[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 735 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                H. R. 735

   To amend the Internal Revenue Code of 1986 and title XVIII of the 
Social Security Act to establish a program of assistance for essential 
community providers of health care services, to establish a program to 
   update and maintain the infrastructure requirements of safety net 
 hospitals, and to require States to develop plans for the allocation 
and review of expenditures for the capital-related costs of health care 
                               services.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 12, 1997

  Mr. Stark introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committee on 
Commerce, for a period to be subsequently determined by the Speaker, in 
   each case for consideration of such provisions as fall within the 
                jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 and title XVIII of the 
Social Security Act to establish a program of assistance for essential 
community providers of health care services, to establish a program to 
   update and maintain the infrastructure requirements of safety net 
 hospitals, and to require States to develop plans for the allocation 
and review of expenditures for the capital-related costs of health care 
                               services.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Essential Health Facilities 
Investment Act of 1997''.

          TITLE I--ESSENTIAL ACCESS COMMUNITY HOSPITAL PROGRAM

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 Appropriations.--Section 1820(l) 
of such Act (42 U.S.C. 1395i-4(l)) is amended--
            (1) by striking ``1990, 1991, and 1992'' and inserting 
        ``1998 through 2003'';
            (2) by amending paragraph (1) to read as follows:
            ``(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, 1997.

SEC. 102. EXTENSION OF PROGRAM TO NETWORKS OF ESSENTIAL 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 adding 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.--Subject to paragraph 
        (2), a State or unit of local government is eligible to receive 
        a grant under subsection (a)(1) only if the State or unit of 
        local government submits to the Secretary, at such time and in 
        such form as the Secretary may require, an application 
        containing such information and assurances as the Secretary may 
        require, together with assurances 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 
                        services) for urban residents in the State or 
                        locality, 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 consultation with 
                appropriate State and community hospital associations, 
                public hospitals, and primary 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 
                essential community providers within such community 
                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 
        located 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 eligible to 
        receive a grant under subsection (a)(2) only if the hospital or 
        facility--
                    ``(A) is located in a State or locality receiving a 
                grant under subsection (a)(1);
                    ``(B) is designated as an essential community 
                provider by the State or unit of local government 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 containing 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 consistent 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 consortium 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 governments.--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 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 service 
                sites;
                    ``(B) the development of integrated information, 
                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 Providers.--A State or 
unit of local government may designate a hospital or facility as an 
essential community provider only if--
            ``(1) the hospital or facility is a member of (or is in the 
        process of becoming a member of) a community health network (as 
        defined in subsection (f));
            ``(2) in the case of a facility other than a hospital--
                    ``(A) the facility is a federally-qualified health 
                center (as defined in section 1861(aa)(4)), or
                    ``(B) the facility would be a federally-qualified 
                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 requirement described 
                in section 330(e)(3)(G)(i) of such Act (relating to the 
                composition of the facility'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 essential 
                access community hospital by the Secretary 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) 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 requirements:
            ``(1) The entity provides primary care services and acute 
        care services to a medically underserved community (as defined 
        in section 799(6) of the Public Health Service Act) in the 
        entity's service area, either directly through its members or 
        through contracts with other entities (under such limited 
        circumstances as the Secretary may permit in regulations).
            ``(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 subsection (e);
                    ``(B) at least 3 facilities (other than hospitals) 
                that have been designated as essential community 
                providers under subsection (e); and
                    ``(C) at the election of the entity's members, 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 appropriate 
                emergency and medical support services to other 
                members,
                    ``(B) each member agrees to accept referrals from 
                other members,
                    ``(C) each hospital member has arrangements 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 communication system, 
                including (where appropriate) 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 hospitals or facilities under such subsection may not 
exceed $1,000,000.''.
    (b) Funding for Grants to Hospitals Through Current EACH Program.--
Section 1820(l) of the Social Security Act (42 U.S.C. 1395i-4(l)) is 
amended--
            (1) in the heading, by striking ``Appropriations'' and 
        inserting ``Appropriations for EACH Program and Essential 
        Community Provider Program'';
            (2) by striking ``and'' at the end of paragraph (1);
            (3) by striking the period at the end of paragraph (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 Determining Payment for Indirect Costs of 
Medical Education.--Section 1886(d)(5)(B) of the Social Security Act 
(42 U.S.C. 1395ww(d)(5)(B)) is amended by adding at the end the 
following new clause:
            ``(v) In determining such adjustment, the Secretary shall 
        count services of interns and residents under a medical 
        residency training program that is conducted at a facility 
        designated as an essential community provider under section 
        1821, but only if--
                    ``(I) the hospital is designated as an essential 
                community provider under such section;
                    ``(II) the hospital incurs all, or substantially 
                all, of the costs of the training program; and
                    ``(III) the facility is a member of a community 
                health network (as described in section 1821(f)) to 
                which the hospital belongs.''.
    (d) Effective Date.--The amendments made by this section shall take 
effect October 1, 1997.

