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U.S. Code as of:
01/19/04
Section 1320a-1. Limitation on use of Federal funds for capital expenditures
(a) Use of reimbursement for planning activities for health
services and facilities
The purpose of this section is to assure that Federal funds
appropriated under subchapters XVIII and XIX of this chapter are
not used to support unnecessary capital expenditures made by or on
behalf of health care facilities which are reimbursed under any of
such subchapters and that, to the extent possible, reimbursement
under such subchapters shall support planning activities with
respect to health services and facilities in the various States.
(b) Agreement between Secretary and State for submission of
proposed capital expenditures related to health care facilities
and procedures for appeal from recommendations
The Secretary, after consultation with the Governor (or other
chief executive officer) and with appropriate local public
officials, shall make an agreement with any State which is able and
willing to do so under which a designated planning agency (which
shall be an agency described in clause (ii) of subsection (d)(1)(B)
of this section that has a governing body or advisory board at
least half of whose members represent consumer interests) will -
(1) make, and submit to the Secretary together with such
supporting materials as he may find necessary, findings and
recommendations with respect to capital expenditures proposed by
or on behalf of any health care facility in such State within the
field of its responsibilities,
(2) receive from other agencies described in clause (ii) of
subsection (d)(1)(B) of this section, and submit to the Secretary
together with such supporting material as he may find necessary,
the findings and recommendations of such other agencies with
respect to capital expenditures proposed by or on behalf of
health care facilities in such State within the fields of their
respective responsibilities, and
(3) establish and maintain procedures pursuant to which a
person proposing any such capital expenditure may appeal a
recommendation by the designated agency and will be granted an
opportunity for a fair hearing by such agency or person other
than the designated agency as the Governor (or other chief
executive officer) may designate to hold such hearings,
whenever and to the extent that the findings of such designated
agency or any such other agency indicate that any such expenditure
is not consistent with the standards, criteria, or plans developed
pursuant to the Public Health Service Act [42 U.S.C. 201 et seq.]
to meet the need for adequate health care facilities in the area
covered by the plan or plans so developed.
(c) Manner of payment to States for carrying out agreement
The Secretary shall pay any such State from the general fund in
the Treasury, in advance or by way of reimbursement as may be
provided in the agreement with it (and may make adjustments in such
payments on account of overpayments or underpayments previously
made), for the reasonable cost of performing the functions
specified in subsection (b) of this section.
(d) Determination of amount of exclusions from Federal payments
(1) Except as provided in paragraph (2), if the Secretary
determines that -
(A) neither the planning agency designated in the agreement
described in subsection (b) of this section nor an agency
described in clause (ii) of subparagraph (B) of this paragraph
had been given notice of any proposed capital expenditure (in
accordance with such procedure or in such detail as may be
required by such agency) at least 60 days prior to obligation for
such expenditure; or
(B)(i) the planning agency so designated or an agency so
described had received such timely notice of the intention to
make such capital expenditure and had, within a reasonable period
after receiving such notice and prior to obligation for such
expenditure, notified the person proposing such expenditure that
the expenditure would not be in conformity with the standards,
criteria, or plans developed by such agency or any other agency
described in clause (ii) for adequate health care facilities in
such State or in the area for which such other agency has
responsibility, and
(ii) the planning agency so designated had, prior to submitting
to the Secretary the findings referred to in subsection (b) of
this section -
(I) consulted with, and taken into consideration the findings
and recommendations of, the State planning agencies established
pursuant to sections 314(a) and 604(a) of the Public Health
Service Act [42 U.S.C. 246(a), 291d(a)] (to the extent that
either such agency is not the agency so designated) as well as
the public or nonprofit private agency or organization
responsible for the comprehensive regional, metropolitan area,
or other local area plan or plans referred to in section 314(b)
of the Public Health Service Act [42 U.S.C. 246(b)] and
covering the area in which the health care facility proposing
such capital expenditure is located (where such agency is not
the agency designated in the agreement), or, if there is no
such agency, such other public or nonprofit private agency or
organization (if any) as performs, as determined in accordance
with criteria included in regulations, similar functions, and
(II) granted to the person proposing such capital expenditure
an opportunity for a fair hearing with respect to such
findings;
then, for such period as he finds necessary in any case to
effectuate the purpose of this section, he shall, in determining
the Federal payments to be made under subchapters XVIII and XIX of
this chapter with respect to services furnished in the health care
facility for which such capital expenditure is made, not include
any amount which is attributable to depreciation, interest on
borrowed funds, a return on equity capital (in the case of
proprietary facilities), or other expenses related to such capital
expenditure. With respect to any organization which is reimbursed
on a per capita or a fixed fee or negotiated rate basis, in
determining the Federal payments to be made under subchapters XVIII
and XIX of this chapter, the Secretary shall exclude an amount
which in his judgment is a reasonable equivalent to the amount
which would otherwise be excluded under this subsection if payment
were to be made on other than a per capita or a fixed fee or
negotiated rate basis.
