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the discretion of the Trust Fund Board, the Secretary
shall give preference to those qualifying projects that—
‘‘(1)(A) are necessary to bring safety net facili-
ties into compliance with accreditation standards or
fire and life safety, seismic, or other related Federal,
State or local regulatory standards;
‘‘(B) improve the provision of essential services
such as emergency medical and trauma services,
AIDS and infections disease, perinatal, burn, pri-
mary care, and other services which the Trust
Fund’s Board may designate; or
‘‘(C) will result in the provision of access to es-
sential health services (as designated by the Board
of the Trust Fund) to indigent and other needy per-
sons within the hospital’s or facility’s service area
that would otherwise be unavailable;
‘‘(2) include specific anticipated State or local
governmental or other non-Federal assurances of fi-
nancial support;
‘‘(3) are unlikely to be financed without the as-
sistance provided under this title; and
‘‘(4) are conducted by entities designated as es-
sential community providers under section 1821.
‘‘(d) SUBMISSION OF APPLICATIONS.—Applications
under this Act shall be submitted to the Secretary through
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the Trust Fund Board. If two or more applicants join in
the project, the application shall be submitted by all par-
ticipating hospitals and facilities jointly. Such applications
shall set forth all of the descriptions, plans, specifications,
and assurances as required by this Act and contain other
such information as the Trust Fund Board shall require.
‘‘(e) OPPORTUNITY FOR APPEAL.—The Trust Fund
Board shall afford a hospital or facility applying for a loan
guarantee under this section an opportunity for a hearing
if the guarantee is denied.
‘‘(f) APPLICATIONS
FOR
AMENDMENTS.—Amend-
ment of an approved application shall be subject to ap-
proval in the same manner as an original application.
‘‘PUBLIC SERVICE RESPONSIBILITIES
‘‘SEC. 2103. (a) IN GENERAL.—Any hospital or facil-
ity accepting capital financing assistance under this title
shall agree—
‘‘(1) to make the services of the facility or por-
tion thereof to be constructed, acquired, or modern-
ized available to all persons the construction, acqui-
sition, or modernization is intended to serve (as
identified in the hospital’s or facility’s application
under this title and the State’s capital allocation
plan established under section 1890); and
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‘‘(2) to provide a significant volume of services
to persons unable to pay therefore, consistent with
other provisions of this Act.
‘‘(b) ENFORCEMENT.—The Director of the Office of
Civil Rights of the Department of Health and Human
Services shall be given the power to enforce the public
service responsibilities described in this section.
‘‘CAPITAL FINANCING TRUST FUND
‘‘SEC. 2104. (a) CREATION OF TRUST FUND.—There
is established in the Treasury of the United States a trust
fund to be known as the Capital Financing Trust Fund,
consisting of such amounts as may be appropriated or
credited to such Trust Fund as provided in this section.
‘‘(b) TRANSFERS TO TRUST FUND.—There are here-
by appropriated to the Trust Fund amounts equivalent to
the taxes received in the Treasury under section 59B of
the Internal Revenue Code of 1986 (relating to hospital
capital financing assistance tax).
‘‘(c) EXPENDITURES FROM TRUST FUND.—Amounts
in the Trust Fund shall be available only—
‘‘(1) for making expenditures to carry out this
title;
‘‘(2) for grants to non-hospital facilities and
consortia under section 1821(a)(2) for fiscal years
1997 through 2002, except that not more than
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$80,000,000 may be available for such grants for
any fiscal year; and
‘‘(3) for providing grants to States under sec-
tion 1890(d) for carrying out capital allocation
plans.
‘‘(d) BOARD OF TRUSTEES; COMPOSITION; MEET-
INGS; DUTIES.—
‘‘(1) IN GENERAL.—There shall be created a
Captial Financing Trust Fund Board of Trustees
composed of the Secretary of Health and Human
Services, the Secretary of the Treasury, the Assist-
ant Secretary for Health, and the Administrator of
the Health Care Financing Administration (all serv-
ing in their ex officio capacities), and 5 public mem-
bers who shall be appointed for 4 year terms by the
President, from the following categories—
‘‘(A) one chief health officer from a State;
‘‘(B) one chief executive officer of a hos-
pital or facility that meets the general eligibility
criteria of this title;
‘‘(C) one representative of the financial
community; and
‘‘(D) two additional public or consumer
representatives.
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‘‘(2) DUTIES.—The Board of Trustees shall
meet no less than quarterly and shall have the re-
sponsibility to approve implementing regulations, to
establish criteria, and to recommend and approve ex-
penditures by the Secretary under the programs set
forth in this title.
‘‘(3) MANAGING TRUSTEE.—The Secretary of
the Treasury shall serve as the Managing Trustee of
the Trust Fund, and shall be responsible for the in-
vestment of funds. The provisions of subsections (b)
through (e) of section 1817 shall apply to the Trust
Fund and the Managing Trustee of the Trust Fund
in the same manner as they apply to the Federal
Hospital Insurance Trust Fund and the Managing
Trustee of that Trust Fund.
‘‘ADMINISTRATION
‘‘SEC. 2105. (a) IN GENERAL.—The Administrator
of the Health Care Financing Administration shall serve
as Secretary of the Board of Trustees and shall administer
the programs under this title.
‘‘(b) 
LIMITATION
AND
ADMINISTRATIVE
EX-
PENSES.—Not more than 5 percent of the funds annually
appropriated to the Trust Fund may be available for ad-
ministration of the Trust Fund or programs under this
title.
