[Federal Register Volume 59, Number 167 (Tuesday, August 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21354]


[[Page Unknown]]

[Federal Register: August 30, 1994]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Public Health Service

42 CFR Part 124

RIN 0905-AE06

 

Medical Facility Construction and Modernization; Requirements for 
Uncompensated Services for Persons Unable to Pay

AGENCY: Public Health Service, DHHS.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The rules below revise the rules currently governing how 
certain health care facilities, assisted under Titles VI and XVI of the 
Public Health Service Act, fulfill the assurance given in their 
applications for assistance that they would provide a reasonable volume 
of services to persons unable to pay for such services. The revisions 
below amend the rules to permit facilities that provide substantial 
free or below cost medical services but nonetheless cannot receive 
credit for such services under current requirements with an alternative 
method of compliance that will enable them to fulfill their 
uncompensated services obligations.

DATES: This rule is effective on August 30, 1994.

FOR FURTHER INFORMATION CONTACT:
Mr. Eulas Dortch, 301-443-5656.

SUPPLEMENTARY INFORMATION: On November 4, 1993, the Secretary of Health 
and Human Services published a Notice of Proposed Rulemaking (NPRM) 
proposing to revise the rules governing what is popularly known as the 
Hill-Burton uncompensated services program. 58 FR 58828. Health care 
facilities covered by the program received construction assistance 
under two titles of the Public Health Service Act, Title VI (the 
``Hill-Burton Act'', 42 U.S.C. 291, et seq.) and Title XVI (42 U.S.C. 
300q, et seq.). Under both titles, facilities receiving construction 
assistance have been required, as a condition of receiving the 
construction assistance, to provide an assurance that ``there will be 
available in the facility or portion thereof to be constructed or 
modernized a reasonable volume of services to persons unable to pay 
therefor * * *.'' 42 U.S.C. 291c(e)(2). See also 42 U.S.C. 300s-
1(b)(1)(K)(ii). This assurance is known as the ``uncompensated services 
assurance.''

Background of the Regulations

    The groundwork of the present uncompensated services compliance 
requirements was laid by comprehensive regulations that were issued in 
1979. 44 FR 29372 (May 18, 1979). The 1979 regulations established 
numerous compliance requirements for uncompensated services programs. 
These included requirements for a minimum level of uncompensated 
services to be provided by facilities, an annual compliance level (ACL) 
of uncompensated services to be provided, make-up of any deficit in 
meeting the ACL, national eligibility criteria for determining who is 
unable to pay, notice requirements, requirements regarding the timing 
and documentation of eligibility determinations, reporting and 
recordkeeping requirements, and so on.
    When experience with the 1979 regulations showed that they created 
substantial compliance problems for a number of public facilities, 
which were amassing large deficits despite serving large numbers of 
indigent patients on a free or below cost basis, the regulations were 
amended. A compliance alternative for public facilities, which is 
codified at 42 CFR 124.513, was created. 51 FR 33208 (Sept. 18, 1986). 
The public facility compliance alternative provides that a publicly 
owned and operated facility or quasi-public facility may be certified 
if it provides health services to eligible persons under a program of 
discounted health services and either received for the past three 
fiscal years at least 10 percent of its total operating revenue from 
state and/or local sources to cover operating deficits attributable to 
the provision of discounted health services, or provided in those 
fiscal years uncompensated services or free or discounted health 
services in an amount equal to or greater than twice the facility's 
annual compliance level. The facility must comply with separate 
reporting and recordkeeping requirements and is required only to comply 
with the requirements relating to certified facilities. A facility may 
make up previously assessed deficits by showing that it met the 
conditions for certification in the deficit period; a Title VI facility 
may also make up a previously assessed deficit by remaining certified 
after its original period of obligation for a period equal to the 
deficit period, while a Title XVI facility that cannot show that it met 
the conditions of certification in the deficit period must make up any 
remaining deficit whenever its certification is withdrawn. A facility 
with an unassessed deficit may submit an independent certified audit to 
establish that no, or a lesser, deficit exists.
    In 1987, the Secretary again revised the 1979 regulations. 52 FR 
46022 (Dec. 3, 1987). As pertinent here, an additional compliance 
alternative for facilities with annual obligations of $10,000 or less 
was created. See Sec. 124.514. This alternative was adopted to bring 
the administrative costs of compliance for such facilities more into 
line with the actual level of uncompensated services available, with 
the requirements applicable under Sec. 124.514 resembling those 
applicable under the public facility compliance alternative.