SEC. 103. STUDY OF EFFECTIVENESS OF PROGRAMS.

    (a) Study.--The Secretary of Health and Human Services shall 
conduct a study of the effectiveness of the essential access community 
hospital program under section 1820 of the Social Security Act and the 
program for assistance for essential community providers under section 
1821 of such Act (as added by section 102(b)) in increasing the access 
of medically underserved populations to primary health care and other 
health care services.
    (b) Report.--Not later than 2 years after the date of the enactment 
of this Act, the Secretary of Health and Human Services shall submit a 
report to Congress on the study conducted under subsection (a).

    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 received 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, any State or political 
subdivision thereof, the District of Columbia, and any agency or 
instrumentality of the foregoing.
    ``(d) Not Treated as Tax for Certain Purposes.--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.--Subparagraph (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, 1997.

   Subtitle B--Capital Financing Assistance for Safety Net Providers

SEC. 211. ESTABLISHMENT OF CAPITAL FINANCING ASSISTANCE PROGRAM.

    (a) In General.--The Social Security Act is amended by adding at 
the end the following new title:

   ``TITLE XXI--CAPITAL FINANCING ASSISTANCE 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 1998 through 2003, 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 assistance have been approved under this title.
    ``(b) General Eligibility Requirements for Assistance.--
            ``(1) Requirements for hospitals.--
                    ``(A) In general.--A hospital shall be generally 
                eligible for capital financing assistance under this 
                title if the hospital--
                            ``(i) is designated as an essential access 
                        community hospital by the Secretary under 
                        section 1820(i)(1);
                            ``(ii) is designated as a rural primary 
                        care hospital by the Secretary under section 
                        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, 
                        defined as a private, nonprofit corporation or 
                        public benefit corporation which is formally 
                        granted one or more governmental powers by 
                        legislative action through (or is otherwise 
                        partially funded by) the State legislature, 
                        city or county council; or
                            ``(iii) be a private nonprofit hospital 
                        which has contracted with, or is otherwise 
                        funded by, a governmental agency to provide 
                        health care services to low income individuals 
                        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 facilities.--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 essential community provider under section 
        1821.
    ``(c) Meeting Additional Specific Criteria.--Hospitals and 
facilities that are generally eligible for assistance 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 programs.
    ``(d) Assistance Available.--Capital financing assistance available 
under this title shall include loan guarantees, interest rate 
subsidies, matching loans and direct 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 facility 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 criteria for general 
        eligibility under this title);
            ``(3) includes a description of the project, including the 
        community in which it is located, and describes utilization and 
        services characteristics of the project and the hospital or 
        facility, and the patient population that is to be served;
            ``(4) provides assurances that the undertaking of the 
        project is in conformity with the State's capital allocation 
        plan established pursuant to section 1890;
            ``(5) describes the extent to which the project is intended 
        to include the financial participation of State and local 
        governments; and all other sources of financing sought for the 
        project; and
            ``(6) establishes, to the satisfaction of the Secretary and 
        the Trust Fund Board, that the project meets the additional 
        criteria for each type of capital financing assistance for 
        which it is applying.
    ``(b) Criteria for Approval.--The Secretary, with the approval of 
the Trust Fund Board, shall determine for each application for 
assistance under this title--
            ``(1) whether the hospital or facility meets the general 
        eligibility criteria under section 2101(b);
            ``(2) whether the hospital or facility meets the specific 
        eligibility criteria of each type of assistance for which it 
        has applied, including whether the hospital or facility meets 
        any criteria for priority consideration for the type of 
        assistance for which it has applied;
            ``(3) whether the capital project for which assistance is 
        being requested in a qualifying project under this title; and
            ``(4) whether funds are available, pursuant to the 
        limitations of each program, to fully fund the request for 
        assistance.
    ``(c) Priority of Applications.--In addition to meeting the 
criteria otherwise described in this title, at 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 facilities 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, primary care, and other services 
        which the Trust Fund's Board may designate; or
            ``(C) will result in the provision of access to essential 
        health services (as designated by the Board of the Trust Fund) 
        to indigent and other needy persons 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 financial 
        support;
            ``(3) are unlikely to be financed without the assistance 
        provided under this title; and
            ``(4) are conducted by entities designated as essential 
        community providers under section 1821.
    ``(d) Submission of Applications.--Applications under this Act 
shall be submitted to the Secretary through the Trust Fund Board. If 
two or more applicants join in the project, the application shall be 
submitted by all participating 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.--Amendment of an approved 
application shall be subject to approval in the same manner as an 
original application.