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‘‘ASSISTANCE FOR PUERTO RICO AND OTHER
COMMONWEALTHS AND TERRITORIES
‘‘SEC. 2106. (a) IN GENERAL.—
‘‘(1) AMOUNT OF ALLOCATION.—Notwithstand-
ing any other provision of this title, there shall be
allocated from the Capital Financing Trust Fund for
each of the fiscal years 1997 through 2002 a total
of $25,000,000 for assistance under this title for
hospitals and facilities located in the Commonwealth
of Puerto Rico, the Commonwealth of the Northern
Mariana Islands, Guam, the Virgin Islands, and
American Samoa.
‘‘(2) REALLOCATION
OF
AMOUNTS
NOT
EX-
CEEDED.—To the extent that any funds allocated
under paragraph (1) to hospitals and facilities de-
scribed in such paragraph for a year are not ex-
pended for assistance under this title, such funds
shall be made available for assistance under this title
during the year for hospitals and facilities not de-
scribed in such paragraph.
‘‘(b) LIMIT ON AMOUNT AVAILABLE FOR GRANTS.—
Of the total amount allocated from the Capital Financing
Trust Fund during a year for assistance for hospitals and
facilities described in subsection (a), not more than 40%
may be used for grants under subtitle E.
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‘‘Subtitle B—Loan Guarantees
‘‘PROVISION OF LOAN GUARANTEES TO SAFETY NET
PROVIDERS
‘‘SEC. 2110. (a) IN GENERAL.—Subject to the an-
nual limitation on the allotment from the Trust Fund de-
scribed in section 2112(a), the Capital Financing Trust
Fund will provide a Federal guarantee of loan repayment,
including guarantees of repayment of refinancing loans,
to non-Federal lenders making loans to qualified hospitals
and facilities for replacement (either by construction or
acquisition), modernization, and renovation projects and
capital equipment acquisitions.
‘‘(b) PURPOSES.—The loan guarantee program shall
be designed by the Trust Fund Board with the goal of
rebuilding and maintaining the essential health services of
hospitals and facilities eligible for assistance under this
title.
‘‘ELIGIBLE LOANS
‘‘SEC. 2111. (a) IN GENERAL.—Loan guarantees
under this subtitle are available for loans made to qualify-
ing hospitals and facilities for replacement facilities, the
modernization and renovation of existing facilities, and
capital equipment acquisitions.
‘‘(b) LOAN GUARANTEE MUST BE ESSENTIAL TO
BOND FINANCING.—Qualifying hospitals and facilities
must demonstrate that a Federal loan guarantee is essen-
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tial to obtaining bond financing from non-Federal lenders
at a reasonably affordable rate of interest.
‘‘(c) ADDITIONAL ELIGIBILITY CRITERIA FOR LOAN
GUARANTEES.—In order to quality for assistance under
this subtitle, a hospital or facility must meet the following
criteria:
‘‘(1) The hospital or facility must demonstrate
evidence of an ability to meet debt service.
‘‘(2) The assistance, when considered with other
resources available to the project, is necessary and
will restore, maintain, or improve the financial or
physical soundness of the hospital or facility.
‘‘(3) The applicant agrees to assume the public
service responsibilities described in section 2103.
‘‘(4) The project is being operated and man-
aged (or will be operated and managed) in accord-
ance with a management-improvement-and-operating
plan which is designed to reduce the operating costs
of the project, which has been approved by the Trust
Fund Board, and which includes—
‘‘(A) a detailed maintenance schedule;
‘‘(B) a schedule for correcting any past de-
ficiencies in maintenance, repairs, and replace-
ments;
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‘‘(C) a plan to upgrade the project to meet
cost-effective energy efficiency standards pre-
scribed by the Trust Fund Board;
‘‘(D) a plan to improve financial and man-
agement control systems;
‘‘(E) a detailed annual operating budget
taking into account such standards for operat-
ing costs in the area as may be determined by
the Trust Fund Board; and
‘‘(F) such other requirements as the Trust
Fund Board may determine.
‘‘(5) The application includes stringent provi-
sions for continued State or local support of the pro-
gram, both with respect to operating and financial
capital.
‘‘(6) The terms, conditions, maturity, security
(if any), and schedule and amount of repayments
with respect to the loan are sufficient to protect the
financial interests to the United States and are oth-
erwise reasonable and in accord with regulation, in-
cluding a determination that the rate of interest
does not exceed such annual percentage on the prin-
cipal obligation outstanding as the Trust Fund
Board determines to be reasonable, taking into ac-
count the range of interest rates prevailing in the
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private market for similar loans and the risks as-
sumed by the United States.
‘‘(7) The hospital or facility must meet such
other additional criteria as the Secretary may im-
pose.
‘‘(d) STATE OR LOCAL PARTICIPATION.—Projects in
which State or local governmental entities participate in
the form of first guarantees of part or all of the total loan
value shall be given a preference for loan guarantees under
this subtitle.
‘‘GUARANTEE ALLOTMENTS
‘‘SEC. 2112. (a) IN GENERAL.—Not more than
$150,000,000 shall be annually allocated from the Trust
Fund for purposes of the loan guarantee program estab-
lished by this subtitle.
‘‘(b) LOAN GUARANTEES
FOR RURAL HOSPITALS
AND FACILITIES.—At least 10 percent of the dollar value
of loan guarantees made under this program during any
given year shall be allocated for eligible rural hospitals and
facilities, to the extent a sufficient number of applications
made by such hospitals and facilities is approved.
‘‘(c) SPECIAL RULE FOR REFINANCING LOANS.—Not
more than 20 percent of the amount allocated each year
to the loan guarantee program established by this subtitle
may be allocated to guarantee refinancing loans during the
year.
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‘‘TERMS AND CONDITIONS OF LOAN GUARANTEES
‘‘SEC. 2113. (a) IN
GENERAL.—The principle
amount of the guaranteed loan, when added to any Fed-
eral grant assistance made under this title, may not exceed
95 percent of the total value of the project, including land.