Proposed Rules

    In the NPRM, the Secretary proposed an additional compliance 
alternative designed to address the compliance problems of another 
class of facilities whose operational characteristics have created 
intractable compliance problems, but which cannot qualify for the 
existing compliance alternatives. Many of these facilities provide 
substantial amounts of free or below cost services, generally because 
they were created to provide services at no or a nominal charge to all 
persons, or they serve an indigent population that is entirely covered 
by third-party programs such as Medicaid. These facilities, which are 
generally private, nonprofit organizations, include facilities such as 
sheltered workshops, crippled children rehabilitation facilities, 
cerebral palsy centers, chronic disease hospitals, Goodwill Centers, 
facilities for the blind, mental health centers, and Easter Seal 
Centers. Based on experience monitoring such facilities' compliance 
with the uncompensated services regulations since 1979, the Department 
determined that many such facilities have accumulated large 
uncompensated services deficits, typically because their policies of 
not charging or of serving populations covered under governmental 
indigent care programs preclude receiving credit under the 
uncompensated services regulations for the free and below cost care 
they in fact provide.
    The Department identified 180 private, nonprofit outpatient, 
rehabilitation, and community mental health center facilities with 
outstanding uncompensated services obligations which were likely to 
have provided a large volume of free or below cost care while receiving 
little or no uncompensated services credit. A survey of 28 of these 
confirmed that there are a number of facilities for which compliance 
with the uncompensated services requirements is difficult or 
impossible, given their charging policies, legal requirements 
applicable to their operations, characteristics of their patient 
populations, or some combination of these factors, but which clearly 
provide health services without regard to ability to pay.
    Accordingly, the Secretary proposed to adopt a compliance 
alternative for private, nonprofit facilities which provide a 
substantial amount of services without regard to ability to pay, but 
which find it difficult, if not impossible, to comply with the present 
uncompensated services requirements. The proposed compliance 
alternative was substantially similar to the public facility compliance 
alternative with respect to requirements for reporting, recordkeeping, 
and the make-up of deficits. However, the eligibility criteria differed 
somewhat. Under the proposed rule, a facility could qualify for the 
compliance alternative if it was a private, nonprofit entity falling 
into one of two categories: either (1) it received no monies directly 
from patients with incomes up to twice the poverty level (exclusive of 
certain deductible and coinsurance amounts and other required 
collections), or (2) it received for the three most recent fiscal years 
at least 10 percent of its non-Medicaid and non-Medicare operating 
revenue from philanthropic sources to cover operating deficits and 
either provided services under a ``program of discounted health 
services'' or provided all services to all persons at no or a nominal 
charge (exclusive of certain deductible and coinsurance amounts and 
other required collections). With respect to the first category, the 
NPRM stated that in the Department's view those facilities that collect 
no monies from patients with incomes up to twice the poverty level are 
meeting the statute's objectives. Similarly, with respect to the second 
category, the proposed percentage of private philanthropic support was 
considered to be a proxy for tax support in the public facility 
context, as such monies are generally contributed to fund services 
which are deemed essential or worthwhile, but which are not self-
supporting. The ``program of discounted health services'' criterion is 
analogous to a similar criterion in the public facility compliance 
alternative, and reflects a recognition that many such facilities have 
in place a mechanism for determining eligibility for such services by 
screening for ability to pay. The rationale for the other criterion is 
self-evident: Clearly, facilities that provide all services at no or a 
nominal charge are adequately serving those in their patient population 
who are unable to pay. The NPRM also solicited comment on whether the 
compliance alternative should be expanded to cover public facilities 
that do not qualify for the public facility compliance alternative but 
whose operational characteristics are similar to the private, nonprofit 
entities the alternative would cover.

Public Comment and the Department's Responses

    The Department received 23 comments on the proposed rules, 
principally from rehabilitation and other facilities and provider 
associations. While most of the comments received were in favor of the 
proposed compliance alternative in principle, many suggested specific 
changes to the proposed policies. The comments and the Department's 
responses thereto are summarized below.