                   ``public service responsibilities

    ``Sec. 2103. (a) In General.--Any hospital or facility accepting 
capital financing assistance under this title shall agree--
            ``(1) to make the services of the facility or portion 
        thereof to be constructed, acquired, or modernized available to 
        all persons the construction, acquisition, 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
            ``(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 hereby 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 1998 through 2003, 
        except that not more than $80,000,000 may be available for such 
        grants for any fiscal year; and
            ``(3) for providing grants to States under section 1890(d) 
        for carrying out capital allocation plans.
    ``(d) Board of Trustees; Composition; Meetings; 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 Assistant Secretary for Health, and the 
        Administrator of the Health Care Financing Administration (all 
        serving in their ex officio capacities), and 5 public members 
        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 hospital 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.
            ``(2) Duties.--The Board of Trustees shall meet no less 
        than quarterly and shall have the responsibility to approve 
        implementing regulations, to establish criteria, and to 
        recommend and approve expenditures 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 investment 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 Expenses.--Not more than 5 
percent of the funds annually appropriated to the Trust Fund may be 
available for administration of the Trust Fund or programs under this 
title.

  ``assistance for puerto rico and other commonwealths and territories

    ``Sec. 2106. (a) In General.--
            ``(1) Amount of allocation.--Notwithstanding any other 
        provision of this title, there shall be allocated from the 
        Capital Financing Trust Fund for each of the fiscal years 1998 
        through 2003 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 exceeded.--To the extent 
        that any funds allocated under paragraph (1) to hospitals and 
        facilities described in such paragraph for a year are not 
        expended for assistance under this title, such funds shall be 
        made available for assistance under this title during the year 
        for hospitals and facilities not described 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.

                     ``Subtitle B--Loan Guarantees

         ``provision of loan guarantees to safety net providers

    ``Sec. 2110. (a) In General.--Subject to the annual limitation on 
the allotment from the Trust Fund described 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 qualifying 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 essential 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 managed (or will be 
        operated and managed) in accordance 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 
                deficiencies in maintenance, repairs, and replacements;
                    ``(C) a plan to upgrade the project to meet cost-
                effective energy efficiency standards prescribed by the 
                Trust Fund Board;
                    ``(D) a plan to improve financial and management 
                control systems;
                    ``(E) a detailed annual operating budget taking 
                into account such standards for operating 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 provisions for 
        continued State or local support of the program, 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 otherwise reasonable and in accord with 
        regulation, including a determination that the rate of interest 
        does not exceed such annual percentage on the principal 
        obligation outstanding as the Trust Fund Board determines to be 
        reasonable, taking into account the range of interest rates 
        prevailing in the private market for similar loans and the 
        risks assumed by the United States.
            ``(7) The hospital or facility must meet such other 
        additional criteria as the Secretary may impose.
    ``(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 established 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.

               ``terms and conditions of loan guarantees

    ``Sec. 2113. (a) In General.--The principle amount of the 
guaranteed loan, when added to any Federal 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.
    ``(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 premium 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 property 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 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 continued 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 facilities (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 considered 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;
                    ``(B) all claims of the lender against the borrower 
                or others, arising out the loan transactions;
                    ``(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 transaction.
            ``(2) Payments by trust fund.--Upon an assignment, 
        transfer, and delivery described in paragraph (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 adjustment provided for in subsection (d), issue to 
        the lender a certificate of claim as provided in subsection 
        (b), and debentures having total face value equal to the 
        original principal face amount of the 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 completion and 
        preservation of the assets and any loan insurance premiums paid 
        after default, less the sum of--
                    ``(A) that part of the amount of the principal 
                obligation that has been repaid by the borrower;
                    ``(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 default under 
                the loan the lender may, at its option 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 receive the benefits of the insurance as herein 
                provided, upon--
                            ``(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 prescribed 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 released with the consent of 
                        the Trust Fund Board.
                    ``(B) Repeal of obligation to pay premium.--Upon 
                such conveyance and assignment, the obligation of the 
                borrower to pay the premium 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 
                deduction set out above shall not apply.
    ``(b) Certificate of Claim; Division of Excess Proceeds.--
            ``(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 debentures 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 reasonable 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 respect to the face amount of such 
        certificate, an increment 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 
        assets, 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 
        debentures, 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 certificate the full amount so 
                payable, and any excess remaining thereafter shall be 
                retained by the Trust Fund and credited to the loan 
                insurance 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--
                    ``(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 mortgage and 
                prosecute such proceedings to conclusion.
            ``(2) Bidding procedures at foreclosure.--The Trust Fund 
        Board at any sale under foreclosure may, in its discretion, for 
        the protection of the Trust Fund, bid any sum up to but not in 
        excess of the total unpaid indebtedness secured by the mortgage 
        plus taxes, insurance, foreclosure costs, fees, and other 
        expenses, and may become the purchaser of the assets at such 
        sale. In determining 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 assets under this 
section.
            ``(4) Exercise of rights pending acquisition.--Pending such 
        acquisition by voluntary conveyance 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; Settlement of Claims.--
            ``(1) Payment for certain expenses.--Notwithstanding 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.
            ``(2) Settlement of claims.--Notwithstanding 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.--Subsections (a) and (b) 
        shall not be construed to apply to any contract for hazard 
        insurance, or to any purchase 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 available 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 acquisition), modernization, 
and renovation projects or capital 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 service 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, 1997.
    ``(b) Non-Federal Participation Requirement.--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 qualifying 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.
    ``(c) Reserve for Rural Hospitals and Facilities.--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.--Successful applicants will 
receive a Federal commitment of interest 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 qualifications of this 
title.