‘‘(b) GUARANTEES PROVIDED MAY NOT SUPPLANT
OTHER FUNDS.—Guarantees provided under this subtitle
Act may not be used to supplant other forms of State or
local support.
‘‘(c) RIGHT TO RECOVER FUNDS.—The United
States shall be entitled to recover from any applicant the
amount of payments made pursuant to any loan guarantee
under this subtitle, unless the Trust Fund Board for good
cause waives its right of recovery, and, upon making any
such payment, the United States shall be subrogated to
all of the rights of the recipients of the payments with
respect to which the guarantee was made.
‘‘(d) MODIFICATION OF TERMS.—Loan guarantees
made under this subtitle shall be subject to further terms
and conditions as the Trust Fund Board determines to
be necessary to assure that the purposes of this Act will
be achieved, and any such terms and conditions may be
modified by the Trust Fund Board to the extent that it
determines such modifications to be consistent with the
financial interest of the United States.
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‘‘(e) TERMS ARE INCONTESTABLE ABSENT FRAUD
OR MISREPRESENTATION.—Any loan guarantee made by
the Trust Fund Board pursuant to this subtitle shall be
incontestable in the hands of an applicant on whose behalf
such guarantee is made, and as to any person who makes
or contracts to make a loan to such applicant in reliance
thereon, except for fraud or misrepresentation on the part
of such applicant or other person.
‘‘PREMIUMS FOR LOAN GUARANTEES
SEC. 2114. (a) IN GENERAL.—The Trust Fund
Board shall determine a reasonable loan insurance pre-
mium which shall be charged for loan guarantees under
this subtitle, taking into account the availability of the
rseserves created under section 2112. Premium charges
shall be payable in cash to the Trust Fund (either in full
upon issuance or annually in advance). In addition to the
premium charge herein provided for, the Trust Fund is
authorized to charge and collect such amount as it may
deem reasonable for the appraisal of a property or project
offered for insurance and for the inspection of such prop-
erty or project.
‘‘(b) PAYMENT IN ADVANCE.—In the event that the
principal obligation of any loan accepted for insurance
under this subtitle is paid in full prior to the maturity
date, the Trust Fund Board is authorized in its discretion
to require the payment by the borrower of an adjusted
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premium charge in such amount as the Board determines
to be equitable, but not in excess of the aggregate amount
of the premium charges that the hospital or facility would
otherwise have been required to pay if the loan had contin-
ued to be insured until maturity date.
‘‘(c) TRUST FUND BOARD MAY WAIVE PREMIUMS.—
The Trust Fund Board may in its discretion partially or
totally waive premiums charged for loan insurance under
this section for financially distressed hospitals and facili-
ties (as described by the Secretary).
‘‘PROCEDURES IN THE EVENT OF LOAN DEFAULT
‘‘SEC. 2115. (a) PAYMENT OF INSURANCE AFTER
DEFAULT.—
‘‘(1) TRANSFER OF RIGHTS AND INTERESTS.—
The failure of the borrower hospital or facility to
make payment due under or provided by the terms
of a loan insured under this subtitle shall be consid-
ered in default under such loan and, if such default
continues for a period of 30 days, the lender shall
be entitled to receive the benefits of the insurance as
hereinafter provided, upon assignment, transfer, and
delivery to the Trust Fund Board, within a period
and in accordance with rules and regulations to be
prescribed by the Trust Fund Board of—
‘‘(A) all rights and interests arising under
the loan in default;
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‘‘(B) all claims of the lender against the
borrower or others, arising out the loan trans-
actions;
‘‘(C) all policies of title or other insurance
or surety bonds or other guarantees and any
and all claims thereunder;
‘‘(D) any balance of the loan not advanced
to the borrower;
‘‘(E) any cash or assets held by the lender,
or to which it is entitled, as deposits made for
the account of the borrower and which have not
been applied in reduction of the principal of the
loan indebtedness; and
‘‘(F) all records, documents, books, papers,
and accounts relating to the mortgage trans-
action.
‘‘(2) PAYMENTS
BY
TRUST
FUND.—Upon an
assignment, transfer, and delivery described in para-
graph (1), the obligation of the borrower to pay the
premium charges for the loan insurance shall cease,
and the Trust Fund shall, subject to the cash ad-
justment provided for in subsection (d), issue to the
lender a certificate of claim as provided in sub-
section (b), and debentures having total face value
equal to the original principal face amount of the
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loan plus such amount as the borrower may have
paid for taxes, special assessments, and water rates,
which are liens prior to the mortgage; insurance on
the assets; and reasonable expenses for the comple-
tion and preservation of the assets and any loan in-
surance premiums paid after default, less the sum
of—
‘‘(A) that part of the amount of the prin-
cipal obligation that has been repaid by the bor-
rower;
‘‘(B) an amount equivalent to 1 percent of
the unpaid amount of such principal obligation;
and
‘‘(C) any net income received by the lender
from the assets.
‘‘(3) OPTION TO FORECLOSE.—
‘‘(A) IN GENERAL.—In the event of a de-
fault under the loan the lender may, at its op-
tion and in accordance with the regulations of,
and in a period of time to be determined by the
Trust Fund Board, proceed to foreclose on and
obtain possession of or otherwise acquire such
assets from the borrower after default, and re-
ceive the benefits of the insurance as herein
provided, upon—
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‘‘(i) the prompt conveyance to the
Trust Fund of title to the assets which
meets the requirements of the rules and
regulations of the Trust Fund Board in
force at the time the loan was insured and
which is evidenced in the manner pre-
scribed by such rules and regulations; and
‘‘(ii) the assignment to the Trust
Fund of all claims of the lender against
the borrower or others, arising out of the
loan transaction or foreclosure proceedings,
except such claims that may have been re-
leased with the consent of the Trust Fund
Board.