1. Criteria for Certification.

a. Inclusion of Public Facilities
    A number of commenters recommended that the criteria for 
certification be changed to permit the inclusion of public facilities 
that otherwise meet the criteria for certification. They argued that 
there is operationally no difference between such facilities and non-
profit facilities that meet the criteria, and that it is unreasonable 
to penalize public facilities just because they are public. The 
Department agrees with these comments and has changed the rules 
accordingly, by eliminating proposed Sec. 124.516(b)(1), which would 
have restricted the compliance alternative to private, nonprofit 
facilities.
b. No Monies Received From the Indigent
    Proposed Sec. 124.516(b)(2) would have established, as one 
alternative criterion for certification, that a facility received no 
monies directly from persons with incomes up to twice the poverty 
level, exclusive of amounts charged or received for purposes of 
obtaining reimbursement under third party programs. Several commenters 
urged that this criterion be revised to permit receipt of funds from 
such persons, on the grounds that it is unrealistic to expect a 
facility to receive no money from such persons. It was suggested that 
the criterion be revised to permit receipt of funds up to some amount, 
such as 10 percent of operating revenues. The Department has not 
accepted this suggestion. This criterion was intended to accommodate 
those exceptional facilities which routinely provide all services at no 
charge to persons unable to pay or which entirely serve populations 
ineligible for uncompensated services and are thus unable to comply 
with the regulations. Facilities that collect monies from patients with 
incomes below twice the poverty level do not come within the intent of 
this criterion. It should be noted, however, that such facilities may 
nonetheless be able to qualify for the compliance alternative under a 
different criterion of the regulation, if they have a ``program of 
discounted health services'' and receive the requisite amount of 
philanthropy. See Sec. 124.516(b)(2) below.
    Another suggestion made with respect to this criterion was that 
amounts collected from patients as part of their Medicaid ``spenddown'' 
be considered to be included under the exclusionary language of this 
section, so that collection of such monies by a facility would not 
render it ineligible under this criterion. This suggestion has likewise 
not been accepted. Spenddown amounts are clearly not within the scope 
of the exclusionary language as written, as Medicaid eligibility does 
not exist until the patient has spent down the requisite amount, and 
therefore they are not amounts charged that are reimbursable. Nor do we 
think the language should be revised to permit inclusion of spenddown 
amounts in the amounts permitted to be charged or claimed. As stated 
above, this criterion is intended to cover a narrow class of 
facilities--ones which can be considered to be meeting their Hill-
Burton obligation because they are in fact not receiving monies 
directly from any patients who would otherwise be eligible for Hill-
Burton uncompensated services. Permitting collection of spenddown 
amounts would thus not be consistent with the intended scope of this 
criterion.
    This criterion has been revised, however, to require that the 
facility demonstrate that it met the criterion for the preceding three 
fiscal years. This revision brings this criterion into line with the 10 
percent philanthropy criterion of Sec. 124.516(b)(2), which also 
requires a demonstration of compliance over the preceding three years. 
The purpose of the three-year demonstration in both cases is to give 
the Secretary a basis for the conclusion that a facility applying for 
certification in fact comes within the intended scope of the compliance 
alternative because of its characteristics and problems, and that 
certification is not made based on what may be a one-time aberration in 
the facility's circumstances. See Sec. 124.516(b)(1) below.
    Another commenter suggested that, in view of the difficulty many 
nursing homes have in finding individuals who are eligible for 
uncompensated services and not also eligible for Medicaid, the 
Department create a new eligibility category for persons in nursing 
homes with incomes up to four times the poverty level. In fact, the 
Secretary is considering such a change to the regulations; an NPRM 
proposing to establish a new ``Category C,'' consisting of persons with 
incomes up to three times the poverty level was recently published. 59 
FR 15693 (April 4, 1994). It should be noted that, should this latter 
policy subsequently be adopted, the Secretary would expect to revise 
Sec. 124.516(b)(1) below to be consistent with the revision in the 
underlying regulations.
c. Definition of ``Philanthropy''
    Consistent with the elimination of the restriction of the 
compliance alternative to private facilities, the Department has also 
broadened the examples of ``philanthropy'' in the new 
Sec. 124.516(b)(2)(i). As revised, the term ``philanthropy'' includes 
state and/or local funding, as it is anticipated that most 
philanthropic funding for public facilities will originate from such 
sources.
    The term ``philanthropy'' has also been clarified by the addition 
of the phrase ``to cover operating deficits attributable to the 
provision of discounted services.'' The added words, among other 
things, make clear that philanthropic state or local funding within the 
scope of this section is different than state or local funds received 
under entitlement programs, which have long been considered not to be 
``uncompensated services''; see Sec. 124.505(a). The additional 
language imposes a similar restriction on other forms of philanthropy.
    Several commenters suggested that the term ``philanthropy'' be 
further revised to include interest earned on donated funds. However, 
since it is the Department's view that interest on donated funds is 
clearly from a ``philanthropic source,'' further clarification of the 
regulation in this respect is not needed.
d. Program of Discounted Services
    One provider group opposed the eligibility criterion permitting 
certification where a facility has a ``program of discounted 
services.'' The group argued that this provision would create a problem 
under Medicaid and Medicare, the rules of which prohibit those programs 
from subsidizing other patients. The Department does not believe that 
this is a problem, since the discounts made to patients under a 
facility's discounted health services program are not required to be 
reflected in charges to those programs. Certainly, this has not proved 
to be a problem with facilities operating under the general compliance 
requirements or with facilities certified under the public facility 
compliance alternative, which contains the same eligibility criterion.
    The definition of ``program of discounted health services'' has 
been revised, however, by the addition of language making clear that 
charges may be made under such a program for the purpose of obtaining 
third party reimbursements. This policy was discussed in the preamble 
to the proposed rule, but was omitted from the proposed rule itself. 
The change simply makes the policy of this section consistent with the 
policy throughout the remainder of the subpart that third party 
collections are to be encouraged. See Sec. 124.505(a).
e. No or Nominal Charge Policies
    This section has likewise been revised by the addition of the 
language discussed in the preceding paragraph. One comment questioned 
the criterion set out in the proposed rules pertaining to making ``all 
services of the facility available to all persons at no or a nominal 
charge.'' It expressed the concern that a hospital could qualify for 
the compliance alternative under this criterion simply by designating 
some narrow group of services, then making them available for free or 
at a nominal charge, while continuing to charge everyone fully for the 
facility's other services. We do not share the commenter's concern, as 
the rule below expressly states that, in order to come within this 
criterion, the facility must ``make[ ] all services of the facility 
available to all persons * * *'' See Sec. 124.516(b)(2)(ii)(B) below.
f. Other Eligibility Criteria
    Other proposals for eligibility criteria were received. Several 
commenters suggested that a facility's Medicaid census be a basis for 
eligibility; these commenters suggested that facilities with a 70 
percent or greater Medicaid census be eligible for the compliance 
alternative. One commenter suggested that long-term care facilities 
with characteristics ``similar'' to the proposed eligibility criteria 
likewise be considered to be eligible for the compliance alternative.
    The Department is not persuaded that it should create a special 
eligibility criterion based on a facility's Medicaid/Medicare census. 
Clearly, those facilities that serve large numbers of Medicaid or 
Medicare recipients are not precluded from qualifying under one of the 
criteria below, if they in fact meet those criteria. Indeed, we do not 
think it would be consistent with the theory underlying the compliance 
alternative to craft such an eligibility criterion. The theory of the 
compliance alternative is that the facilities who come within it need 
the alternative because compliance with the general compliance 
standards is difficult, if not impossible, for them because of their 
operational characteristics, even though they are clearly providing 
free or below cost services to ``persons unable to pay.'' However, 
compliance with the general compliance standards is not impossible for 
a facility with a 70 percent Medicaid/Medicare census which charges the 
remaining 30 percent of its patient population. After all, if none of 
the remaining 30 percent of the facility's patient population meets the 
eligibility criteria of Sec. 124.505, the facility will qualify for the 
compliance alternative under Sec. 124.516(b)(1) below. Thus, it must be 
assumed that the intent of the proposed revision would be to permit 
facilities to qualify for the compliance alternative even though they 
charge patients who meet the Hill-Burton eligibility criteria and who 
thus could be provided uncompensated services.
    With respect to the comment regarding long-term care facilities, 
the Department has not created a special criterion for such facilities. 
If such facilities meet the eligibility criteria below, they may be 
certified under the new compliance alternative. We note, moreover, that 
the proposed change in eligibility criteria for nursing homes may well 
relieve some of the particular difficulties of nursing homes in 
complying with the general compliance standards.