                    ``subsidies for loan refinancing

    ``Sec. 2125. In addition to providing interest rate subsidies for 
new loans, the Trust Fund may provide subsidies to assist in 
refinancing if the hospital or facility presently lacks permanent 
financing at an affordable current 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 construction 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.
    ``(b) Exception for Financially Distressed Applicants.--The Trust 
Fund Board shall have the discretion to waive the 25 percent match 
requirement for financially 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 matching loans annually. Funded 
projects should be divided between projects designed to achieve 
compliance with accreditation standards, life safety code, and other 
certification standards, and those related to the provision of new 
services.
    ``(b) Reserve for Rural Hospitals and Facilities.--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 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 subtitle 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 proceedings 
against the borrower.
    ``(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 compromise 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 capital 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 facilities that are 
        threatened with closure or loss of accreditation 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 would provide limited funding 
        for repair and renovation 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, emergency and trauma, primary care and preventive 
        health services.
            ``(3) Planning grants would be available to qualified 
        hospitals and facilities requiring pre-approval assistance 
        related to management and finance in order to apply for loans, 
        loan guarantees, and interest subsidies under this Act.
    ``(c) Priority to Financially Distressed Providers.--Priority for 
direct grants under this section would be given to financially 
distressed hospitals and facilities (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 $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 capital 
        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 combination 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 demonstrate 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 management and governance 
restructuring.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect October 1, 1998.

SEC. 212. ADJUSTMENT TO PAYMENTS FOR CAPITAL-RELATED COSTS UNDER 
              MEDICARE.

    (a) In General.--Section 1886(g)(1)(B) of the Social Security Act 
(42 U.S.C. 1395ww(g)(1)(B)) is amended--
            (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 incurred 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 beginning on or after October 1, 1999.

SEC. 213. TAX EXEMPT STATUS OF FEDERALLY GUARANTEED STATE OR LOCAL 
              BONDS.

    (a) In General.--Section 149(b)(3)(A) of the Internal Revenue Code 
of 1986 is amended--
            (1) in clause (ii), by striking ``or'';
            (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 Security Act.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
take effect on October 1, 1998.

                  TITLE III--CAPITAL ALLOCATION PLANS

SEC. 301. REQUIRING STATE REVIEW MECHANISMS AS A CONDITION OF PAYMENT 
              FOR CAPITAL-RELATED COSTS UNDER MEDICARE.

