) each member has in effect (or is in
the process of establishing) agreements with
other members to share in the member’s com-
munication system, including (where appro-
priate) the electronic sharing of patient data,
medical records, and billing services.
‘‘(g) LIMIT ON AMOUNT OF GRANT TO HOSPITAL OR
FACILITY.—A grant made to a hospital or facility under
subsection (a)(2) may not exceed $200,000, except that
the total amount of a grant awarded to a consortia of hos-
pitals or facilities under such subsection may not exceed
$1,000,000.’’.
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(b) FUNDING FOR GRANTS TO HOSPITALS THROUGH
CURRENT EACH PROGRAM.—Section 1820(l) of the So-
cial Security Act (42 U.S.C. 1395i–4(l)) is amended—
(1) in the heading, by striking ‘‘Appropria-
tions’’ and inserting ‘‘Appropriations for EACH
Program and Essential Community Provider Pro-
gram’’;
(2) by striking ‘‘and’’ at the end of paragraph
(1);
(3) by striking the period at the end of para-
graph (2) and inserting ‘‘; and’’; and
(4) by adding at the end the following new
paragraph:
‘‘(3) $80,000,000 for grants to hospitals under
section 1821(a)(2).’’.
(c) INCLUDING INTERNS AND RESIDENTS PROVIDING
SERVICES AT ESSENTIAL COMMUNITY PROVIDERS IN DE-
TERMINING PAYMENT FOR INDIRECT COSTS OF MEDICAL
EDUCATION.—Section 1886(d)(5)(B) of the Social Secu-
rity Act (42 U.S.C. 1395ww(d)(5)(B)) is amended by add-
ing at the end the following new clause:
‘‘(v) In determining such adjustment, the Sec-
retary shall count services of interns and residents
under a medical residency training program that is
conducted at a facility designated as an essential
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TITLE II—CAPITAL FINANCING
ASSISTANCE FOR SAFETY NET
PROVIDERS
Subtitle A—Amendments of
Internal Revenue Code of 1986
SEC. 201. GROSS RECEIPTS TAX ON HOSPITALS.
(a) IN GENERAL.—Subchapter A of chapter 1 of the
Internal Revenue Code of 1986 is amended by adding at
the end the following new part:
‘‘PART VII—HOSPITAL CAPITAL FINANCING
ASSISTANCE TAX
‘‘Sec. 59B. Imposition of tax.
‘‘SEC. 59B. IMPOSITION OF TAX.
‘‘(a) GENERAL RULE.—In addition to any other tax
imposed by this subtitle, there is hereby imposed a tax
of 0.5 percent of the hospital gross receipts of any person
for the taxable year.
‘‘(b) HOSPITAL GROSS RECEIPTS.—For purposes of
this section, the term ‘hospital gross receipts’ means gross
receipts received or accrued during the taxable year from
the operation of any hospital, other than payments re-
ceived under a State plan for medical assistance under
title XIX of the Social Security Act.
‘‘(c) PERSON.—The term ‘person’ includes persons
exempt from tax under section 501(a), the United States,
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any State or political subdivision thereof, the District of
Columbia, and any agency or instrumentality of the fore-
going.
‘‘(d) NOT TREATED AS TAX FOR CERTAIN PUR-
POSES.—The taxes imposed by this section shall not be
treated as taxes imposed by this chapter for purposes of
determining—
‘‘(1) the amount of any credit allowable under
this chapter, or
‘‘(2) the amount of the minimum tax imposed
by section 55.’’
(b) TAXES INCLUDED IN ESTIMATED TAX.—Sub-
paragraph (A) of section 6655(g)(1) of such Code is
amended by striking ‘‘plus’’ at the end of clause (iii), by
redesignating clause (iv) as clause (v), and by inserting
after clause (iii) the following new clause:
‘‘(iv) the tax imposed by section 59B,
plus’’.
(c) CLERICAL AMENDMENT.—The table of parts for
subchapter A of chapter 1 of such Code is amended by
adding at the end thereof the following new item:
‘‘Part VII. Hospital capital financing assistance tax.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
September 30, 1996.
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Subtitle B—Capital Financing
Assistance for Safety Net Providers
SEC. 211. ESTABLISHMENT OF CAPITAL FINANCING ASSIST-
ANCE PROGRAM.