‘‘(B) REPEAL OF OBLIGATION TO PAY PRE-
MIUM.—Upon such conveyance and assignment,
the obligation of the borrower to pay the pre-
mium charges for insurance shall cease and the
borrower shall be entitled to receive the benefits
of the insurance as provided in this subsection,
except that in such event the 1 percent deduc-
tion set out above shall not apply.
‘‘(b) CERTIFICATE OF CLAIM; DIVISION OF EXCESS
PROCEEDS.—
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‘‘(1) VALUE OF CERTIFICATE.—The certificate
of claim issued under this section shall be for an
amount which the Trust Fund Board determines to
be sufficient, when added to the face value of the de-
bentures issued and the cash adjustment paid to the
lender, to equal the amount which the lender would
have received if, on the date of the assignment,
transfer and delivery to the Trust Fund provided for
in subsection (a) of this section, the mortgagor had
extinguished the mortgage indebtedness by payment
in full of all obligations under the loan and a reason-
able amount for necessary expenses incurred by the
lender in connection with the default proceedings, or
the acquisition of the mortgaged assets otherwise,
and the conveyance thereof to the Trust Fund. Each
such certificate of claim shall provide that there
shall accrue to the holder of such certificate with re-
spect to the face amount of such certificate, an in-
crement at the rate of 3 percent per annum which
shall not be compounded.
‘‘(2) TREATMENT
OF
EXCESS.—If the net
amount realized from the mortgage, and all claims
in connection therewith, so assigned, transferred,
and delivered, and from the assets covered by such
mortgage and all claims in connection with such as-
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sets, after deducting all expenses incurred by the
Trust Fund in handling, dealing with, acquiring title
to, and disposing of such mortgage and assets and
in collecting such claims, exceeds the face value of
the debentures issued and the case adjustment paid
to the mortgagee plus all interest paid on such de-
bentures, such excess shall be divided as follows:
‘‘(A) If such excess is greater than the
total amount payable under the certificate of
claim issued in connection with such assets, the
Trust Fund shall pay to the holder of such cer-
tificate the full amount so payable, and any ex-
cess remaining thereafter shall be retained by
the Trust Fund and credited to the loan insur-
ance program of the Trust Fund.
‘‘(B) If such excess is equal to or less than
the total amount payable under such certificate
of claim, the Trust Fund Board shall pay to the
holder of such certificate the full amount of
such excess.
‘‘(c) ACQUISITION OF ASSETS BY CONVEYANCE OR
FORECLOSURE.—
‘‘(1) IN GENERAL.—The Trust Fund Board is
authorized to—
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‘‘(A) acquire possession of and title to any
assets, covered by a mortgage insured under
this section and assigned to it, by voluntary
conveyance in extinguishment of the mortgage
indebtedness, or
‘‘(B) institute proceeding for foreclosure on
the assets covered by any such insured mort-
gage and prosecute such proceedings to conclu-
sion.
‘‘(2) 
BIDDING
PROCEDURES
AT
FORE-
CLOSURE.—The Trust Fund Board at any sale
under foreclosure may, in its discretion, for the pro-
tection of the Trust Fund, bid any sum up to but
not in excess of the total unpaid indebtedness se-
cured by the mortgage plus taxes, insurance, fore-
closure costs, fees, and other expenses, and may be-
come the purchaser of the assets at such sale. In de-
termining the amount to be bid, the Trust Fund
Board shall act consistently with its duties.
‘‘(3) PAYMENT
OF
EXPENSES.—The Trust
Fund Board is authorized to pay from the Trust
Fund such sums as may be necessary to defray such
taxes, insurance, costs, fees, and other expenses in
connection with the acquisition or foreclosure of as-
sets under this section.
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‘‘(4) EXERCISE OF RIGHTS PENDING ACQUISI-
TION.—Pending such acquisition by voluntary con-
veyance or by foreclosure, the Trust Fund Board is
authorized, with respect to any mortgage assigned to
it under the provisions of subsection (a), to exercise
all the rights of a mortgagee under such mortgage,
including the right to sell such a mortgage, and to
take such action and advance such sums as may be
necessary to preserve or protect the lien of such
mortgage.
‘‘(d) HANDLING AND DISPOSAL OF ASSETS; SETTLE-
MENT OF CLAIMS.—
‘‘(1) PAYMENT FOR CERTAIN EXPENSES.—Not-
withstanding any other provisions of law relating to
the acquisition, handling, or disposal of real and
other property by the United States, the Trust Fund
Board shall also have power, for the protection of
the interests of the Trust Fund, to pay out of the
Trust Fund all expenses or charges in connection
with, and to deal with, complete, reconstruct, rent,
renovate, modernize, insure, make contracts for the
management of, or establish suitable agencies for
the management of, or sell for cash or credit or lease
in its discretion, any assets acquired by it under this
section.
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‘‘(2) SETTLEMENT OF CLAIMS.—Notwithstand-
ing any other provision of law, the Trust Fund
Board shall also have the power to pursue to final
collection by way of compromise or otherwise all
claims assigned and transferred to it in connection
with the assignment, transfer, and delivery provided
for in this section, and at any time, upon default, to
foreclose or refrain from foreclosing on any assets
secured by any mortgage assigned and transferred
to or held by it.
‘‘(3) 
LIMITATIONS
ON
AUTHORITY.—Sub-
sections (a) and (b) shall not be construed to apply
to any contract for hazard insurance, or to any pur-
chase or contract for services or supplies on account
of such assets if the amount thereof does not exceed
$1,000.
‘‘Subtitle C—Interest Rate Subsidies
‘‘PROVISION OF INTEREST RATE SUBSIDIES
‘‘SEC. 2121. (a) IN GENERAL.—The Secretary, with
the approval of the Trust Fund Board, shall make avail-
able interest subsidies to reduce the cost of financing
qualifying projects.