2. Documentation

    A number of comments expressed support for minimizing the reporting 
and recordkeeping required of qualifying facilities under the proposed 
compliance alternative. One hospital, however, opposed the proposed 
rules on the grounds that they simply created an additional layer of 
reporting and recordkeeping requirements, stating that the existing 
requirements work well. It should be emphasized that the compliance 
alternative is not meant to create an additional set of requirements 
for facilities already complying with the general compliance 
requirements at Secs. 124.501-124.512; rather, the compliance 
alternative below is designed to relieve facilities which qualify for 
it from the burden of complying with the general compliance 
requirements. Consistent with this approach, the reporting and 
recordkeeping required for qualifying facilities is different from that 
required of most facilities and should generally be considerably less 
than that under the general compliance standards. In any event, a 
facility that is not certified under the compliance alternative does 
not have to comply with the reporting and recordkeeping requirements 
applicable to those facilities which are certified; concommitantly, a 
facility that is certified under the compliance alternative is not 
required to comply with reporting and recordkeeping requirements other 
than those that apply to certified facilities. A facility always has 
the option of continuing to comply with the general compliance 
requirements; it can thus ignore the compliance alternative completely 
if it decides that compliance with the general compliance requirements 
makes more sense for it. Thus, we do not think that this particular 
concern is justified.
    A couple of commenters pointed out that the proposed means of 
demonstrating that a facility meets the eligibility criteria--through 
audited financial statements--would not necessarily suffice, depending 
on the criterion involved. They pointed out that, for example, audited 
financial statements do not necessarily set forth philanthropic sources 
in the level of detail required, or establish a facility's charging 
policies. They suggested that the rule be amended to require facilities 
to contract for such information as part of their audits. The 
Department agrees with the observation made about the limitations of 
audited financial statements, but does not agree with the remedy 
proposed. Rather, it is our view that documentation sufficient to 
establish sources of philanthropy, charging practices and so on can be 
provided by other means, and we are reluctant to put facilities to the 
added expense of contracting for audit services that they would not 
otherwise need. Thus, Sec. 124.516(c)(1) below has been revised to add 
a requirement for ``other documents'' to cover the concern raised by 
the commenters. The Department will issue program instructions 
clarifying what other documents may be required in specific instances.

