[Federal Register Volume 66, Number 187 (Wednesday, September 26, 2001)]
[Rules and Regulations]
[Pages 49262-49269]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-24043]



[[Page 49261]]

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

Part II





Department of Health and Human Services





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



42 CFR Part 124



Compliance Alternatives for Provision of Uncompensated Services; Final 
Rule

  Federal Register / Vol. 66, No. 187 / Wednesday, September 26, 2001 / 
Rules and Regulations  

[[Page 49262]]


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

DEPARTMENT OF HEALTH AND HUMAN SERVICES

42 CFR Part 124

RIN 0906-AA52


Compliance Alternatives for Provision of Uncompensated Services

AGENCY: Health Resources and Services Administration, HHS.

ACTION: Final rule.

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

SUMMARY: The rules below revise a compliance alternative applicable to 
health care facilities with Hill-Burton uncompensated services 
obligations. The revised compliance alternative provides a more 
flexible compliance standard for facilities that principally serve 
nonpaying patient populations by reducing the amount of time needed to 
qualify for certification under the alternative and by providing for a 
provisional certification, where a facility is unable to qualify for 
full certification. The rules below also provide a compliance 
alternative for obligated facilities with histories of uncompensated 
services deficits, to enable them to make up the deficits on a timely 
basis. These revisions have the effect of making it easier for 
facilities with uncompensated services obligations to meet those 
obligations, while still ensuring the availability of uncompensated 
services to persons unable to pay.

DATES: This rule is effective on September 26, 2001.

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

SUPPLEMENTARY INFORMATION: On October 19, 2000, the Secretary of Health 
and Human Services published a Notice of Proposed Rulemaking (NPRM) 
proposing to revise certain requirements relating to the compliance by 
health care facilities that received assistance under Title VI or Title 
XVI of the Public Health Service Act, 42 U.S.C. 291, et seq., and 42 
U.S.C. 300q, et seq. with their assurance, given as a condition of such 
assistance, that they would provide a reasonable volume of services to 
persons unable to pay therefor. 65 FR 62976. The regulations 
establishing the requirements for complying with this assurance, which 
is commonly known as the ``uncompensated services'' assurance, are 
codified at 42 CFR part 124, subpart F. The NPRM proposed to revise one 
of several current compliance alternatives, to decrease the number of 
years needed to qualify for the alternative and to permit qualification 
on a provisional basis. The NPRM also proposed to add another 
compliance alternative, designed for compliant Title VI-assisted 
facilities that are in chronic deficit in meeting their uncompensated 
services obligations.

I. Background

    The Hill-Burton uncompensated services regulations date, in their 
present form, back to 1979, when regulations containing the basic 
components of the present regulations were promulgated. 44 FR 29372 
(May 18, 1979). The 1979 regulations for the first time established a 
purely quantitative measure of the statutory ``reasonable volume of 
services''; this quantitative measure was a total obligation measured 
in dollars, broken down into annual compliance levels. They also 
provided that a facility that failed to provide in a given year 
uncompensated services in an amount sufficient to meet its annual 
compliance level would have a ``deficit,'' which it would have to make 
up in subsequent years. If not made up, the deficit (along with any 
additional deficits in later years) would accumulate, and be adjusted 
by any increases in the medical Consumer Price Index (CPI). See, 
Sec. 124.503(b)(3).
    In the years since 1979, the regulations have been amended several 
times--in 1986, 1987, 1994, and 1995. Aside from the amendment of the 
basic regulatory structure effected by the 1987 amendment, the rest of 
the amendments were directed at creating various alternative methods by 
which facilities could comply with their obligation to provide a 
reasonable volume of uncompensated services to persons unable to pay. 
These various ``compliance alternatives'' appear at Secs. 124.513--
124.516 of subpart F. Although each of the compliance alternatives is 
addressed to different types of facilities, all of the facilities that 
qualify for the compliance alternatives share the same basic 
characteristics: They provide significant amounts of free or below cost 
care to persons unable to pay for that care, but, for various reasons, 
are unable to receive sufficient credit for the care they provide to 
meet their Hill-Burton uncompensated services obligations under the 
compliance standards codified at 42 CFR 124.501--124.512. As a 
consequence, prior to the adoption of the compliance alternatives set 
out at Secs. 124.513--124.516, these types of facilities were generally 
running uncompensated services deficits, despite providing substantial 
services on a free or below-cost basis to poor individuals. The 
compliance alternatives were adopted to address this anomaly.
    Over the years since 1979, the number of facilities with an 
outstanding Hill-Burton uncompensated services obligation has shrunk 
from approximately 5,000 in 1979 to approximately 650 as of December 
31, 2000. Thus, approximately 4,350 Hill-Burton assisted facilities 
have fulfilled their obligation, provided as a condition of the federal 
assistance received, to provide a ``reasonable volume of uncompensated 
services to persons unable to pay therefor.'' However, a number of the 
remaining Hill-Burton obligated facilities operate compliant, fully 3 
expanded uncompensated services programs but fail to receive sufficient 
uncompensated services requests to satisfy their annual dollar 
obligation. (``Fully expanded'' means that the facilities make 
available on request, all of their services at no charge to persons 
unable to pay up to the limit of double the poverty guidelines, 
Category B eligibility (for facilities other than nursing homes), or 
triple the poverty guidelines, Category C eligibility (for nursing 
homes).) Thus, they run Hill-Burton deficits on a chronic basis, and 
those deficits are adjusted upwards by the percentage change in the 
medical CPI, pursuant to Sec. 124.503(b)(3). The Department believes 
that many of these facilities may never be able to make up their 
deficits under the present requirements.
    A few statistics indicate the dimensions of the problem. As of the 
end of 1998, of the 424 Hill-Burton facilities in deficit, 226 had 
operated a fully expanded, compliant program for at least a year. Of 
these 226 facilities, 117 (52 percent, or 28 percent of the total 
number of facilities in deficit) had operated a fully expanded program 
for the last three years, and, despite providing over $73 million in 
uncompensated services in that period, saw their collective deficit 
increase from $178,724,130 to $180,748,408--an increase of one 
percent--in the same period. Of these 226 facilities, 64 facilities (28 
percent, or 15 percent of the total in deficit) operated fully expanded 
programs for the last two years, and, despite providing over $36 
million in uncompensated services in that period, saw their collective 
deficit decrease only $10.8 million, or 13 percent for that period, 
while in 33 of the 64 facilities, the deficits increased. Of the 226 
facilities, 45 facilities (20 percent, or 11 percent of the total in 
deficit) operated fully expanded programs in the last year and, despite 
providing over $9.8 million in uncompensated services in that period, 
saw their collective deficit increase from

