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(E) by adding at the end the following:
‘‘(E) CLINICAL QUALITY MANAGEMENT.—
‘‘(i) REQUIREMENT.—Each State that
receives a grant under section 2611 shall
provide for the establishment of a clinical
quality management program to assess the
extent to which HIV health services pro-
vided to patients under the grant are con-
sistent with the most recent Public Health
Service guidelines for the treatment of HIV/
AIDS and related opportunistic infection,
and as applicable, to develop strategies for
ensuring that such services are consistent
with the guidelines for improvement in the
access to and quality of HIV health services.
‘‘(ii) USE OF FUNDS.—
‘‘(I) 
IN
GENERAL.—From
amounts 
received 
under 
a 
grant
awarded under section 2611 for a fis-
cal year, a State may use for activities
associated with the clinical quality
management 
program 
required 
in
clause (i) not to exceed the lesser of—
‘‘(aa) 5 percent of amounts
received under the grant; or
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‘‘(bb) $3,000,000.
‘‘(II) RELATION
TO
LIMITATION
ON
ADMINISTRATIVE
EXPENSES.—The
costs of a clinical quality management
program under clause (i) may not be
considered administrative expenses for
purposes of the limitation established
in subparagraph (A).’’;
(4) in paragraph (4) (as so redesignated)—
(A) by striking ‘‘paragraph (6)’’ and insert-
ing ‘‘paragraph (5)’’; and
(B) by striking ‘‘paragraphs (3) and (4)’’
and inserting ‘‘paragraphs (2) and (3)’’; and
(5) in paragraph (5) (as so redesignated), by
striking ‘‘paragraphs (3)’’ and all that follows
through ‘‘(5),’’ and inserting the following: ‘‘para-
graphs (2) and (3), may, notwithstanding paragraphs
(2) through (4),’’.
(f) REALLOCATION FOR SUPPLEMENTAL GRANTS.—
Section 2618(d) of the Public Health Service Act (42 U.S.C.
300ff–28(d)) is amended to read as follows:
‘‘(d) REALLOCATION.—Any portion of a grant made
to a State under section 2611 for a fiscal year that has
not been obligated as described in subsection (c) ceases to
be available to the State and shall be made available by
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the Secretary for grants under section 2620, in addition
to amounts made available for such grants under section
2623(b)(2).’’.
(g) 
DEFINITIONS; 
OTHER
TECHNICAL
AMEND-
MENTS.—Section 2618(a) of the Public Health Service Act
(42 U.S.C. 300ff–28(a)) is amended—
(1) in paragraph (1), in the matter preceding
subparagraph (A), by striking ‘‘section 2677’’ and in-
serting ‘‘section 2623’’;
(2) in paragraph (1)(A)—
(A) in the matter preceding clause (i), by
striking ‘‘each of the several States and the Dis-
trict of Columbia’’ and inserting ‘‘each of the 50
States, the District of Columbia, Guam, and the
Virgin Islands (referred to in this paragraph as
a ‘covered State’)’’; and
(B) in clause (i)—
(i) in subclause (I), by striking ‘‘State
or District’’ and inserting ‘‘covered State’’;
and
(ii) in subclause (II)—
(I) by striking ‘‘State or District’’
and inserting ‘‘covered State’’; and
(II) by inserting ‘‘and’’ after the
semicolon; and
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(3) in paragraph (1)(B), by striking ‘‘each terri-
tory of the United States, as defined in paragraph
(3),’’ and inserting ‘‘each territory other than Guam
and the Virgin Islands’’;
(4) in paragraph (2)(C)(i), by striking ‘‘or terri-
tory’’; and
(5) by striking paragraph (3).
SEC. 204. ADDITIONAL AMENDMENTS TO SUBPART I OF
PART B.
(a) REFERENCES TO PART B.—Subpart I of part B
of title XXVI of the Public Health Service Act (42 U.S.C.
300ff–21 et seq.) is amended by striking ‘‘this part’’ each
place such term appears and inserting ‘‘section 2611’’.
(b) HEPATITIS.—Section 2614(a)(3) of the Public
Health Service Act (42 U.S.C. 300ff–24(a)(3)) is amended
by inserting ‘‘, including specialty care and vaccinations
for hepatitis co-infection,’’ after ‘‘health services’’.