3. Deficits

    One commenter suggested that the proposed rules be revised to 
permit facilities to treat deficits resulting from Medicaid 
underpayments as justifiable deficits. However, we are not accepting 
this comment, as it is not pertinent to the compliance alternative. The 
rules below do not distinguish between types of deficits for purposes 
of deficit make-up under the alternative, unlike the general compliance 
requirements, which do draw such a distinction. Compare 
Sec. 124.516(d)(2) below with Sec. 124.503(b). Thus, under the 
compliance alternative, a certified facility with a noncompliance 
deficit may make up the deficit in precisely the same manner as a 
certified facility with a justifiable deficit.

4. Other Comments

    Several comments questioned whether vocational services could be 
counted as uncompensated services under the compliance alternative; the 
facilities concerned stated that they have difficulty meeting the ACL 
since they do not receive credit for vocational services they provide. 
The compliance alternative below should relieve this problem for 
facilities that are certified, however. Certified facilities will not 
have to provide a set amount of uncompensated services, unlike 
facilities operating under the general compliance requirements. Thus, 
so long as certified facilities provide some medical services and 
otherwise remain in compliance with the requirements for certification, 
they will be considered to be in compliance with their uncompensated 
services assurance.
    In view of the fact that the rules below relieve restrictions on 
facilities that apply and are certified for the compliance alternative 
and impose no additional duties or obligations on other facilities, 
delay in the effective date of these rules is not required under 5 
U.S.C. 553. For the same reasons, the Secretary hereby finds that good 
cause exists for not delaying the effective date of the rules below. 
The rules are accordingly effective upon publication.

Regulatory Flexibility Act and Executive Order 12866

    The rule below would generally maintain the existing procedural and 
reporting requirements for the majority of obligated facilities, but 
significantly lessen them for certain private, nonprofit or public 
facilities. The Department has determined that the impact would not 
approach the annual $100 million threshold for major economic 
consequences as defined in Executive Order 12866. Therefore, a 
regulatory impact analysis is not required.
    Consistent with the provisions of the Regulatory Flexibility Act (5 
U.S.C. 605(b)), the Secretary certifies that this rule will not have a 
significant economic impact on a substantial number of small entities.

Paperwork Reduction Act of 1980

    This final rule contains information collections which have been 
approved by the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1980, and assigned control #0915-0171.
    The underlying purpose of this rule is to decrease recordkeeping, 
reporting, and notification burden for the charitable facilities. 
Facilities certified under the charitable facility compliance 
alternative will no longer be required to maintain extensive records on 
uncompensated services (124.510(a)), but instead will have to maintain 
only records which document its eligibility for the compliance 
alternative (124.510(b)). We believe this recordkeeping requirement 
imposes no additional burden because these documents are ordinarily 
retained by facilities. This change is expected to reduce the 
recordkeeping burden by 75 hours per facility per year.
    Similarly, reporting burden will be reduced. Charitable facilities 
will be required to apply once for the certification (124.516(c)), and 
thereafter will need only to certify their continued eligibility 
annually (124.509(b)). Currently, facilities in deficit status, which 
include most of the charitable facilities, must file a report each year 
which documents the amount of uncompensated care provided (124.509(a)). 
This change in reporting requirements is expected to reduce the 
reporting burden by 6 hours per facility in the first year, and by 13.5 
hours per facility in subsequent years.
    Finally, notification/disclosure burden will be eliminated, because 
the facilities will no longer be required to: (1) Publish a notice each 
year of the availability of uncompensated services (124.504(a)); (2) 
provide individual written notices to each person seeking service in 
the facility (124.504(c)); or (3) provide a determination of 
eligibility to each person applying for uncompensated services 
(124.507). These changes are expected to reduce the notification burden 
by 380 hours per facility per year.
    All sections of the regulations that contain reporting, 
recordkeeping, or notification/disclosure requirements have been 
approved by OMB under the Paperwork Reduction Act (OMB) #0915-0077 and 
#0915-0171. The title, description, and respondent description of the 
information collections are shown below with an estimate of the annual 
reporting and recordkeeping burden. Included in the estimate is the 
time for reviewing instructions, searching existing data sources, 
gathering and maintaining the data needed, and completing and reviewing 
the collection of information.
    The addition of the requirement for ``other documents'' in 
Sec. 124.516(c)(1) will not affect the burden because the other 
documents are expected to be readily available materials.
    The estimate of 150 applicants was based on a review, prior to 
development of the NPRM, of data on the kinds of facilities expected to 
qualify for the alternative. A recent re-review of the list of 
facilities indicated that 30 of the facilities have completed their 
obligations. With the addition of public facilities in the qualifying 
criteria, we expect approximately 30 additional facilities to apply for 
certification.
    Title: Charitable Facility Compliance Alternative (42 CFR part 124 
subpart F).
    Description: Information will be collected from facilities 
requesting certification under the compliance alternative for the 
purpose of determining whether the required criteria for qualification 
have been met.
    Description of Respondents: Public and private non-profit 
institutions.