[[Page 49263]]

$57,374,195 to $61,739,838--an increase 4 of 7.6 percent--in that 
period. It is projected that, because of the increasing deficits a 
number of these facilities are experiencing, 81 facilities will have at 
least another 20 years under obligation, and 53 of these 81 will have 
obligations extending for at least 100 years.

II. Proposed Rules

    The proposed rules shared the objective of the prior compliance 
alternatives. Like those compliance alternatives, the proposed rules 
had the goal of enabling facilities, which, by the nature of their 
operations have great difficulty or find it impossible to meet the 
dollar volume requirements of the general regulations but nonetheless 
provide significant uncompensated services to persons unable to pay, to 
comply with and complete their uncompensated services obligations. A 
corollary goal of this objective is the reduction or elimination of the 
uncompensated services deficits of such facilities.
    In the case of the amendment to Sec. 124.516, the so-called 
``charitable facility'' compliance alternative, the proposed rule 
permitted a provisional certification, to make it easier for facilities 
to qualify for the alternative. Facilities could be provisionally 
certified, with credit toward their obligation earned during the period 
of provisional certification if they met the conditions of the 
provisional certification and with no credit earned if they failed to 
meet the conditions of the provisional certification. The proposed 
amendment to Sec. 124.516 thus enabled facilities whose operations in 
fact qualify them for the charitable facility alternative to start 
earning credit under that alternative at the earliest possible date, 
instead of requiring a three-year track record, which was required 
under the alternative.
    In the case of the new compliance alternative set out at 
Sec. 124.517, the proposed rule provided a means by which facilities in 
deficit, which remain in deficit despite running procedurally compliant 
and fully expanded uncompensated services programs, could eliminate 
their deficits and complete their obligations in a reasonable time 
frame. The compliance alternative proposed at Sec. 124.517 was to be 
available to facilities that did not restrict the availability of 
uncompensated services to their patient population in any way--i.e., 
they did not restrict the type of services of the facility available on 
an uncompensated basis, and they did not restrict eligibility for those 
uncompensated services (for example, by limiting uncompensated services 
to Category A individuals only, or by charging Category B or, for 
nursing homes, Category C individuals). In addition, those facilities 
must comply with the procedural requirements of the standard 
regulations with respect to notice, eligibility determinations, 
recordkeeping requirements, and so on. Also, these facilities must 
provide broad notice of their program to provide services to the poor 
by:
    1. Posting Federally supplied Hill-Burton signs, in prescribed 
locations, that describe the facilities' obligation to provide 
uncompensated services to the poor and specify where to file 
complaints;
    2. Publishing notice of their Federal obligation in local 
newspapers, describing their allocation plan which includes all of 
their services to eligible persons requesting uncompensated services 
with incomes up to triple the poverty guidelines for nursing homes and 
up to twice the poverty guidelines for all other facilities;
    3. Distributing, to each person coming to the facilities for 
services, specific written notification of the Hill-Burton obligation, 
including the allocation plan, income eligibility criteria, timeframes 
for facilities to make determinations of patients' Hill-Burton 
eligibility, and where to make application for Hill-Burton assistance.
    Thus, it was clear that Hill-Burton facilities qualifying for the 
proposed alternative were unique from other facilities located in their 
areas. Although the non-Hill-Burton facilities may provide charity 
care, their programs tend not to be publically visible and often are 
mere writeoffs to charity after they have exhausted efforts to collect 
payments from the patients.
    Where a facility fails to meet its annual compliance level despite 
the existence of an unrestricted program, the Secretary believes that 
there is clear evidence that there is insufficient demand for the 
uncompensated services offered and that the facility should not have to 
incur a deficit due to a failure of demand. The proposed compliance 
alternative addressed this issue. In addition, we believe that the 
compliance alternative will provide a mechanism that will facilitate 