‘‘(b) PURPOSES.—The interest subsidy program shall
provide a partial Federal subsidy of debt service payment
for financing replacement (whether by construction or ac-
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quisition), modernization, and renovation projects or cap-
ital equipment acquisitions by undertaking the issuance of
bonds.
‘‘ELIGIBLE LOANS
‘‘SEC. 2122. (a) IN GENERAL.—Qualifying hospitals
and facilities should have issued or plan to issue bonds
for capital projects or be responsible for paying debt serv-
ice on general obligation or revenue bonds issued on the
qualifying hospital’s or facility’s behalf. To be eligible,
bonds must have been issued after December 31, 1996.
‘‘(b) 
NON-FEDERAL
PARTICIPATION
REQUIRE-
MENT.—In order to obtain assistance under this subtitle,
a hospital or facility must receive assistance from non-
Federal sources in an amount not less than the amount
of the assistance provided under this subtitle.
‘‘ALLOTMENT OF SUBSIDIES
‘‘SEC. 2123. (a) IN GENERAL.—Interest subsidy
grants will be made in the amount of 3 percent for qualify-
ing non-Federal loans.
‘‘(b) QUALIFYING FEDERAL LOANS MADE UNDER
THIS ACT.—Interest subsidy grants in an amount of up
to 5 percent will be made for qualifying Federal loans
made under this title if it is determined by the Trust Fund
Board that the project would not be otherwise financially
feasible.
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‘‘(c) RESERVE FOR RURAL HOSPITALS AND FACILI-
TIES.—At least 10 percent of the total value of all interest
subsidies awarded in any given year shall be awarded to
rural hospitals and facilities, provided that a sufficient
number of applications are approved.
‘‘(d) LIMITATION
ON
AMOUNT
OF
SUBSIDIES
AWARDED IN A GIVEN STATE.—The aggregate value of
interest subsidies made to hospitals and facilities in any
State in a given year shall not exceed 25 percent of the
total value of all interest subsidies made during that year.
‘‘(e) AMOUNT ALLOCATED FROM TRUST FUND.—
The Trust Fund Board shall make available $220,000,000
annually for interest subsidies under this subtitle.
‘‘TERMS AND CONDITIONS FOR SUBSIDIES
‘‘SEC. 2124. (a) STATE OR LOCAL PARTICIPATION.—
State or local participation in an amount equal to not less
than the Federal subsidy is required.
‘‘(b) ISSUANCE OF FEDERAL COMMITMENTS.—Suc-
cessful applicants will receive a Federal commitment of in-
terest subsidy grant. Applicants will then have 12 months
to finalize financing arrangements before unobligated
funds would be returned to the subsidy program pool. A
commitment, when issued, shall be valid for as long as
a hospital or facility continues to meet the eligibility quali-
fications of this title.
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‘‘SUBSIDIES FOR LOAN REFINANCING
‘‘SEC. 2125. In addition to providing interest rate
subsidies for new loans, the Trust Fund may provide sub-
sidies to assist in refinancing if the hospital or facility
presently lacks permanent financing at an affordable cur-
rent market rate.
‘‘Subtitle D—Direct Matching Loans
‘‘PROVISION OF MATCHING LOANS
‘‘SEC. 2131. (a) IN GENERAL.—The Secretary, with
the approval of the Trust Fund Board, shall provide direct
matching loans to qualified hospitals and facilities unable
otherwise to obtain essential financing.
‘‘(b) PURPOSES.—The purpose of this subtitle is to
provide qualifying hospitals and facilities with direct
matching loans for essential replacement (whether by con-
struction or acquisition), modernization, and renovation
projects and capital equipment acquisitions. These loans
are to be primarily provided for the funding of smaller
projects where the transaction costs of securing financing
from other sources may be disporportionately onerous in
relationship to the amounts financed.
‘‘ELIGIBLE PROJECTS
‘‘SEC. 2132. (a) IN GENERAL.—Qualified applicants
may seek a project loan of up to $50,000,000. Not more
than 75 percent of the cost of the project may come from
Federal sources.
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‘‘(b) EXCEPTION FOR FINANCIALLY DISTRESSED AP-
PLICANTS.—The Trust Fund Board shall have the discre-
tion to waive the 25 percent match requirement for finan-
cially distressed hospitals and facilities (as described by
the Secretary).
‘‘ALLOTMENT OF LOANS
‘‘Sec. 2133. (a) IN GENERAL.—The Trust Fund
Board shall make available $200,000,000 in direct match-
ing loans annually. Funded projects should be divided be-
tween projects designed to achieve compliance with accred-
itation standards, life safety code, and other certification
standards, and those related to the provision of new serv-
ices.
‘‘(b) RESERVE FOR RURAL HOSPITALS AND FACILI-
TIES.—No less than 10 percent of the total value of loans
made under the program shall be made to rural hospitals
and facilities, if there are a sufficient number of approved
applications from such hospitals and facilities.
‘‘TERMS AND CONDITIONS OF LOANS
‘‘SEC. 2134. (a) GENERAL TERM.—Loans will be
made for a period equal to the construction period plus
up to 39 years amortization.
‘‘(b) INTEREST RATE.—The interest rate will be a
market rate determined by the Trust Fund Board to be
the most recent applicable index for revenue bonds, based
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on the index published by the Bond Buyer and such other
information as the Board finds appropriate.
‘‘USE OF LOANS FOR REFINANCING
‘‘SEC. 2135. In addition to providing loans for new
projects, the Trust Fund Board may grant loans under
this subtitle to refinance existing loans if the hospital or
facility has been unable to secure permanent financing at
an affordable current market rate, except that the amount
of assistance provided under this subtitle during a year
for refinancing existing loans may not exceed 20 percent
of the total amount made available for assistance under
this subtitle for the year.