                               Estimated Annual Reporting and Recordkeeping Burden                              
----------------------------------------------------------------------------------------------------------------
                                                                 Annual                   Average       Annual  
           Section                        Activity             number of      Annual     burden per     burden  
                                                              respondents   frequency     response      hours   
----------------------------------------------------------------------------------------------------------------
124.516(c)...................  Procedures for                         150            1          6.0          900
                                certification\1\                                                                
----------------------------------------------------------------------------------------------------------------
\1\Approximately 150 facilities are expected to be certified under the proposed charitable facility compliance  
  alternative in the first year. We expect no new applications in subsequent years; therefore, there will be no 
  burden beginning in year 2.                                                                                   

    We received no public comments on the estimated public reporting 
burden and it remains the same as that contained in the proposed rule.

List of Subjects in 42 CFR Part 124

    Grant programs--Health, Health facilities, Loan programs--Health, 
Low income persons, Reporting and recordkeeping requirements.

    Dated: July 1, 1994.
Philp R. Lee,
Assistant Secretary for Health.

    Approved: August 11, 1994.
Donna E. Shalala,
Secretary.

    For reasons set out in the preamble, part 124, subpart F, of title 
42 of the Code of Federal Regulations is amended to read as follows:

PART 124--[AMENDED]

Subpart F--Reasonable Volume of Uncompensated Services to Persons 
Unable to Pay

    1. The authority citation for 42 CFR part 124, subpart F, continues 
to read as follows:

    Authority: 42 U.S.C. 216; 42 U.S.C. 300s(3).

    2. Section 124.502 is amended by revising the first sentence of 
paragraph (m)(1) and revising paragraph (m)(2) to read as follows:


Sec. 124.502  Definitions.

* * * * *
    (m) * * *
    (1) For facilities other than those certified under Sec. 124.513, 
Sec. 124.514, Sec. 124.515, or Sec. 124.516, health services that are 
made available to persons unable to pay for them without charge or at a 
charge which is less than the allowable credit for those services. * * 
*
    (2) For facilities certified under Sec. 124.513, Sec. 124.514, 
Sec. 124.515, or Sec. 124.516, services as defined in paragraph (m)(1) 
of this section and services that are made available to persons unable 
to pay for them under programs described by the documentation provided 
under Sec. 124.513(c)(2), Sec. 124.514(c)(2), or Sec. 124.516(c)(2), as 
applicable, or pursuant to the terms of the applicable grant or 
agreement as provided in Sec. 124.515. Except as provided in 
Sec. 124.516, excluded are services reimbursed by Medicare, Medicaid, 
or other third party programs, including services for which 
reimbursement was provided as payment in full, and services provided 
more than 96 hours following notification to the facility by a peer 
review organization that it disapproved the services under section 
1155(a)(1) or section 1154(a)(1) of the Social Security Act.
    3. Section 124.508 is amended by revising the heading and 
introductory text of paragraph (a) to read as follows:


Sec. 124.508  Cessation of uncompensated services.

    (a) Facilities not certified under Sec. 124.513, Sec. 124.514, 
Sec. 124.515 or Sec. 124.516. Where a facility, other than a facility 
certified under Sec. 124.513, Sec. 124.514, Sec. 124.515, or 
Sec. 124.516, has maintained the records required by Sec. 124.510(a) 
and determines based thereon that it has met its annual compliance 
level for the fiscal year or the appropriate level for the period 
specified in its allocation plan, it may, for the remainder of that 
year or period:
* * * * *
    4. Section 124.509 is amended by revising the heading of paragraph 
(a) and by revising the heading and introductory text of paragraph (b) 
to read as follows:


Sec. 124.509  Reporting requirements.