the goal of making up large deficits. The sheer size of a number of 
deficits leads to a level of discouragement that can affect a 
facility's performance. Where this has happened, the existence of the 
deficit has the perverse effect of harming, rather than helping, the 
pool of eligible individuals such facilities serve. The compliance 
alternative should encourage facilities with chronic deficits to reopen 
their uncompensated services programs and complete their obligations. 
This expansion would result in more uncompensated services provided to 
persons unable to pay. For example, based on the most recent data 
available at the time the NPRM was developed, hospitals which began 
operating fully expanded programs in fiscal year 1997 provided an 
average of 22 percent more uncompensated services than in the previous 
year under a limited program. Despite the increase in services, their 
average Hill-Burton deficit increased by 6 percent due to the effect of 
the CPI adjustment applied to large deficits. Nursing homes which began 
operating fully expanded programs in fiscal year 1997 provided an 
average of 39 percent more uncompensated services than in the previous 
year. Despite the increase in services, their average Hill-Burton 
deficit increased by 16 percent, also because of the CPI adjustment.
    Thus, it was thought that the proposed rule would likely result in 
more facilities operating fully expanded programs, and also that more 
uncompensated services would be provided during their periods of 
obligation. The immediate value to the community of the increase in the 
uncompensated care services provided to eligible individuals under a 
fully expanded program is greater than the value of deferred services 
provided at some indeterminable, unspecified future date. Moreover, the 
new alternative implements best the intent of the 1979 regulation which 
set a fixed period of 20 years to fulfill a facility's obligations. 
This rule gives facilities which operate fully expanded programs the 
option of obtaining a fixed period of obligation.
    As of the time of writing the proposed rules, approximately 188 
hospitals nationwide could qualify for the proposed alternative once 
they begin to implement compliant and fully expanded uncompensated 
services programs. Significant is the fact that only four States have 
more than eight potentially qualifying facilities: New York, 32; 
Pennsylvania, 22; Wisconsin, 13; and Michigan, 12. Within the State of 
New York, 21 of the 32 facilities are the sole hospital care provider 
within their municipality. In Pennsylvania, this is true for 13 of the 
27 facilities; in Wisconsin, 12 of the 13 facilities; and in Michigan, 
10 of the 12 facilities. This means that these facilities are not 
meeting their uncompensated services obligations because there are not 
enough Hill-Burton eligible people in their communities. They are not 
shifting the burden of caring for the poor to other facilities since in 
most cases the Hill-

[[Page 49264]]

Burton obligated facilities are the only community providers. Further, 
where Hill-Burton obligated facilities are located with other providers 
in urban communities with large, low-income populations, in general, 
they have not met their obligations because: (1) Their Hill-Burton 
assistance was large resulting in very high annual compliance levels; 
(2) they sometimes implemented restricted programs; and (3) they 
sometimes failed to obtain eligibility documentation for uncompensated 
services provided to low-income persons. Most of these urban facilities 
would have to operate an additional 10 or more years under the 
alternative.
    The alternative could impact as many as 121 nursing homes 
nationwide once they all begin to implement compliant and fully 
expanded uncompensated services programs. Significant is the fact that 
only two States, Michigan with 20 facilities and Ohio, with 15 
facilities, have more than seven qualifying nursing homes. Thirty 
States have three or fewer facilities, with 15 of the States having no 
facilities. Further, the typical nursing home has 75-90 percent of its 
patients covered by Medicaid and Medicare, leaving few and sometimes no 
Hill-Burton eligible patients for credit against their obligations.
    For these reasons, we conclude that where a Hill-Burton facility 
has a record of operating a visible, compliant, and fully expanded 
uncompensated services program, its uncompensated services deficit is 
due to a lack of community need.
    In addition to the foregoing, various technical and conforming 
changes to the existing Subpart F were proposed. The NPRM also 
solicited comments on the proposed changes.