(a) IN GENERAL.—The Social Security Act is amend-
ed by adding at the end the following new title:
‘‘TITLE XXI—CAPITAL FINANCING ASSIST-
ANCE FOR SAFETY NET PROVIDERS
‘‘Subtitle A—General Provisions
‘‘PAYMENTS TO HOSPITALS AND FACILITIES
‘‘SEC. 2101. (a) IN GENERAL.—The Secretary, with
the approval of the Capital Financing Trust Fund Board
of Trustees described in section 2104(d) (hereafter in this
title referred to as the ‘Trust Fund Board’), shall make
payments during fiscal year 1997 through 2002, from
amounts in the Capital Financing Trust Fund established
under section 2104(a) (hereafter in this title referred to
as the ‘Trust Fund’), for capital financing assistance to
eligible hospitals and facilities whose applications for as-
sistance have been approved under this title.
‘‘(b) GENERAL ELIGIBILITY REQUIREMENTS FOR AS-
SISTANCE.—
‘‘(1) REQUIREMENTS FOR HOSPITALS.—
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‘‘(A) IN
GENERAL.—A hospital shall be
generally eligible for capital financing assist-
ance under this title if the hospital—
‘‘(i) is designated as an essential ac-
cess community hospital by the Secretary
under section 1820(i)(1);
‘‘(ii) is designated as a rural primary
care hospital by the Secretary under sec-
tion 1820(i)(2);
‘‘(iii) 
is 
described 
in 
section
1886(d)(5)(F)(i)(II); or
‘‘(iv) receives an additional payment
amount under section 1886(d)(5)(F) based
on the formula described in clause (vii) (I)
of such section.
‘‘(B) 
OWNERSHIP
REQUIREMENTS.—In
order to qualify for assistance under this title,
a hospital must—
‘‘(i) be owned or operated by a unit of
State or local government;
‘‘(ii) be a quasi-public corporation, de-
fined as a private, nonprofit corporation or
public benefit corporation which is formally
granted one or more governmental powers
by legislative action through (or is other-
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wise partially funded by) the State legisla-
ture, city or county council; or
‘‘(iii) be a private nonprofit hospital
which has contracted with, or is otherwise
funded by, a governmental agency to pro-
vide health care services to low income in-
dividuals not eligible for assistance under
title XVIII or title XIX of this Act, where
revenue from such contracts constitute at
least 10 percent of the hospital’s operating
revenues over the prior 3 fiscal years.
‘‘(2) REQUIREMENTS FOR NON-HOSPITAL FA-
CILITIES.—A facility that is not a hospital shall be
generally eligible for capital financing assistance
under this title if the facility is designated as an es-
sential community provider under section 1821.
‘‘(c) MEETING ADDITIONAL SPECIFIC CRITERIA.—
Hospitals and facilities that are generally eligible for as-
sistance under this title under subsection (b) may apply
for the specific programs described in this title and must
meet any additional criteria for participation in such pro-
grams.
‘‘(d) ASSISTANCE AVAILABLE.—Capital financing as-
sistance available under this title shall include loan guar-
antees, interest rate subsidies, matching loans and direct
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grants. Hospitals and facilities determined to be generally
eligible for assistance under this title may apply for and
receive more than one type of assistance under this title.
‘‘APPLICATION FOR ASSISTANCE
‘‘SEC. 2102. (a) IN GENERAL.—No hospital or facil-
ity may receive assistance for a qualifying project under
this title unless the hospital or facility—
‘‘(1) has filed with the Secretary, in a form and
manner specified by the Secretary, with the advice
and approval of the Trust Fund Board (as described
in section 2104(d)), an application for assistance
under this title;
‘‘(2) establishes in its application (for its most
recent cost reporting period) that it meets the cri-
teria for general eligibility under this title);
‘‘(3) includes a description of the project, in-
cluding the community in which it is located, and
describes utilization and services characteristics of
the project and the hospital or facility, and the pa-
tient population that is to be served;
‘‘(4) provides assurances that the undertaking
of the project is in conformity with the State’s cap-
ital allocation plan established pursuant to section
1890;
‘‘(5) describes the extent to which the project is
intended to include the financial participation of