    (a) Facilities not certified under Sec. 124.513, Sec. 124.514, 
Sec. 124.515, or Sec. 124.516. * * *
* * * * *
    (b) Facilities certified under Sec. 124.513 or Sec. 124.516. A 
facility certified under Sec. 124.513 or Sec. 124.516 shall comply with 
paragraph (a)(3) of this section and shall submit within 90 days after 
the close of its fiscal year, as appropriate:
* * * * *
    5. Section 124.510 is amended by revising the heading of paragraph 
(a) and by revising the heading and the first sentence of paragraph (b) 
to read as follows:


Sec. 124.510  Record maintenance requirements.

    (a) Facilities not certified under Sec. 124.513, Sec. 124.514, 
Sec. 124.515, or Sec. 124.516. * * *
* * * * *
    (b) Facilities certified under Sec. 124.513, Sec. 124.514, or 
Sec. 124.516. A facility certified under Sec. 124.513, Sec. 124.514, or 
Sec. 124.516 shall maintain, make available for public inspection 
consistent with personal privacy, and provide to the Secretary on 
request, any records necessary to document its compliance with the 
applicable requirements of this subpart in any fiscal year, including 
those documents submitted to the Secretary under Sec. 124.513(c), 
Sec. 124.514(c), or Sec. 124.516(c). * * *
* * * * *
    6. Section 124.511 is amended by revising the first sentence of 
paragraph (a)(3) and by revising paragraph (b)(1)(iii)(C) to read as 
follows:


Sec. 124.511  Investigation and determination of compliance.

    (a) * * *
    (3) When the Secretary investigates a facility, the facility, 
including a facility certified under Sec. 124.513, Sec. 124.514, 
Sec. 124.515, or Sec. 124.516, shall provide to the Secretary on 
request any documents, records and other information concerning its 
operation that relate to the requirements of this subpart. * * *
* * * * *
    (b) * * *
    (1) * * *
    (iii) * * *
    (C) The facility had procedures in place that complied with the 
requirements of Secs. 124.504(c), 124.505, 124.507, 124.509, 124.510, 
124.513(b)(2), 124.514(b)(2), 124.515, and 124.516 (b)(1) or (b)(2), as 
applicable, and systematically correctly followed such procedures.
* * * * *
    7. Section 124.512 is amended by revising the introductory text of 
paragraph (b) and by revising paragraph (c)(1) to read as follows:


Sec. 124.512  Enforcement.

* * * * *
    (b) A facility, including a facility certified under Sec. 124.513, 
Sec. 124.514, or Sec. 124.516, that has denied uncompensated services 
to any person because it failed to comply with the requirements of this 
subpart will not be in compliance with its assurance until it takes 
whatever steps are necessary to remedy fully the noncompliance, 
including:
* * * * *
    (c) * * *
    (1) Have a system for providing notice to eligible persons as 
required by Sec. 124.504(c), Sec. 124.513(b)(2), Sec. 124.514(b)(2), or 
Sec. 124.516(b)(2)(ii)(A), as applicable;
* * * * *
    8. In subpart F, Sec. 124.516 is redesignated as Sec. 124.517.
    9. A new Sec. 124.516 is added to subpart F, to read as follows:


Sec. 124.516  Charitable facility compliance alternative.