III. Public Comment and the Department's Responses

    The Department received nine comments on the proposed rule. Thirty-
five health care facilities are represented by the comments. Two 
commenters commended the proposed rules, expressing the opinion that 
the new compliance alternative will allow facilities currently in 
deficit to complete their Hill-Burton uncompensated services obligation 
in a realistic way. Two commenters expressed the opinion that the Hill-
Burton program is archaic and should be terminated immediately. The 
remaining five commenters raised specific issues regarding the details 
of the proposed rules. Their comments and the Department's responses 
thereto are summarized below.

1. Criteria for Certification

Public Comment
    A number of commenters questioned the requirement that, in order to 
qualify for full credit for past years under the new alternative, 
Sec. 124.517, a facility must have been operating a fully expanded 
program. They felt that this requirement was unfair because the 
Department had never required expansion to a fully expanded program in 
order to be in compliance with the regulations.
Department's Response
    Actually, the current regulation required facilities with deficits 
to take specific affirmative steps each year to make up deficits from 
previous years. See 42 CFR 124.503(b)(4). Thus, expansion from a 
limited allocation plan (limited services and/or limited financial 
criteria) up to and including a fully expanded plan was an option 
clearly available to all facilities throughout the program's history. 
The clear purpose of the affirmative action plan requirement was to 
increase the pool of eligible persons and medical services each 
facility offered in order for it to meet its obligation.
    In some instances, facilities took no or only modest affirmative 
steps to address deficits. In others, they expanded their allocation 
plans to include the full range of services offered in the facility and 
considered income eligibility based on maximum financial criteria 
allowed under the regulation. Many of these facilities successfully 
completed their total obligation as a result of the expansion. Others 
did not, despite having implemented the broadest possible plan. The 
intent of the new rule is to recognize those facilities whose deficits 
continue in spite of having willingly implemented the broadest possible 
compliant program under the applicable rules. Thus, any deficit 
remaining clearly demonstrates a lack of community need and the 
facilities would be eligible for a year's credit for each year that 
they ran a fully expanded program.
    Although those facilities with annual deficits which operated 
compliant but limited programs are ineligible to receive a year's 
credit, they do receive credit based on any actual uncompensated care 
provided. In addition, by expanding their allocation plans under the 
terms of the proposed rule now, they can establish a finite time for 
completion of the obligation, which, based on past performance, was not 
determinable.
    Additionally, the Department has determined that for the first year 
that facilities were subject to the 1979 regulations (1980 for most 
facilities), any facility which operated a compliant Hill-Burton 
program will receive a year's credit under the new regulation, because 
only after completion of the first year was it possible to determine a 
facility's status in regard to excess/deficit. If a facility was in 
deficit status, then it became subject to the affirmative action plan 
requirement, which served as the catalyst for the facility to expand 
its Hill-Burton program.
    According to the NPRM, a facility could receive a year's credit 
only where there was a fully expanded program for the entire fiscal 
year. Because many facilities expanded to a full program in the middle 
of their fiscal year, the Department has determined that a facility 
will receive a percentage of a year's credit for the first year in 
which it fully expanded its Hill-Burton program, depending on the 
effective date of the fully expanded program, as long as it continued 
its fully expanded program in the subsequent years.

2. Formula Pertaining to the New Compliance Alternative

Public Comment
    A number of commenters felt that the formula set forth in the 
Preamble was confusing, complex, and precluded the facilities from 
computing the dollars-to-years conversion.
Department's Response
    The Department acknowledges that the formula may appear complex and 
that some facilities will require assistance to do the calculation. 
Therefore, the Department will provide each Title VI facility that is 
in deficit a preliminary calculation regarding the conversion of 
deficit dollars to years of obligation.
    Some of the comments suggested a misapprehension about the intent 
of the formula. The idea behind the new compliance alternative, known 
as the unrestricted availability compliance alternative for Title VI-
assisted facilities (Sec. 124.517), is to convert the Hill-Burton 
deficit of a facility operating a fully expanded Hill-Burton program 
from an amount of money to a number of years of obligation. The effect 
of this change is to establish an end-date for the Hill-Burton 
obligation to provide uncompensated services.
    In order to make this conversion, the Department will first compute 
the number of years of obligation. The date required to do this differs 
from facility to facility, based on a 20-year period that began with 
the opening of a Hill-Burton-assisted facility. For example, a