‘‘CREATION OF REVOLVING FUND
‘‘SEC. 2136. In addition to the new amounts made
available each year, all loan repayments made by hospitals
and facilities shall be held in a revolving fund that may
be used for additional loans.
‘‘LOAN DEFAULT
‘‘SEC. 2137. (a) IN GENERAL.—The failure of the
borrower hospital or facility to make payment due under
or provided by the terms of a loan granted under this sub-
title shall be considered a default under such loan and,
if such default continues for a period of 30 days, the Trust
Fund Board shall have the right to begin collection pro-
ceedings against the borrower.
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‘‘(b) PRIORITY OF FEDERAL INTEREST.—In the case
of default, the United States shall be paid prior to State
or local bonds.
‘‘(c) SETTLEMENT
OF CLAIMS.—Notwithstanding
any other provision of law, the Trust Fund Board shall
have the power to pursue to final collection by way of com-
promise or otherwise all claims assigned and transferred
to the Trust Fund in connection with an assignment,
transfer, and delivery and at any time, upon default, to
foreclose or refrain from foreclosing on any assets secured
by any defaulted loan held by the Trust Fund.
‘‘Subtitle E—Grants for Urgent Capital Needs
‘‘PROVISION OF GRANTS
‘‘SEC. 2141. (a) IN GENERAL.—The Secretary, with
the approval of the Trust Fund Board, shall make direct
grants to qualified hospitals and facilities with urgent cap-
ital needs.
‘‘(b) PURPOSES.—Direct grants shall be available to
eligible hospitals and facilities for 3 types of projects:
‘‘(1) Emergency certification and licensure
grants would be available to eligible hospitals and fa-
cilities that are threatened with closure or loss of ac-
creditation or certification of a facility or of essential
services as a result of life or safety code violations
or similar facility or equipment failures. Such grants
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would provide limited funding for repair and renova-
tion or capital equipment acquisition where failure to
fund would disrupt the provision of essential public
health services such as emergency care.
‘‘(2) Emergency grants would be available for
capital 
renovation, 
expansion, 
or 
replacement
(whether by construction or acquisition) necessary to
the maintenance or expansion of essential safety and
health services such as obstetrics, perinatal, emer-
gency and trauma, primary care and preventive
health services.
‘‘(3) Planning grants would be available to
qualified hospitals and facilities requiring pre-ap-
proval assistance related to management and finance
in order to apply for loans, loan guarantees, and in-
terest subsidies under this Act.
‘‘(c) PRIORITY TO FINANCIALLY DISTRESSED PRO-
VIDERS.—Priority for direct grants under this section
would be given to financially distressed hospitals and fa-
cilities (as described by the Secretary).
‘‘(d) APPLICATION PROCESS.—The Secretary, with
the approval of the Trust Fund Board, shall create an
expedited application process for direct grants.
‘‘(e) AMOUNT ALLOCATED FROM TRUST FUND.—
The 
Trust 
Fund 
Board 
shall 
annually 
allocate
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$400,000,000 from the Trust Fund for grants under this
subtitle.
‘‘ELIGIBLE PROJECTS
‘‘SEC. 2142. (a) MATCHING GRANTS.—
‘‘(1) LIMITATION ON AMOUNT.—Grants for cap-
ital expenditures by qualified hospitals and facilities
will be limited to $25,000,000.
‘‘(2) MATCHING REQUIREMENT.—At least half
of the projects funded in a year must receive at least
50 percent of their funding from State or local
sources. The remaining projects funded during the
year could be financed up to 90 percent with a com-
bination of Federal grants and loans.
‘‘(3) RESERVATION FOR RURAL APPLICANTS.—
No less than 10 percent of the grant funds in any
given year would be reserved for rural applicants,
provided that a sufficient number of applications are
approved.
‘‘(b) PLANNING GRANTS.—Applicants who can dem-
onstrate general qualification for the direct matching loan,
loan guarantee, or interest subsidy programs under this
title or eligibility for mortgage insurance under section
242 of the National Housing Act will be eligible for a
grant of up to $500,000 to assist in implementation of
key budgetary and financial systems as well as manage-
ment and governance restructuring.’’.
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(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect October 1, 1997.
SEC. 212. ADJUSTMENT TO PAYMENTS FOR CAPITAL-RE-
LATED COSTS UNDER MEDICARE.
(a) IN GENERAL.—Section 1886(g)(1)(B) of the So-
cial Security Act (42 U.S.C. 1395ww(g)(1)(B)) is amend-
ed—
(1) by striking ‘‘and’’ at the end of clause (iii);
(2) by striking the period at the end of clause
(iv) and inserting ‘‘, and’’; and
(3) by adding at the end the following new
clause:
‘‘(v) shall provide for adjustments to take into
account the extent to which capital-related costs in-
curred by a hospital are costs with respect to which
the hospital received financial assistance under title
XXI.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to cost reporting periods begin-
ning on or after October 1, 1998.
SEC. 213. TAX EXEMPT STATUS OF FEDERALLY GUARAN-
TEED STATE OR LOCAL BONDS.
(a) IN GENERAL.—Section 149(b)(3)(A) of the Inter-
nal Revenue Code of 1986 is amended—
(1) in clause (ii), by striking ‘‘or’’;
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(2) in clause (iii) by striking the period at the
end and inserting ‘‘, or’’; and
(3) by adding at the end the following new
clause: ‘‘(iv) any guarantee by the Capital Financing
Trust Fund pursuant to title XXI of the Social Se-
curity Act.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall take effect on October 1, 1997.