(c) APPLICATION FOR GRANT.—
(1) COORDINATION.—Section 2617(b) of the Pub-
lic Health Service Act (42 U.S.C. 300ff–27(b)) is
amended—
(A) 
by 
redesignating 
paragraphs 
(4)
through (6) as paragraphs (5) through (7), re-
spectively;
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(B) by inserting after paragraph (3), the
following:
‘‘(4) the designation of a lead State agency that
shall—
‘‘(A) administer all assistance received
under this part;
‘‘(B) conduct the needs assessment and pre-
pare the State plan under paragraph (3);
‘‘(C) prepare all applications for assistance
under this part;
‘‘(D) receive notices with respect to pro-
grams under this title;
‘‘(E) every 2 years, collect and submit to the
Secretary all audits, consistent with Office of
Management and Budget circular A133, from
grantees within the State, including audits re-
garding funds expended in accordance with this
part; and
‘‘(F) carry out any other duties determined
appropriate by the Secretary to facilitate the co-
ordination of programs under this title.’’;
(C) in paragraph (5) (as so redesignated)—
(i) in subparagraph (E), by striking
‘‘and’’ at the end; and
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(ii) by inserting after subparagraph
(F) the following:
‘‘(G) includes key outcomes to be measured
by all entities in the State receiving assistance
under this title; and’’; and
(D) in paragraph (7) (as so redesignated),
in subparagraph (A)—
(i) by striking ‘‘paragraph (5)’’ and
inserting ‘‘paragraph (6)’’; and
(ii) by striking ‘‘paragraph (4)’’ and
inserting ‘‘paragraph (5)’’.
(2) NATIVE AMERICAN REPRESENTATION.—Sec-
tion 2617(b)(6) of the Public Health Service Act, as
redesignated by paragraph (1)(A) of this subsection,
is amended by inserting before ‘‘representatives of
grantees’’ the following: ‘‘members of a Federally rec-
ognized Indian tribe as represented in the State,’’.
(3) 
PAYER
OF
LAST
RESORT.—Section
2617(b)(7)(F)(ii) of the Public Health Service Act, as
redesignated by paragraph (1)(A) of this subsection,
is amended by inserting before the semicolon the fol-
lowing: ‘‘(except for a program administered by or
providing the services of the Indian Health Service)’’.
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(d) MATCHING FUNDS; APPLICABILITY OF REQUIRE-
MENT.—Section 2617(d)(3) of the Public Health Service Act
(42 U.S.C. 300ff–27(d)(3)) is amended—
(1) in subparagraph (A), by striking ‘‘acquired
immune deficiency syndrome’’ and inserting ‘‘HIV/
AIDS’’; and
(2) in subparagraph (C), by striking ‘‘acquired
immune deficiency syndrome’’ and inserting ‘‘HIV/
AIDS’’.
SEC. 205. SUPPLEMENTAL GRANTS ON BASIS OF DEM-
ONSTRATED NEED.
Subpart I of part B of title XXVI of the Public Health
Service Act (42 U.S.C. 300ff–21 et seq.) is amended—
(1) by redesignating section 2620 as section
2621; and
(2) by inserting after section 2619 the following:
‘‘SEC. 2620. SUPPLEMENTAL GRANTS.
‘‘(a) IN GENERAL.—For the purpose of providing serv-
ices described in section 2612(a), the Secretary shall make
grants to States—
‘‘(1) whose applications under section 2617 have
demonstrated the need in the State, on an objective
and quantified basis, for supplemental financial as-
sistance to provide such services; and
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‘‘(2) that did not, for the most recent grant year
pursuant to section 2618(a)(1) or 2618(a)(2)(G)(i) for
which data is available, have more than 2 percent of
grant funds under such sections canceled or covered
by any waivers under section 2622(c).
‘‘(b) DEMONSTRATED NEED.—The factors considered
by the Secretary in determining whether an eligible area
has a demonstrated need for purposes of subsection (a)(1)
may include any or all of the following:
‘‘(1) The unmet need for such services, as deter-
mined under section 2617(b).
‘‘(2) An increasing need for HIV/AIDS-related
services, including relative rates of increase in the
number of cases of HIV/AIDS.
‘‘(3) The relative rates of increase in the number
of cases of HIV/AIDS within new or emerging sub-
populations.
‘‘(4) The current prevalence of HIV/AIDS.
‘‘(5) Relevant factors related to the cost and com-
plexity of delivering health care to individuals with
HIV/AIDS in the eligible area.
‘‘(6) The impact of co-morbid factors, including
co-occurring conditions, determined relevant by the
Secretary.
‘‘(7) The prevalence of homelessness.
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‘‘(8) The prevalence of individuals described
under section 2602(b)(2)(M).
‘‘(9) The relevant factors that limit access to
health care, including geographic variation, adequacy
of health insurance coverage, and language barriers.
‘‘(10) The impact of a decline in the amount re-
ceived pursuant to section 2618 on services available
to all individuals with HIV/AIDS identified and eli-
gible under this title.