    (a) In General.--Section 1862(a) of the Social Security 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 during a year (beginning 
with 1998) where--
                    ``(A) such expenses are incurred in a State that 
                does not have a capital allocation plan approved 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 section.''.
    (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 
        Secretary to find that the plan meets the requirements of this 
        section.
            ``(2) Termination or extension of approval permitted.--
        Notwithstanding paragraph (1), the Secretary may--
                    ``(A) terminate the approval of a plan under this 
                section for a fiscal year if the Secretary determines 
                during the year that the plan is not substantially in 
                compliance with this section; or
                    ``(B) extend the approval of a plan under this 
                section (on a conditional basis) for an additional 
                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 review 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 approval under the plan 
                (in accordance with subsection (c));
                    ``(D) the State review agency determines whether 
                capital expenditures are in accordance with the plan 
                using the criteria specified in subsection (c) and 
                notifies the Secretary if it determines that any 
                capital expenditures subject to 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 expenditures of health care services in a 
        geographic region 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 includes 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 majority of 
                        the members of which are consumers or 
                        purchasers of health care services in the 
                        region, and
                            ``(iii) has resource allocation and 
                        planning 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 requirements 
        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 
                        assurance of access to health care services by 
                        low density rural populations in the State; and
                            ``(iii) address at least--
                                    ``(I) the regionalization of 
                                services,
                                    ``(II) alternatives to traditional 
                                facilities,
                                    ``(III) the development of new 
                                organizational forms, and
                                    ``(IV) the needs for special 
                                emergency and other health-services-re- 
                                lated transportation needs.
    ``(c) Contents of Plan Described.--
            ``(1) Requirements relating to allocation of capital.--
                    ``(A) In general.--Each capital allocation plan 
                under this subsection shall--
                            ``(i) be developed consistent with criteria 
                        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 
                        inpatient hospital facilities;
                            ``(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 targets for 
                        health care services;
                            ``(iii) provide for regionalization of 
                        services, where appropriate; and
                            ``(iv) address--
                                    ``(I) the special needs and 
                                circumstances of hospitals receiving an 
                                additional payment under section 
                                1886(d)(5)(F), Federally-qualified 
                                health centers, and other institutions 
                                and facilities that receive special 
                                assistance for providing services to 
                                low-income individuals and other 
                                individuals in medically underserved 
                                communities (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 proposed 
                        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 
                                proposed capital expenditure to the 
plan.
                                    ``(II) The need that the population 
                                to be served has for the proposed 
                                services, equipment, or facility 
                                provided by the capital expenditure.
                                    ``(III) The availability of 
                                alternative, 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 
                                provided 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 
                                facility shall eliminate unnecessary or 
                                duplicative services.
                                    ``(VII) The extent to which the 
                                proposed services, equipment, or 
                                facility 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 capital project for purposes of 
                subparagraph (A)(i), there shall be included--
                            ``(i) the cost of any studies, surveys, 
                        designs, plans, working drawings, 
                        specifications, and other activities essential 
                        to the acquisition, improvement, expansion, or 
                        replacement of the capital project with respect 
                        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 related 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 requirements relating to 
                procedures for review as follows:
                            ``(i) Reviews must be performed under a 
                        regular schedule that provides that 
                        applications relating to expenditures for 
                        similar capital projects will be considered at 
                        the same time, and that provides an opportunity 
                        for additional applicants to seek approval for 
                        carrying out a capital project if 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 
                        established 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 requested by 
                        persons directly affected by the review.
                            ``(vi) Any decision of the State review 
                        agency to approve or not to approve a proposed 
                        capital expenditure must be based solely on the 
                        agency's review and the record created by the 
                        review.
                            ``(vii) An application for a proposed 
                        capital expenditure must include a timetable 
                        for completing the project for which the 
                        expenditure is proposed, and any approval 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 otherwise meet any applicable 
                        condition for approval.
                            ``(viii) The allocation plan must provide 
                        either for an appeals mechanism (consistent 
                        with the State's administrative procedures act) 
                        or for an appeal before an entity (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 1998 from the allotment under 
        paragraph (2) for the State, a grant to each State with an 
        approved capital allocation plan under this section in an 
        amount equal to 75 percent of the operating costs of carrying 
        out the plan in the State in the fiscal year. Grants under this 
        paragraph shall be payable from the Capital Financing Trust 
        Fund under section 2104.
            ``(2) Amount of allotment.--The amount of an allotment to 
        each State is equal to the sum of--
                    ``(A) the product of $0.70 and the number of 
                individuals residing in the State who do not reside in 
                an area under the jurisdiction of a regional review 
                agency (as established by the State under subsection 
                (b)(2)); and
                    ``(B) the product of $1.00 and the number of 
                individuals residing in the State who reside in an area 
                under the jurisdiction of a regional review agency.
    ``(e) Definitions.--In this subsection:
            ``(1) The term `Governor' means the chief executive officer 
        of a State, or his designee.
            ``(2) The term `capital expenditure' means an expenditure 
        which--
                    ``(A) under generally accepted accounting 
                principles, is not properly chargeable as an expense of 
                operation and maintenance; or
                    ``(B) is made to obtain by lease or comparable 
                arrangement any facility thereof or any equipment for a 
                facility or part.
            ``(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 antitrust laws--
                    (A) the establishment by a State of a capital 
                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 supervision with respect 
                to such individuals and entities.
            (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 Commission Act 
                (15 U.S.C. 45) to the extent such section applies to 
                unfair methods of competition; and
                    (B) any State law similar to the antitrust laws.
                                 <all>