[[Page 49265]]

facility which as of the start of its fiscal year 1980 had 7 years 
remaining in its 20-year obligation period, would have a total 
obligation period equal to 7.0 years.
    Next, the Department will subtract one year from that total for 
each year that the facility implemented a fully expanded Hill-Burton 
program. If the facility implemented a fully expanded program for 4 
years, it would have a balance of 3 years of obligation remaining. 
Next, the Department will compute partial years' credit, through use of 
a formula, for years that the facility earned credit but did not have a 
fully expanded program. The facility will receive credit expressed in 
time proportionate to its total outstanding obligation, after allowing 
credit for whole years credited in the previous step. If the above 
facility was determined to have a maximum remaining deficit equal to 
$500,000 and was credited with providing $100,000 during non-fully 
expanded years, it would receive additional credit expressed in time 
equal to 20 percent of 3 years, or 7.2 months.
    Once these computations have been made, each facility under the new 
compliance alternative will have a specified number of years remaining 
to provide Hill-Burton uncompensated services. As long as the facility 
continues to operate a fully expanded program, the years of obligation 
will decline until the end-date established by the computations 
described above.
    One commenter expressed the opinion that the Department is 
considering the use of a formula different from the one that appeared 
in the NPRM. The Department is not considering any change to the 
formula originally published in the NPRM except as noted above.

3. Requirements of a Fully Expanded, Compliant Program

Public Comment
    One commenter felt that, for future reference, the requirements of 
a compliant, fully expanded program should be a part of the 
regulations.
Department's Response
    The requirements of a compliant, fully expanded program have been 
restated in the Preamble and are also included in the final rule at 
Sec. 124.517(b).
    In view of the fact that the rules below relieve restrictions on 
facilities that apply and are certified for either the provisional 
component of the charitable facility compliance alternative or the new 
unrestricted availability compliance alternative for Title VI-assisted 
facilities, 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.

IV. Summary of Supporting Analyses

Executive Order 12866

    Executive Order 12866 requires that all regulations reflect 
consideration of alternatives, costs, benefits, incentives, equity, and 
available information. Regulations must meet certain standards, such as 
avoiding unnecessary burden. Regulations which are ``significant'' 
because of cost, adverse effects on the economy, inconsistency with 
other agency actions, budgetary impact, or novel legal or policy issues 
require special analysis. The Department has determined that this rule 
will not have an annual effect on the economy of $100 million or more, 
and does not otherwise meet the definition of a ``significant'' rule 
under Executive Order 12866.

The Regulatory Flexibility Act

    The Regulatory Flexibility Act requires that agencies analyze 
regulatory changes to determine whether they create a significant 
impact on a substantial number of small entities. As the total universe 
of facilities with outstanding Hill-Burton obligations is small 
(approximately 650 facilities) and a little over half of these are 
presently either without deficit or have elected to comply with their 
uncompensated services obligations through other compliance options, it 
is not anticipated that the final rule will affect a substantial number 
of small entities, within the meaning of the Act. Moreover, the impact 
of the rules should be positive, as they would lessen the burden of 
compliance on those facilities that would elect to utilize either of 
the compliance options. Accordingly, the Secretary certifies that the 
rules below would not create a significant impact on a substantial 
number of small entities.

Paperwork Reduction Act

    The unrestricted availability compliance alternative for Title VI 
facilities does not contain any information collection requirements 
subject to OMB review under the Paperwork Reduction Act of 1995. The 
amendment to the charitable facility compliance alternative rule 
contains information collections which are subject to review by the 
Office of Management and Budget (OMB) under the Paperwork Reduction Act 
of 1995. The underlying purpose of this rule is to decrease 
recordkeeping, reporting, and notification burden for the charitable 
facilities not already certified under the alternative. New estimates 
for the reduction of burden have been determined. They were submitted 
and cleared by OMB. Facilities receiving prospective certification 
under the charitable facility compliance alternative will no longer be 
required to maintain extensive records on uncompensated services 
(Sec. 124.510(a)), but instead will have to maintain only records which 
document its eligibility for the compliance alternative 
(Sec. 124.510(b)). These documents are ordinarily retained by the 
facilities so the recordkeeping requirement imposes no additional 
burden. This change is expected to reduce the recordkeeping burden by 
50 hours per facility per year.
    Similarly, reporting burden will be reduced. Charitable facilities 
will be required to apply once for the certification (Sec. 124.516(d)), 
and thereafter will need only to certify their continued eligibility 
annually (Sec. 124.509(b)). Currently, facilities in deficit status 
under the general rule must file a report each year which documents the 
amount of uncompensated care provided (Sec. 124.509(a)). Facilities 
certified under the alternative will have their reporting burden 
reduced by 5 hours per facility in the first year, and by 10.5 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 (Sec. 124.504(a)); 
(2) provide individual written notices to each person seeking service 
in the facility (Sec. 124.504(c)); or (3) provide a determination of 
eligibility to each person applying for uncompensated service 
(Sec. 124.507). These changes are expected to reduce the notification 
burden by 45 hours per facility per year.
    All sections of the regulations that contain reporting, 
recordkeeping, or notification/disclosure requirements previously have 
been approved by OMB under the Paperwork Reduction Act (OMB #0915-
0077). The NPRM invited the public to provide comments on this 
information collection requirement so that the Department of Health and 
Human Services could:
    (1) Evaluate whether the proposed collections of information are 
necessary for the proper performance of the

[[Page 49266]]

functions of the agency, including whether the information will have 
practical utility;
    (2) Evaluate the accuracy of the agency's estimates of the burdens 
of the collections of information, including the validity of the 
methodology and assumptions used;
    (3) Enhance the quality, utility and clarity of the information to 
be collected; and
    (4) Minimize the burden of the collections of information on those 
who are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology, e.g., permitting electronic 
submission of responses.
    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.
    We received no public comments on the estimated public reporting 
burden.