(2) If the Secretary, after submitting the matters involved to
the advisory council established or designated under subsection (i)
of this section, determines that an exclusion of expenses related
to any capital expenditure of any health care facility would
discourage the operation or expansion of such facility which has
demonstrated to his satisfaction proof of capability to provide
comprehensive health care services (including institutional
services) efficiently, effectively, and economically, or would
otherwise be inconsistent with the effective organization and
delivery of health services or the effective administration of
subchapter XVIII or XIX of this chapter, he shall not exclude such
expenses pursuant to paragraph (1).
(e) Treatment of lease or comparable arrangement of any facility or
equipment for a facility in determining amount of exclusions from
Federal payments
Where a person obtains under lease or comparable arrangement any
facility or part thereof, or equipment for a facility, which would
have been subject to an exclusion under subsection (d) of this
section if the person had acquired it by purchase, the Secretary
shall (1) in computing such person's rental expense in determining
the Federal payments to be made under subchapters XVIII and XIX of
this chapter with respect to services furnished in such facility,
deduct the amount which in his judgment is a reasonable equivalent
of the amount that would have been excluded if the person had
acquired such facility or such equipment by purchase, and (2) in
computing such person's return on equity capital deduct any amount
deposited under the terms of the lease or comparable arrangement.
(f) Reconsideration by Secretary of determinations
Any person dissatisfied with a determination by the Secretary
under this section may within six months following notification of
such determination request the Secretary to reconsider such
determination. A determination by the Secretary under this section
shall not be subject to administrative or judicial review.
(g) "Capital expenditure" defined
For the purposes of this section, a "capital expenditure" is an
expenditure which, under generally accepted accounting principles,
is not properly chargeable as an expense of operation and
maintenance and which (1) exceeds $600,000 (or such lesser amount
as the State may establish), (2) changes the bed capacity of the
facility with respect to which such expenditure is made, or (3)
substantially changes the services of the facility with respect to
which such expenditure is made. For purposes of clause (1) of the
preceding sentence, the cost of the studies, surveys, designs,
plans, working drawings, specifications, and other activities
essential to the acquisition, improvement, expansion, or
replacement of the plant and equipment with respect to which such
expenditure is made shall be included in determining whether such
expenditure exceeds the dollar amount specified in clause (1).
(h) Applicability to Christian Science sanatoriums
The provisions of this section shall not apply to a religious
nonmedical health care institution (as defined in section
1395x(ss)(1) of this title).
(i) National advisory council; establishment or designation of
existing council; functions; consultations with other appropriate
national advisory councils; composition; compensation and travel
expenses
(1) The Secretary shall establish a national advisory council, or
designate an appropriate existing national advisory council, to
advise and assist him in the preparation of general regulations to
carry out the purposes of this section and on policy matters
arising in the administration of this section, including the
coordination of activities under this section with those under
other parts of this chapter or under other Federal or federally
assisted health programs.
(2) The Secretary shall make appropriate provision for
consultation between and coordination of the work of the advisory
council established or designated under paragraph (1) and the
Federal Hospital Council, the National Advisory Health Council, the
Health Insurance Benefits Advisory Council, and other appropriate
national advisory councils with respect to matters bearing on the
purposes and administration of this section and the coordination of
activities under this section with related Federal health programs.
(3) If an advisory council is established by the Secretary under
paragraph (1), it shall be composed of members who are not
otherwise in the regular full-time employ of the United States, and
who shall be appointed by the Secretary without regard to the civil
service laws from among leaders in the fields of the fundamental
sciences, the medical sciences, and the organization, delivery, and
financing of health care, and persons who are State or local
officials or are active in community affairs or public or civic
affairs or who are representative of minority groups. Members of
such advisory council, while attending meetings of the council or
otherwise serving on business of the council, shall be entitled to
receive compensation at rates fixed by the Secretary, but not
exceeding the maximum rate specified at the time of such service
for grade GS-18 in section 5332 of title 5, including traveltime,
and while away from their homes or regular places of business they
may also be allowed travel expenses, including per diem in lieu of
subsistence, as authorized by section 5703 of such title 5 for
persons in the Government service employed intermittently.
(j) Capital expenditure review exception for eligible organization
health care facilities
A capital expenditure made by or on behalf of a health care
facility shall not be subject to review pursuant to this section if
75 percent of the patients who can reasonably be expected to use
the service with respect to which the capital expenditure is made
will be individuals enrolled in an eligible organization as defined
in section 1395mm(b) of this title, and if the Secretary determines
that such capital expenditure is for services and facilities which
are needed by such organization in order to operate efficiently and
economically and which are not otherwise readily accessible to such
organization because -
(1) the facilities do not provide common services at the same
site (as usually provided by the organization),
(2) the facilities are not available under a contract of
reasonable duration,
(3) full and equal medical staff privileges in the facilities
are not available,
(4) arrangements with such facilities are not administratively
feasible, or
(5) the purchase of such services is more costly than if the
organization provided the services directly.
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