    (a) Effect of certification. The Secretary may certify a facility 
which meets the requirements of paragraphs (b) and (c) of this section 
as a ``charitable facility.'' A facility which is so certified is not 
required to comply with this subpart except as otherwise herein 
provided.
    (b) Criteria for qualification. A facility may qualify for 
certification under this section if it meets the criteria of either 
paragraph (b)(1) or paragraph (b)(2) of this section:
    (1) It received, for the three most recent fiscal years, no monies 
directly from patients with incomes up to double the current poverty 
line issued by the Secretary pursuant to 42 U.S.C. 9902, exclusive of 
amounts charged or received for purposes of claiming reimbursement 
under third party insurance or governmental programs, such as Medicaid 
or Medicare deductible or coinsurance amounts; or
    (2)(i) It received, for the three most recent fiscal years, at 
least 10 percent of its total operating revenue (net patient revenue 
plus other operating revenue, exclusive of any amounts received, or if 
not received, claimed, as reimbursement under titles XVIII and XIX of 
the Social Security Act) from philanthropic sources to cover operating 
deficits attributable to the provision of discounted services. 
Philanthropic sources include private trusts, foundations, churches, 
charitable organizations, state and/or local funding, and individual 
donors; and either--
    (ii) (A) Provides health services without charge or at a 
substantially reduced rate (exclusive of amounts charged or received 
for purposes of claiming reimbursement under third party insurance or 
governmental programs, such as Medicaid or Medicare deductible or 
coinsurance amounts) to persons who are determined by the facility to 
qualify therefor under a program of discounted health services. A 
``program of discounted health services'' must provide for financial 
and other objective eligibility criteria and procedures, including 
notice prior to nonemergency service, that assure effective opportunity 
for all persons to apply for and obtain a determination of eligibility 
for such services including a determination prior to service where 
requested; or
    (B) Makes all services of the facility available to all persons at 
no more than a nominal charge, exclusive of amounts charged or received 
for purposes of claiming reimbursement under third party insurance or 
governmental programs, such as Medicaid or Medicare deductible or 
coinsurance amounts.
    (c)  Procedures for certification. To be certified under this 
section, a facility must submit to the Secretary, in addition to other 
materials that the Secretary may from time to time require, copies of 
the following:
    (1) Audited financial statements for the three most recent fiscal 
years or other documents prescribed by the Secretary, sufficient to 
show that the facility meets the criteria of paragraph (b)(1) or (b)(2) 
of this section.
    (2)(i) Where the facility claims qualification under paragraph 
(b)(2)(ii)(A) of this section, a complete description, and 
documentation where requested, of its program of discounted health 
services, including charging and collection policies of the facility, 
and eligibility criteria and notice and determination procedures used 
under its program(s) of discounted health services.
    (ii) Where the facility claims qualification under paragraph (b)(1) 
or paragraph (b)(2)(ii)(B) of this section, a complete description, and 
documentation where requested, of its admission, charging, and 
collection policies.
    (d) Period of effectiveness. (1) A certification by the Secretary 
under this section remains in effect until withdrawn. The Secretary may 
disallow credit under this subpart when the Secretary determines that 
there has been a material change in any factor upon which certification 
was based or substantial noncompliance with this subpart. The Secretary 
may withdraw certification where the change or noncompliance has not 
been in the Secretary's judgment adequately remedied or otherwise 
continues.
    (2) Deficits.--(1) Title VI-assisted facilities with assessed 
deficits. Where a facility assisted under title VI of the Act has been 
assessed as having a deficit under Sec. 124.503(b) that has not been 
made up prior to certification under this section, the facility may 
make up that deficit by either--
    (A) Demonstrating to the Secretary's satisfaction that it met the 
applicable requirements of paragraph (b) of this section for each year 
in which a deficit was assessed; or
    (B) Providing an additional period of service under this section on 
the basis of one year (or portion of a year) of certification for each 
year (or portion of a year) of deficit assessed. The period of 
obligation applicable to the facility under Sec. 124.501(b) shall be 
extended until the deficit is made up in accordance with the preceding 
sentence.
    (ii) Where any period of compliance under this subpart of a 
facility assisted under title VI of the Act has not been assessed, the 
facility will be presumed to have no allowable credit for such period. 
The facility may either--
    (A) Make up such deficit in accordance with paragraph (d)(2)(i) of 
this section; or
    (B) Submit an independent certified audit, conducted in accordance 
with procedures specified by the Secretary, of the facility's records 
maintained pursuant to Sec. 124.510. If the audit establishes to the 
Secretary's satisfaction that no, or a lesser, deficit exists for the 
period in question, the facility will receive credit for the period so 
justified. Any deficit which the Secretary determines still remains 
must be made up in accordance with paragraph (d)(2)(i) of this section.
    (iii) Title XVI-assisted facilities. (A) A facility assisted under 
title XVI of the Act which has an assessed deficit which was not made 
up prior to certification under this section shall make up that deficit 
in accordance with paragraph (d)(2)(i)(A) of this section. If it cannot 
make the showing required by that paragraph, it shall make up the 
deficit when its certification under this section is withdrawn.
    (B) A facility assisted under title XVI of the Act whose compliance 
with this subpart has not been completely assessed will be presumed to 
have no allowable credit for the unassessed period. The facility may 
make up the deficit by--
    (1) Following the procedure of paragraph (d)(2)(iii)(A) of this 
section; or
    (2) Submitting an independent certified audit, conducted in 
accordance with procedures specified by the Secretary, of the 
facility's records maintained pursuant to Sec. 124.510. If the audit 
establishes that no, or a lesser, deficit exists for the period in 
question, the facility will receive credit for the period so justified. 
Any deficit which the Secretary determines still remains must be made 
up in accordance with paragraph (d)(2)(iii)(A) of this section.

[FR Doc. 94-21354 Filed 8-29-94; 8:45 am]
BILLING CODE 4160-15-M