Unfunded Mandates Reform Act

    The final rule contains no Federal mandates for State, local, or 
tribal governments or the private sector.

Executive Order 13132

    The final rule has no impact on federalism as set forth in 
Executive Order 13132, which became effective on November 8, 1999, 
replacing Executive Order 12612.

Environmental Impact Statement

    The final rule has no impact on the quality of the human 
environment and, therefore, an Environmental Impact Statement is not 
required.

List of Subjects in 42 CFR Part 124

    Grant programs--health, Health care, Health facilities, Loan 
programs--health, Low income persons.

    Dated: April 12, 2001.
Elizabeth M. Duke,
Acting Administrator, Health Resources and Services Administration.

    Approved: June 13, 2001.
Tommy G. Thompson,
Secretary.


    For the 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--MEDICAL FACILITY CONSTRUCTION AND MODERNIZATION

    1. Revise the authority citation for part 124 to read as follows:

    Authority: 42 U.S.C. 216, 300r, 300s, unless otherwise noted.

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

    2. Revise the first sentence of Sec. 124.503(c)(1) to read as 
follows:


Sec. 124.503  Compliance level.

* * * * *
    (c) * * * (1) Except for facilities certified under Sec. 124.513, 
Sec. 124.514, Sec. 124.515, Sec. 124.516, or Sec. 124.517, if a 
facility provides in a fiscal year uncompensated services in an amount 
exceeding its annual compliance level, it may apply the amount of 
excess to reduce its annual compliance level in any subsequent fiscal 
year. * * *
* * * * *

    3. Revise the heading and introductory text of paragraph (a) of 
Sec. 124.508 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, Sec. 124.516, or Sec. 124.517. Where a facility, other 
than a facility certified under Sec. 124.513, Sec. 124.514, 
Sec. 124.515, Sec. 124.516, or Sec. 124.517, 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. Revise the heading of paragraph (a) and add paragraph (e) to 
Sec. 124.509 to read as follows:


Sec. 124.509  Reporting requirements.

    (a) Facilities not certified under Sec. 124.513, Sec. 124.514, 
Sec. 124.515, Sec. 124.516, or Sec. 124.517. * * *
* * * * *
    (e) Facilities certified under Sec. 124.517. If a facility 
certified under Sec. 124.517 ceases to provide uncompensated services 
consistent with its certification under that section because of 
financial inability, it shall report such cessation to the Secretary 
within 90 days of the cessation and provide any documentation or 
information relating to the provision or cessation of uncompensated 
services that the Secretary may require.

    5. Revise the heading of paragraph (a) and the heading and the 
first sentence of paragraph (b) of Sec. 124.510 to read as follows:


Sec. 124.510  Record maintenance requirements.

    (a) Facilities not certified under Sec. 124.513, Sec. 124.514, 
Sec. 124.515, Sec. 124.516, or Sec. 124.517. * * *
* * * * *
    (b) Facilities certified under Sec. 124.513, Sec. 124.514, 
Sec. 124.516, or Sec. 124.517. A facility certified under Sec. 124.513, 
Sec. 124.514, Sec. 124.516, or Sec. 124.517 shall retain, make 
available for public inspection consistent with personal privacy, and 
provide to the Secretary on request any records necessary to document 
compliance with the applicable requirements of this subpart in any 
fiscal year, including those documents provided to the Secretary under 
Sec. 124.513(c), Sec. 124.514(c), Sec. 124.516(c), or Sec. 124.517(b), 
as applicable. * * *
* * * * *

    6. Revise the first sentence of paragraph (a)(3) and paragraph 
(b)(1)(iii)(C) of Sec. 124.511 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, Sec. 124.516, or Sec. 124.517, 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 Sec. 124.504(c), Sec. 124.505, Sec. 124.507, 
Sec. 124.509, 125.510, Sec. 124.513(b)(2), Sec. 124.514(b)(2), 
Sec. 124.515, Sec. 124.516(b)(1) or (b)(2), as applicable, or 
Sec. 124.517(b), and systematically and correctly followed such 
procedures.
* * * * *

    7. Revise the introductory text of paragraph (b) and paragraph 
(c)(1) of Sec. 124.512 to read as follows:


Sec. 124.512  Enforcement.