TITLE III—CAPITAL
ALLOCATION PLANS
SEC. 301. REQUIRING STATE REVIEW MECHANISMS AS A
CONDITION OF PAYMENT FOR CAPITAL-RE-
LATED COSTS UNDER MEDICARE.
(a) IN GENERAL.—Section 1862(a) of the Social Se-
curity Act (42 U.S.C. 1395y(a)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph (15);
(2) by striking the period at the end of paragraph
(16) and inserting ‘‘; or’’ and
(3) by inserting after paragraph (16) the following
new paragraph:
‘‘(17) with respect to expenses for capital-related
costs (as defined in section 1886(g)(1)(C)) incurred dur-
ing a year (beginning with 1997) where—
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‘‘(A) such expenses are incurred in a State
that does not have a capital allocation plan ap-
proved by the Secretary under section 1890, or
‘‘(B) the State notifies the Secretary that
such expenses were incurred in violation of the
State’s capital allocation plan under such sec-
tion.’’.
(b) CAPITAL ALLOCATION PLANS DESCRIBED.—Title
XVIII of the Social Security Act (42 U.S.C. 1395 et seq.)
is amended by inserting after section 1889 the following
new section:
‘‘CAPITAL ALLOCATION PLANS
‘‘SEC. 1890. (a) APPROVAL BY SECRETARY.—
‘‘(1) IN
GENERAL.—For purposes of section
1862(a)(17), the Secretary shall approve the capital
allocation plan of a State for a fiscal year if the
Governor of the State provides the Secretary with
information and assurances necessary for the Sec-
retary to find that the plan meets the requirements
of this section.
‘‘(2) TERMINATION
OR
EXTENSION
OF
AP-
PROVAL
PERMITTED.—Notwithstanding paragraph
(1), the Secretary may—
‘‘(A) terminate the approval of a plan
under this section for a fiscal year if the Sec-
retary determines during the year that the plan
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is not substantially in compliance with this sec-
tion; or
‘‘(B) extend the approval of a plan under
this section (on a conditional basis) for an addi-
tional period not to exceed 12 months.
‘‘(b) REQUIREMENTS.—
‘‘(1) IN GENERAL.—A State’s capital allocation
plan meets the requirements of this section if—
‘‘(A) except as provided in paragraph (2),
the Governor designates a single agency of the
State government as the State review agency
for the development of the plan;
‘‘(B) the Governor designates a single
agency of the State government as the State re-
view agency for the enforcement of the plan;
‘‘(C) all capital expenditures of health care
services in the State (except as provided in
paragraph (4)) are subject to review and ap-
proval under the plan (in accordance with sub-
section (c));
‘‘(D) the State review agency determines
whether capital expenditures are in accordance
with the plan using the criteria specified in sub-
section (c) and notifies the Secretary if it deter-
mines that any capital expenditures subject to
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the plan are not in accordance with the plan;
and
‘‘(E) the State review agency provides the
Secretary with assurances that the agency is
enforcing the plan.
‘‘(2) PERMITTING USE OF REGIONAL REVIEW
AGENCIES.—Notwithstanding paragraph (1)(A), a
Governor may designate a regional review agency to
develop the capital allocation plan for capital ex-
penditures of health care services in a geographic re-
gion in the State, but only if—
‘‘(A) each such geographic region has a
population of at least 500,000;
‘‘(B) if the region includes any portion of
a metropolitan statistical area, the region in-
cludes all of such metropolitan statistical area;
and
‘‘(C) each such regional review agency in
the State—
‘‘(i) is a nonprofit corporation or a
public regional planning body or single
unit of local government,
‘‘(ii) is governed by a board a major-
ity of the members of which are consumers
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or purchasers of health care services in the
region, and
‘‘(iii) has resource allocation and plan-
ning in the region as its primary purpose.
‘‘(3) PERMITTING USE OF MULTISTATE REVIEW
AGENCIES.—The Governors of 2 or more contiguous
States may designate a single review agency to carry
out the requirements of this section with respect to
capital expenditures of health care services in such
States, but only if such agency meets the require-
ments described in paragraph (2) for regional review
agencies.
‘‘(4) SPECIAL
TREATMENT
OF
SERVICES
IN
RURAL AREAS PERMITTED.—
‘‘(A) IN
GENERAL.—A capital allocation
plan need not provide for review of expenditures
for services provided in rural areas in a State
if the State has developed a rural health plan
that meets the requirements of this paragraph.
‘‘(B) REQUIREMENTS FOR RURAL HEALTH
PLAN.—A rural health plan must—
‘‘(i) meet criteria developed by the
Secretary;
‘‘(ii) have as its major focus the as-
surance of access to health care services by
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low density rural populations in the State;
and
‘‘(iii) address at least—
‘‘(I) the regionalization of serv-
ices,
‘‘(II) alternatives to traditional
facilities,
‘‘(III) the development of new or-
ganizational forms, and
‘‘(IV) the needs for special emer-
gency and other health-services-re-
lated transportation needs.
‘‘(c) CONTENTS OF PLAN DESCRIBED.—
‘‘(1) REQUIREMENTS
RELATING
TO
ALLOCA-
TION OF CAPITAL.—
‘‘(A) IN
GENERAL.—Each capital alloca-
tion plan under this subsection shall—
‘‘(i) be developed consistent with cri-
teria developed by the Secretary;
‘‘(ii) be designed to assure that the
needs of the State’s residents for health
care services are met;
‘‘(iii) include occupancy targets for in-
patient hospital facilities;
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‘‘(iv) include utilization targets for
services subject to review under the plan;
and
‘‘(v) provide an opportunity for formal
review and comment before becoming final.