‘‘(c) PRIORITY IN MAKING GRANTS.—The Secretary
shall provide funds under this section to a State to address
the decline in services related to the decline in the amounts
received pursuant to section 2618 consistent with the grant
award to the State for fiscal year 2006, to the extent that
the factor under subsection (b)(10) (relating to a decline
in funding) applies to the State.
‘‘(d) REPORT ON THE AWARDING OF SUPPLEMENTAL
FUNDS.—Not later than 45 days after the awarding of sup-
plemental funds under this section, the Secretary shall sub-
mit to Congress a report concerning such funds. Such report
shall include information detailing—
‘‘(1) the total amount of supplemental funds
available under this section for the year involved;
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‘‘(2) the amount of supplemental funds used in
accordance with the hold harmless provisions of sec-
tion 2618(a)(2);
‘‘(3) the amount of supplemental funds disbursed
pursuant to subsection (c);
‘‘(4) the disbursement of the remainder of the
supplemental funds after taking into account the uses
described in paragraphs (2) and (3); and
‘‘(5) the rationale used for the amount of funds
disbursed as described under paragraphs (2), (3), and
(4).
‘‘(e) CORE MEDICAL SERVICES.—The provisions of
section 2612(b) apply with respect to a grant under this
section to the same extent and in the same manner as such
provisions apply with respect to a grant made pursuant
to section 2618(a)(1).
‘‘(f) APPLICABILITY OF GRANT AUTHORITY.—The au-
thority to make grants under this section applies beginning
with the first fiscal year for which amounts are made avail-
able for such grants under section 2623(b)(1).’’.
SEC. 206. EMERGING COMMUNITIES.
Section 2621 of the Public Health Service Act, as re-
designated by section 205(1) of this Act, is amended—
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(1) in the heading for the section, by striking
‘‘SUPPLEMENTAL
GRANTS’’ 
and 
inserting
‘‘EMERGING COMMUNITIES’’;
(2) in subsection (b)—
(A) in paragraph (2), by striking ‘‘and’’ at
the end;
(B) by redesignating paragraph (3) as
paragraph (4); and
(C) by inserting after paragraph (2) the fol-
lowing:
‘‘(3) agree that the grant will be used to provide
funds directly to emerging communities in the State,
separately from other funds under this title that are
provided by the State to such communities; and’’.
(3) by striking subsections (d) and (e) and in-
serting the following:
‘‘(d) DEFINITIONS OF EMERGING COMMUNITY.—For
purposes of this section, the term ‘emerging community’
means a metropolitan area (as defined in section 2607) for
which there has been reported to and confirmed by the Di-
rector of the Centers for Disease Control and Prevention a
cumulative total of at least 500, but fewer than 1,000, cases
of AIDS during the most recent period of 5 calendar years
for which such data are available.
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‘‘(e) CONTINUED
STATUS
AS
EMERGING
COMMU-
NITY.—Notwithstanding any other provision of this section,
a metropolitan area that is an emerging community for a
fiscal year continues to be an emerging community until
the metropolitan area fails, for three consecutive fiscal
years—
‘‘(1) to meet the requirements of subsection (d);
and
‘‘(2) to have a cumulative total of 750 or more
living cases of AIDS (reported to and confirmed by
the Director of the Centers for Disease Control and
Prevention) as of December 31 of the most recent cal-
endar year for which such data is available.
‘‘(f) DISTRIBUTION.—The amount of a grant under
subsection (a) for a State for a fiscal year shall be an
amount equal to the product of—
‘‘(1) 
the 
amount 
available 
under 
section
2623(b)(1) for the fiscal year; and
‘‘(2) a percentage equal to the ratio constituted
by the number of living cases of HIV/AIDS in emerg-
ing communities in the State to the sum of the respec-
tive numbers of such cases in such communities for
all States.’’.
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SEC. 207. TIMEFRAME FOR OBLIGATION AND EXPENDITURE
OF GRANT FUNDS.
Subpart I of part B of title XXVI of the Public Health
Service Act (42 U.S.C. 300ff–21 et seq.), as amended by
section 205, is further amended by adding at the end the
following:
‘‘SEC. 2622. TIMEFRAME FOR OBLIGATION AND EXPENDI-
TURE OF GRANT FUNDS.
‘‘(a) OBLIGATION BY END OF GRANT YEAR.—Effective
for fiscal year 2007 and subsequent fiscal years, funds from
a grant award made to a State for a fiscal year pursuant
to section 2618(a)(1) or 2618(a)(2)(G), or under section
2620 or 2621, are available for obligation by the State
through the end of the one-year period beginning on the date
in such fiscal year on which funds from the award first
become available to the State (referred to in this section as
the ‘grant year for the award’), except as provided in sub-
section (c)(1).