* * * * *
    (b) A facility, including a facility certified under Sec. 124.513, 
Sec. 124.514, Sec. 124.516, or Sec. 124.517, 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

[[Page 49267]]

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), 
Sec. 124.516 (b)(2)(ii)(A), or Sec. 124.517(b)(2), as applicable;
* * * * *

    8. Revise Sec. 124.516 to read as follows:


Sec. 124.516  Charitable facility compliance alternative.

    (a) Effect of certification. The Secretary may certify as a 
``charitable facility'' a facility which meets the applicable 
requirements of this section. A facility which is certified or 
provisionally certified as a charitable facility is not required to 
comply with this subpart except as provided in this section.
    (b) Methods of qualification for certification or provisional 
certification. (1) A facility may qualify for certification under this 
section if it meets the criteria of paragraph (c)(1) or paragraph 
(c)(2) of this section.
    (2) A facility may qualify for a provisional certification under 
this section if it provides an assurance that meets the requirements of 
paragraph (d)(2) of this section.
    (c) Criteria for certification under paragraph (b)(1) of this 
section. A facility may qualify for certification under paragraph 
(b)(1) of this section if it met the criteria of either paragraph 
(c)(1) or paragraph (c)(2) of this section for the fiscal year 
preceding the request for certification. A facility that seeks 
certification under paragraph (c)(2) of this section must also meet the 
requirements of paragraph (c)(2)(i) or paragraph (c)(2)(ii) of this 
section during each year of certification.
    (1)(i) For facilities that are nursing homes: It received no monies 
directly from patients with incomes up to triple 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 co-insurance amounts.
    (ii) For all other facilities. It received 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.
    (2) It received 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 
Medicaid or Medicare) 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--
    (i) 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 for 
such reduced charges 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
    (ii) 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.
    (d) Procedures for certification--(1) Certification under paragraph 
(b)(1) of this section. To be certified under paragraph (b)(1) of 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:
    (i) An audited financial statement for the fiscal year preceding 
the request or other documents prescribed by the Secretary, sufficient 
to show that the facility meets the criteria of paragraph (c)(1) or 
(c)(2) of this section, as applicable;
    (ii) Where a facility claims qualification under paragraph 
(c)(2)(i) 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;
    (iii) Where the facility claims qualification under paragraph 
(c)(1) or paragraph (c)(2)(ii) of this section, a complete description, 
and documentation where requested, of its admission, charging, and 
collection policies.
    (2) Provisional certification under paragraph (b)(2) of this 
section. (i) In order to receive a provisional certification under 
paragraph (b)(2) of this section, prior to the beginning of the fiscal 
year for which provisional certification will be sought, the facility 
must submit to the Secretary an assurance, together with such 
documentation and in such form and manner as the Secretary may require, 
that it will operate during the fiscal year a program that qualifies 
for certification under paragraph (b)(1) of this section.
    (ii) No later than 90 days following the end of the fiscal year in 
which a facility has operated a provisionally certified program, the 
facility must submit to the Secretary, the documentation required, as 
applicable, under paragraph (d)(1) of this section.
    (e) Period of effectiveness--(1) Certification under paragraph 
(b)(1) of this section. A certification by the Secretary under 
paragraph (b)(1) of 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 
section. The Secretary may withdraw certification where the change or 
noncompliance has not been, in the Secretary's judgment, adequately 
remedied or otherwise continues.
    (2) Provisional certification under paragraph (b)(2) of this 
section. Where the Secretary is satisfied, based on the documentation 
submitted by the facility in accordance with paragraph (d)(2)(ii) of 
this section and any other information available to the Secretary, that 
the facility has complied with the terms of its provisional 
certification under paragraph (b)(2) of this section, the Secretary 
shall certify the facility under paragraph (b)(1) of this section. If 
the Secretary finds that the facility has not complied with the terms 
of its provisional certification under paragraph (b)(2) of this 
section, the facility will receive no credit towards its uncompensated 
services obligation during the fiscal year of provisional 
certification.
    (f) Deficits--(1) Title VI-assisted facilities--(i) 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

[[Page 49268]]

Sec. 124.503(b) that has not been made up prior to certification under 
paragraph (b)(1) of 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 (c) 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) Title VI-assisted facilities with unassessed deficits. 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 the unassessed period. The 
facility may either--
    (A) Make up such deficit in accordance with paragraph (f)(1)(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 (f)(1)(i)(B) of this 
section.
    (2) Title XVI-assisted facilities--(i) Title XVI-assisted 
facilities with assessed deficits. A facility assisted under title XVI 
of the Act which has an assessed deficit which was not made up prior to 
certification under paragraph (b)(1) of this section shall make up that 
deficit in accordance with paragraph (f)(1)(i) of this section. If it 
cannot make the showing required by that paragraph, it shall make up 
the deficit when its certification under paragraph (b)(1) of this 
section is withdrawn.
    (ii) Title XVI-assisted facilities with unassessed deficits. Where 
any period of compliance under this subpart of a facility assisted 
under title XVI of the Act has not been assessed, the facility will be 
presumed to have no allowable credit for the unassessed period. The 
facility may either--
    (A) Make up such deficit in accordance with paragraph (f)(1)(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 (f)(2)(i) of this section.


Sec. 124.517  [Redesignated as Sec. 124.518]

    9. Redesignate Sec. 124.517 as Sec. 124.518 of subpart F.

    10. Add a new Sec. 124.517 to read as follows:


Sec. 124.517  Unrestricted availability compliance alternative for 
Title VI-assisted facilities.

    (a) Effect of certification. The Secretary may certify a Title VI-
assisted facility which meets the requirements of paragraph (b) of this 
section and the applicable requirements of this subpart as an 
unrestricted availability facility. A facility which is so certified is 
not required to comply with the requirements of this subpart, except as 
provided in this section or elsewhere in this subpart.
    (b) Criteria for qualification. A facility may qualify for 
certification under this section if, for any fiscal year for which 
certification is sought, it operates a compliant, fully expanded 
uncompensated services program. Such a program must meet the following 
criteria:
    (1) It makes all services of the facility available without charge 
to all persons requesting uncompensated services from the facility who 
are eligible under Sec. 124.505, including all persons coming within 
Category B and, if applicable, Category C.
    (2) It complies with the notice and allocation plan requirements of 
Secs. 124.504 and 124.506, except that all notices published or 
provided must describe an allocation plan and program consistent with 
paragraph (b)(1) of this section.
    (3) It makes written determinations in accordance with 
Sec. 124.507, except that all favorable determinations must indicate 
that the facility will provide uncompensated services at no charge.
    (4) It provides uncompensated services consistent with the 
requirements of this section for the entire fiscal year for which 
certification is sought, except that a facility may
    (i) Cease providing such services and still receive credit, 
calculated in accordance with paragraph (d) of this section, where--
    (A) The facility has completed its total uncompensated services 
obligation, including making up any deficit; or
    (B) The facility determines, and submits documentation which the 
Secretary finds, taking into account the factors identified in 
Sec. 124.511(c), sufficient to establish that it is financially unable 
to continue to meet the requirements of this section for the remainder 
of the fiscal year; and
    (ii) Receive a portion of a year's credit for the first partial 
year in which it began operating a fully expanded program, as long as 
it continued to operate the fully expanded program in subsequent years.
    (c) Period of effectiveness. A certification by the Secretary under 
this section remains in effect until withdrawn. The Secretary may 
withdraw certification under this section where the Secretary 
determines the facility is in substantial noncompliance with the 
requirements of paragraph (b) of this section and has not adequately 
remedied or otherwise continues such noncompliance. Where the Secretary 
withdraws certification for part or all of a fiscal year or years, no 
credit may be granted for the period of unremedied substantial 
noncompliance.
    (d) Deficits. (1) Where a Title VI-assisted facility 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 the deficit by providing uncompensated services in accordance 
with this section. The facility shall receive credit towards its 
deficit on the basis of one year, or part thereof, of credit towards 
each ``deficit year'' for each year, or part thereof, of operation in 
compliance with this section and the applicable requirements of this 
subpart.
    (2) The number of ``deficit years'' of a facility shall be 
calculated as follows:
    (i) Determine the number of years in the facility's total period of 
obligation pursuant to Sec. 124.501;
    (ii) Subtract the number of years in which the facility operated in 
compliance with this section and the applicable requirements of this 
subpart from the number of years derived under paragraph (d)(2)(i) of 
this section;
    (iii) For all years in which the facility did not operate in 
compliance with this section, determine the ratio of the total 
compliance levels applicable under Sec. 124.503(a) to the facility's 
total deficit under Sec. 124.503(b);
    (iv) Multiply the percentage derived under paragraph (d)(2)(iii) of 
this section by the number of years under obligation pursuant to 
Sec. 124.501 but for

[[Page 49269]]

which the facility did not operate in compliance with this section;
    (v) Subtract the number derived under paragraph (d)(2)(iv) of this 
section from the number of years derived under paragraph (d)(2)(ii) of 
this section;
    (vi) If the facility is still within the period described in 
Sec. 124.501(b)(1), add the number of years derived under paragraph 
(d)(2)(v) of this section to the end of the period of obligation, or if 
the facility is beyond the period described in Sec. 124.501(b)(1), add 
the number of years derived under paragraph (d)(2)(v) of this section 
to the last year the facility operated in compliance with this section.

[FR Doc. 01-24043 Filed 9-25-01; 8:45 am]
BILLING CODE 4160-15-P