‘‘(B) SPECIFICS.—Each capital allocation
plan must—
‘‘(i) assure access to hospital facilities;
‘‘(ii) identify which facilities (and
parts of facilities) would be closed in order
to reach the occupancy and utilization tar-
gets for health care services;
‘‘(iii) provide for regionalization of
services, where appropriate; and
‘‘(iv) address—
‘‘(I) the special needs and cir-
cumstances of hospitals receiving an
additional 
payment 
under 
section
1886(d)(5)(F), 
Federally-qualified
health centers, and other institutions
and facilities that receive special as-
sistance for providing services to low-
income individuals and other individ-
uals in medically underserved commu-
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nities (as defined in section 799(6) of
the Public Health Service Act), and
‘‘(II) the provision of trauma
care.
‘‘(2) REQUIREMENTS RELATING TO REVIEW.—
‘‘(A) IN GENERAL.—The capital allocation
plan shall—
‘‘(i) require the review of any pro-
posed expenditures for capital expenditures
in excess of $1,000,000 in the area covered
by the plan;
‘‘(ii) permit the review of expenditures
in the area covered by the plan that are
not described in clause (i); and
‘‘(iii) provide that a review shall take
into consideration at least the following
criteria:
‘‘(I) The relationship of the pro-
posed capital expenditure to the plan.
‘‘(II) The need that the popu-
lation to be served has for the pro-
posed services, equipment, or facility
provided by the capital expenditure.
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‘‘(III) The availability of alter-
native, less costly, or more effective
methods for providing such services.
‘‘(IV) The impact of the proposed
expenditure on the quality of care and
the costs of health care services pro-
vided to such population.
‘‘(V) The impact of the proposed
expenditure on the utilization of the
applicant’s other capital resources.
‘‘(VI) The extent to which the
proposed services, equipment, or facil-
ity shall eliminate unnecessary or du-
plicative services.
‘‘(VII) The extent to which the
proposed services, equipment, or facil-
ity will be available to all residents of
the area, regardless of their ability to
pay for the use of such services,
equipment, or facility.
‘‘(B) SPECIAL RULES FOR DETERMINING
AMOUNT
OF
EXPENDITURES.—In determining
the amount of proposed expenditures for a cap-
ital project for purposes of subparagraph (A)(i),
there shall be included—
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‘‘(i) the cost of any studies, surveys,
designs, plans, working drawings, specifica-
tions, and other activities essential to the
acquisition, improvement, expansion, or re-
placement of the capital project with re-
spect to which the expenditure is made;
and
‘‘(ii) any proposed expenditures for
other capital projects which are found by
the review agency to be fundamentally re-
lated to the capital project in question (in
accordance with criteria developed by the
State using guidelines established by the
Secretary).
‘‘(C) 
PROCEDUREAL
REQUIREMENTS.—
The capital allocation plan shall meet require-
ments relating to procedures for review as fol-
lows:
‘‘(i) Reviews must be performed under
a regular schedule that provides that appli-
cations relating to expenditures for similar
capital projects will be considered at the
same time, and that provides an oppor-
tunity for additional applicants to seek ap-
proval for carrying out a capital project if
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the review agency determines (based on the
application of an initial sponsor of such a
project) that an expenditure for such a
project would be appropriate under the
plan.
‘‘(ii) the determinations of the review
must be made in public meetings.
‘‘(iii) If local review agencies are es-
tablished under subsection (a)(2), the
State review agency must take the results
of reviews by such agencies into account.
‘‘(iv) The State review agency must
make provision for access by the general
public to all applications for review and for
written findings of its reviews that state
the basis for agency determinations.
‘‘(v) The State review agency must
hold at least one public hearing if re-
quested by persons directly affected by the
review.
‘‘(vi) Any decision of the State review
agency to approve or not to approve a pro-
posed capital expenditure must be based
solely on the agency’s review and the
record created by the review.
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‘‘(vii) An application for a proposed
capital expenditure must include a time-
table for completing the project for which
the expenditure is proposed, and any ap-
proval of such an expenditure shall be
withdrawn if the State review agency finds
that the applicant was not making a good
faith effort to meet the timetable or to oth-
erwise meet any applicable condition for
approval.
‘‘(viii) The allocation plan must pro-
vide either for an appeals mechanism (con-
sistent with the State’s administrative pro-
cedures act) or for an appeal before an en-
tity (other than the State review agency)
designated by the Governor.
‘‘(d) FUNDING ASSISTANCE TO STATES.—
‘‘(1) IN GENERAL.—The Secretary shall make,
in each fiscal year beginning with fiscal year 1997
from the allotment under paragraph (2) for the
State, a grant to each State with an approved cap-
ital allocation plan under this section in an amount
equal to 75 percent of the operating costs of carry-
ing out the plan in the State in the fiscal year.
Grants under this paragraph shall be payable from
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‘‘(3) the term ‘rural area’ has the meaning
given such term in section 1886(d)(2)(D).’’.
(c) EFFECT ON ANTITRUST LAWS.—
(1) IN GENERAL.—For purposes of the anti-
trust laws—
(A) the establishment by a State of a cap-
ital allocation plan under section 1890 of the
Social Security Act (as added by subsection (b))
shall be considered as affirmative State policy
with respect to individuals and entities in the
State providing health care services subject to
the plan; and
(B) the enforcement by a State of such a
plan shall be considered as active State super-
vision with respect to such individuals and enti-
ties.
(2) ANTITRUST LAWS DEFINED.—In paragraph
(1), the term ‘‘antitrust laws’’ has the meaning
given it in subsection (a) of the first sections of the
Clayton Act (15 U.S.C. 12(a)), except that such
term includes—
(A) section 5 of the Federal Trade Com-
mission Act (15 U.S.C. 45) to the extent such
section applies to unfair methods of competi-
tion; and
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(B) any State law similar to the antitrust
laws.
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