‘‘(b) SUPPLEMENTAL GRANTS; CANCELLATION OF UN-
OBLIGATED BALANCE OF GRANT AWARD.—Effective for fis-
cal year 2007 and subsequent fiscal years, if a grant award
made to a State for a fiscal year pursuant to section
2618(a)(2)(G)(ii), or under section 2620 or 2621, has an
unobligated balance as of the end of the grant year for the
award—
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‘‘(1) the Secretary shall cancel that unobligated
balance of the award, and shall require the State to
return any amounts from such balance that have been
disbursed to the State; and
‘‘(2) the funds involved shall be made available
by the Secretary as additional amounts for grants
pursuant to section 2620 for the first fiscal year be-
ginning after the fiscal year in which the Secretary
obtains the information necessary for determining
that the balance is required under paragraph (1) to
be canceled, except that the availability of the funds
for such grants is subject to section 2618(a)(2)(H) as
applied for such year.
‘‘(c) FORMULA GRANTS; CANCELLATION OF UNOBLI-
GATED BALANCE OF GRANT AWARD; WAIVER PERMITTING
CARRYOVER.—
‘‘(1) IN GENERAL.—Effective for fiscal year 2007
and subsequent fiscal years, if a grant award made
to a State for a fiscal year pursuant to section
2618(a)(1) or 2618(a)(2)(G)(i) has an unobligated
balance as of the end of the grant year for the award,
the Secretary shall cancel that unobligated balance of
the award, and shall require the State to return any
amounts from such balance that have been disbursed
to the State, unless—
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‘‘(A) before the end of the grant year, the
State submits to the Secretary a written applica-
tion for a waiver of the cancellation, which ap-
plication includes a description of the purposes
for which the State intends to expend the funds
involved; and
‘‘(B) the Secretary approves the waiver.
‘‘(2) EXPENDITURE
BY
END
OF
CARRYOVER
YEAR.—With respect to a waiver under paragraph (1)
that is approved for a balance that is unobligated as
of the end of a grant year for an award:
‘‘(A) The unobligated funds are available
for expenditure by the State involved for the one-
year period beginning upon the expiration of the
grant year (referred to in this section as the ‘car-
ryover year’).
‘‘(B) If the funds are not expended by the
end of the carryover year, the Secretary shall
cancel that unexpended balance of the award,
and shall require the State to return any
amounts from such balance that have been dis-
bursed to the State.
‘‘(3) USE
OF
CANCELLED
BALANCES.—In the
case of any balance of a grant award that is cancelled
under paragraph (1) or (2)(B), the grant funds in-
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volved shall be made available by the Secretary as ad-
ditional amounts for grants under section 2620 for
the first fiscal year beginning after the fiscal year in
which the Secretary obtains the information necessary
for determining that the balance is required under
such paragraph to be canceled, except that the avail-
ability of the funds for such grants is subject to sec-
tion 2618(a)(2)(H) as applied for such year.
‘‘(4) CORRESPONDING
REDUCTION
IN
FUTURE
GRANT.—
‘‘(A) IN GENERAL.—In the case of a State
for which a balance from a grant award made
pursuant 
to 
section 
2618(a)(1) 
or
2618(a)(2)(G)(i) is unobligated as of the end of
the grant year for the award—
‘‘(i) the Secretary shall reduce, by the
same amount as such unobligated balance,
the amount of the grant under such section
for the first fiscal year beginning after the
fiscal year in which the Secretary obtains
the information necessary for determining
that such balance was unobligated as of the
end of the grant year (which requirement
for a reduction applies without regard to
whether a waiver under paragraph (1) has
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been approved with respect to such balance);
and
‘‘(ii) the grant funds involved in such
reduction shall be made available by the
Secretary as additional funds for grants
under section 2620 for such first fiscal year,
subject to section 2618(a)(2)(H);
except that this subparagraph does not apply to
the State if the amount of the unobligated bal-
ance was 2 percent or less.
‘‘(B) RELATION TO INCREASES IN GRANT.—
A reduction under subparagraph (A) for a State
for a fiscal year may not be taken into account
in applying section 2618(a)(2)(H) with respect
to the State for the subsequent fiscal year.
‘‘(d) TREATMENT OF DRUG REBATES.—For purposes
of this section, funds that are drug rebates referred to in
section 2616(g) may not be considered part of any grant
award referred to in subsection (a).’’.
SEC. 208. AUTHORIZATION OF APPROPRIATIONS FOR SUB-
PART I OF PART B.
Subpart I of part B of title XXVI of the Public Health
Service Act (42 U.S.C. 300ff–21 et seq.), as amended by
section 207, is further amended by adding at the end the
following: