[Title 42 CFR K]
[Code of Federal Regulations (annual edition) - October 1, 2008 Edition]
[Title 42 - PUBLIC HEALTH]
[Chapter I - PUBLIC HEALTH SERVICE, DEPARTMENT OF HEALTH AND HUMAN]
[Subchapter K - HEALTH RESOURCES DEVELOPMENT]
[From the U.S. Government Printing Office]


42PUBLIC HEALTH12008-10-012008-10-01falseHEALTH RESOURCES DEVELOPMENTKSUBCHAPTER KPUBLIC HEALTHPUBLIC HEALTH SERVICE, DEPARTMENT OF HEALTH AND HUMAN
                SUBCHAPTER K_HEALTH RESOURCES DEVELOPMENT



PART 121_ORGAN PROCUREMENT AND TRANSPLANTATION NETWORK--Table of Contents




Sec.
121.1 Applicability.
121.2 Definitions.
121.3 The OPTN.
121.4 OPTN Policies: Secretarial review and appeals.
121.5 Listing requirements.
121.6 Organ procurement.
121.7 Identification of organ recipient.
121.8 Allocation of organs.
121.9 Designated transplant program requirements.
121.10 Reviews, evaluation, and enforcement.
121.11 Record maintenance and reporting requirements.
121.12 Advisory Committee on Organ Transplantation.
121.13 Definition of Human Organ Under section 301 of the National Organ 
          Transplant Act, as amended.

    Authority: Sections 215, 371-376 of the Public Health Service Act 
(42 U.S.C. 216, 273-274d); sections 1102, 1106, 1138 and 1871 of the 
Social Security Act (42 U.S.C. 1302, 1306, 1320b-8 and 1395hh); and 
section 301 of the National Organ Transplant Act, as amended (42 U.S.C. 
274e).

    Source: 63 FR 16332, Apr. 2, 1998, unless otherwise noted.



Sec. 121.1  Applicability.

    (a) The provisions of this part, with the exception of Sec. 121.13, 
apply to the operation of the Organ Procurement and Transplantation 
Network (OPTN) and to the Scientific Registry.
    (b) The provisions of Sec. 121.13 apply to the prohibition set 
forth in section 301 of the National Organ Transplant Act, as amended.
    (c) In accordance with section 1138 of the Social Security Act, 
hospitals in which organ transplants are performed and which participate 
in the programs under titles XVIII or XIX of the Social Security Act, 
and organ procurement organizations designated under section 1138(b) of 
the Social Security Act, are subject to the requirements of this part.

[63 FR 16332, Apr. 2, 1998, as amended at 64 FR 56658, Oct. 20, 1999; 72 
FR 10618, Mar. 9, 2007]



Sec. 121.2  Definitions.

    As used in this part--
    Act means the Public Health Service Act, as amended.
    Designated transplant program means a transplant program that has 
been found to meet the requirements of Sec. 121.9.
    Family member means a family member of a transplant candidate, 
transplant recipient, or organ donor.
    OPTN computer match program means a set of computer-based 
instructions which compares data on a cadaveric organ donor with data on 
transplant candidates on the waiting list and ranks the candidates 
according to OPTN policies to determine the priority for allocating the 
donor organ(s).
    Organ means a human kidney, liver, heart, lung, pancreas, or 
intestine (including the esophagus, stomach, small and/or large 
intestine, or any portion of the gastrointestinal tract). Blood vessels 
recovered from an organ donor during the recovery of such organ(s) are 
considered part of an organ with which they are procured for purposes of 
this part if the vessels are intended for use in organ transplantation 
and labeled ``For use in organ transplantation only.''
    Organ donor means a human being who is the source of an organ for 
transplantation into another human being.
    Organ procurement organization or OPO means an entity so designated 
by the Secretary under section 1138(b) of the Social Security Act.
    Organ procurement and transplantation network or OPTN means the 
network established pursuant to section 372 of the Act.
    Potential transplant recipient or potential recipient means a 
transplant candidate who has been ranked by the OPTN computer match 
program as the person to whom an organ from a specific cadaveric organ 
donor is to be offered.
    Scientific Registry means the registry of information on transplant 
recipients established pursuant to section 373 of the Act.

[[Page 646]]

    Secretary means the Secretary of Health and Human Services and any 
official of the Department of Health and Human Services to whom the 
authority involved has been delegated.
    Transplant candidate means an individual who has been identified as 
medically suited to benefit from an organ transplant and has been placed 
on the waiting list by the individual's transplant program.
    Transplant hospital means a hospital in which organ transplants are 
performed.
    Transplant physician means a physician who provides non-surgical 
care and treatment to transplant patients before and after transplant.
    Transplant program means a component within a transplant hospital 
which provides transplantation of a particular type of organ.
    Transplant recipient means a person who has received an organ 
transplant.
    Transplant surgeon means a physician who provides surgical care and 
treatment to transplant recipients.
    Waiting list means the OPTN computer-based list of transplant 
candidates.

[63 FR 16332, Apr. 2, 1998, as amended at 64 FR 56658, Oct. 20, 1999; 72 
FR 10619, Mar. 9, 2007; 72 FR 10925, Mar. 12, 2007]



Sec. 121.3  The OPTN.

    (a) Organization of the OPTN. (1) The OPTN shall establish a Board 
of Directors of whatever size the OPTN determines appropriate. The Board 
of Directors shall include:
    (i) Approximately 50 percent transplant surgeons or transplant 
physicians;
    (ii) At least 25 percent transplant candidates, transplant 
recipients, organ donors and family members. These members should 
represent the diversity of the population of transplant candidates, 
transplant recipients, organ donors and family members served by the 
OPTN including, to the extent practicable, the minority and gender 
diversity of this population. These members shall not be employees of, 
or have a similar relationship with OPOs, transplant centers, voluntary 
health organizations, transplant coordinators, histocompatibility 
experts, or other non-physician transplant professionals; however, the 
Board may waive this requirement for not more than 50 percent of these 
members; and
    (iii) Representatives of OPOs, transplant hospitals, voluntary 
health associations, transplant coordinators, histocompatibility 
experts, non-physician transplant professionals, and the general public.
    (2) The Board of Directors shall elect an Executive Committee from 
the membership of the Board. The Executive Committee shall include at 
least one general public member, one OPO representative, approximately 
50 percent transplant surgeons and transplant physicians, and at least 
25 percent transplant candidates, transplant recipients, organ donors, 
and family members.
    (3) The Board of Directors shall appoint an Executive Director of 
the OPTN. The Executive Director may be reappointed upon the Board's 
determination that the responsibilities of this position have been 
accomplished successfully.
    (4) The Board of Directors shall establish such other committees as 
are necessary to perform the duties of the OPTN. Committees established 
by the Board of Directors shall include:
    (i) Representation by transplant coordinators, organ procurement 
organizations, and transplant hospitals, and at least one transplant 
candidate, transplant recipient, organ donor or family member; and
    (ii) To the extent practicable, minority and gender representation 
reflecting the diversity of the population of transplant candidates, 
transplant recipients, organ donors and family members served by the 
OPTN.
    (b) Membership of the OPTN. (1) The OPTN shall admit and retain as 
members the following:
    (i) All organ procurement organizations;
    (ii) Transplant hospitals participating in the Medicare or Medicaid 
programs; and
    (iii) Other organizations, institutions, and individuals that have 
an interest in the fields of organ donation or transplantation.
    (2) To apply for membership in the OPTN:

[[Page 647]]

    (i) An OPO shall provide to the OPTN the name and address of the 
OPO, and the latest year of designation under section 1138(b) of the 
Social Security Act;
    (ii) A transplant hospital shall provide to the OPTN the name and 
address of the hospital, a list of its transplant programs by type of 
organ; and
    (iii) Any other organization, institution, or individual eligible 
under paragraph (c)(1)(iii) of this section shall demonstrate to the 
OPTN an interest in the fields of organ donation or transplantation.
    (3) The OPTN shall accept or reject as members entities or 
individuals described in paragraph (c)(1)(iii) of this section within 90 
days.
    (4) Applicants rejected for membership in the OPTN may appeal to the 
Secretary. Appeals shall be submitted in writing within 30 days of 
rejection of the application. The Secretary may:
    (i) Deny the appeal; or
    (ii) Direct the OPTN to take action consistent with the Secretary's 
response to the appeal.
    (c) Corporate status of the OPTN. (1) The OPTN shall be a private, 
not-for-profit entity.
    (2) The requirements of this section do not apply to any parent, 
sponsoring, or affiliated organization of the OPTN, or to any activities 
of the contracting organization that are not integral to the operation 
of the OPTN. Such an organization is free to establish its own corporate 
procedures.
    (3) No OPTN member is required to become a member of any 
organization that is a parent, sponsor, contractor, or affiliated 
organization of the OPTN, to comply with the by-laws of any such 
organization, or to assume any corporate duties or obligations of any 
such organization.
    (d) Effective date. The organization designated by the Secretary as 
the OPTN shall have until June 30, 2000, or six months from its initial 
designation as the OPTN, whichever is later, to meet the requirements of 
this section, except that the Secretary may extend such period for good 
cause.

[63 FR 16332, Apr. 2, 1998, as amended at 63 FR 35847, July 1, 1998; 64 
FR 56658, Oct. 20, 1999]



Sec. 121.4  OPTN policies: Secretarial review and appeals.

    (a) The OPTN Board of Directors shall be responsible for developing, 
with the advice of the OPTN membership and other interested parties, 
policies within the mission of the OPTN as set forth in section 372 of 
the Act and the Secretary's contract for the operation of the OPTN, 
including:
    (1) Policies for the equitable allocation of cadaveric organs in 
accordance with Sec. 121.8;
    (2) Policies, consistent with recommendations of the Centers for 
Disease Control and Prevention, for the testing of organ donors and 
follow-up of transplant recipients to prevent the spread of infectious 
diseases;
    (3) Policies that reduce inequities resulting from socioeconomic 
status, including, but not limited to:
    (i) Ensuring that payment of the registration fee is not a barrier 
to listing for patients who are unable to pay the fee;
    (ii) Procedures for transplant hospitals to make reasonable efforts 
to obtain from all available sources, financial resources for patients 
unable to pay such that these patients have an opportunity to obtain a 
transplant and necessary follow-up care;
    (iii) Recommendations to private and public payers and service 
providers on ways to improve coverage of organ transplantation and 
necessary follow-up care; and
    (iv) Reform of allocation policies based on assessment of their 
cumulative effect on socioeconomic inequities;
    (4) Policies regarding the training and experience of transplant 
surgeons and transplant physicians in designated transplant programs as 
required by Sec. 121.9;
    (5) Policies for nominating officers and members of the Board of 
Directors; and
    (6) Policies on such other matters as the Secretary directs.
    (b) The Board of Directors shall:
    (1) Provide opportunity for the OPTN membership and other interested 
parties to comment on proposed policies and shall take into account the 
comments received in developing and

[[Page 648]]

adopting policies for implementation by the OPTN; and
    (2) Provide to the Secretary, at least 60 days prior to their 
proposed implementation, proposed policies it recommends to be 
enforceable under Sec. 121.10 (including allocation policies). These 
policies will not be enforceable until approved by the Secretary. The 
Board of Directors shall also provide to the Secretary, at least 60 days 
prior to their proposed implementation, proposed policies on such other 
matters as the Secretary directs. The Secretary will refer significant 
proposed policies to the Advisory Committee on Organ Transplantation 
established under Sec. 121.12, and publish them in the Federal Register 
for public comment. The Secretary also may seek the advice of the 
Advisory Committee on Organ Transplantation established under Sec. 
121.12 on other proposed policies, and publish them in the Federal 
Register for public comment. The Secretary will determine whether the 
proposed policies are consistent with the National Organ Transplant Act 
and this part, taking into account the views of the Advisory Committee 
and public comments. Based on this review, the Secretary may provide 
comments to the OPTN. If the Secretary concludes that a proposed policy 
is inconsistent with the National Organ Transplant Act or this part, the 
Secretary may direct the OPTN to revise the proposed policy consistent 
with the Secretary's direction. If the OPTN does not revise the proposed 
policy in a timely manner, or if the Secretary concludes that the 
proposed revision is inconsistent with the National Organ Transplant Act 
or this part, the Secretary may take such other action as the Secretary 
determines appropriate, but only after additional consultation with the 
Advisory Committee on the proposed action.
    (c) The OPTN Board of Directors shall provide the membership and the 
Secretary with copies of its policies as they are adopted, and make them 
available to the public upon request. The Secretary will publish lists 
of OPTN policies in the Federal Register, indicating which ones are 
enforceable under Sec. 121.10 or subject to potential sanctions of 
section 1138 of the Social Security Act. The OPTN shall also 
continuously maintain OPTN policies for public access on the Internet, 
including current and proposed policies.
    (d) Any interested individual or entity may submit to the Secretary 
in writing critical comments related to the manner in which the OPTN is 
carrying out its duties or Secretarial policies regarding the OPTN. Any 
such comments shall include a statement of the basis for the comments. 
The Secretary will seek, as appropriate, the comments of the OPTN on the 
issues raised in the comments related to OPTN policies or practices. 
Policies or practices that are the subject of critical comments remain 
in effect during the Secretary's review, unless the Secretary directs 
otherwise based on possible risk to the health of patients or to public 
safety. The Secretary will consider the comments in light of the 
National Organ Transplant Act and the regulations under this part and 
may consult with the Advisory Committee on Organ Transplantation 
established under Sec. 121.12. After this review, the Secretary may:
    (1) Reject the comments;
    (2) Direct the OPTN to revise the policies or practices consistent 
with the Secretary's response to the comments; or
    (3) Take such other action as the Secretary determines appropriate.
    (e) The OPTN shall implement policies and shall:
    (1) Provide information to OPTN members about these policies and the 
rationale for them; and
    (2) Update policies developed in accordance with this section to 
accommodate scientific and technological advances.

[63 FR 16332, Apr. 2, 1998, as amended at 64 FR 56658, Oct. 20, 1999]



Sec. 121.5  Listing requirements.

    (a) A transplant hospital which is an OPTN member may list 
individuals, consistent with the OPTN's criteria under Sec. 
121.8(b)(1), only for a designated transplant program.
    (b) Transplant hospitals shall assure that individuals are placed on 
the waiting list as soon as they are determined to be candidates for 
transplantation.

[[Page 649]]

The OPTN shall advise transplant hospitals of the information needed for 
such listing.
    (c) An OPTN member shall pay a registration fee to the OPTN for each 
transplant candidate it places on the waiting list. The amount of such 
fee shall be calculated to cover (together with contract funds awarded 
by the Secretary) the reasonable costs of operating the OPTN and shall 
be determined by the OPTN with the approval of the Secretary. No less 
often than annually, and whether or not a change is proposed, the OPTN 
shall submit to the Secretary a statement of its proposed registration 
fee, together with such supporting information as the Secretary finds 
necessary to determine the reasonableness or adequacy of the fee 
schedule and projected revenues. This submission is due at least three 
months before the beginning of the OPTN's fiscal year. The Secretary 
will approve, modify, or disapprove the amount of the fee within a 
reasonable time of receiving the OPTN's submission.

[63 FR 16332, Apr. 2, 1998, as amended at 64 FR 56659, Oct. 20, 1999]



Sec. 121.6  Organ procurement.

    The suitability of organs donated for transplantation shall be 
determined as follows:
    (a) Tests. An OPTN member procuring an organ shall assure that 
laboratory tests and clinical examinations of potential organ donors are 
performed to determine any contraindications for donor acceptance, in 
accordance with policies established by the OPTN.
    (b) HIV. The OPTN shall adopt and use standards for preventing the 
acquisition of organs from individuals known to be infected with human 
immunodeficiency virus.
    (c) Acceptance criteria. Transplant programs shall establish 
criteria for organ acceptance, and shall provide such criteria to the 
OPTN and the OPOs with which they are affiliated.

[63 FR 16332, Apr. 2, 1998, as amended at 64 FR 56659, Oct. 20, 1999]



Sec. 121.7  Identification of organ recipient.

    (a) List of potential transplant recipients. (1) An OPTN member 
procuring an organ shall operate the OPTN computer match program within 
such time as the OPTN may prescribe to identify and rank potential 
recipients for each cadaveric organ procured.
    (2) The rank order of potential recipients shall be determined for 
each cadaveric organ using the organ specific allocation criteria 
established in accordance with Sec. 121.8.
    (3) When a donor or donor organ does not meet a transplant program's 
donor acceptance criteria, as established under Sec. 121.6(c), 
transplant candidates of that program shall not be ranked among 
potential recipients of that organ and shall not appear on a roster of 
potential recipients of that organ.
    (b) Offer of organ for potential recipients. (1) Organs shall be 
offered for potential recipients in accordance with policies developed 
under Sec. 121.8 and implemented under Sec. 121.4.
    (2) Organs may be offered only to potential recipients listed with 
transplant programs having designated transplant programs of the same 
type as the organ procured.
    (3) An organ offer is made when all information necessary to 
determine whether to transplant the organ into the potential recipient 
has been given to the transplant hospital.
    (4) A transplant program shall either accept or refuse the offered 
organ for the designated potential recipient within such time as the 
OPTN may prescribe. A transplant program shall document and provide to 
the OPO and to the OPTN the reasons for refusal and shall maintain this 
document for one year.
    (c) Transportation of organ to potential recipient--(1) 
Transportation. The OPTN member that procures a donated organ shall 
arrange for transportation of the organ to the transplant hospital.
    (2) Documentation. The OPTN member that is transporting an organ 
shall assure that it is accompanied by written documentation of 
activities conducted to determine the suitability of the organ donor and 
shall maintain this document for one year.

[[Page 650]]

    (3) Packaging. The OPTN member that is transporting an organ shall 
assure that it is packaged in a manner that is designed to maintain the 
viability of the organ.
    (d) Receipt of an organ. Upon receipt of an organ, the transplant 
hospital responsible for the potential recipient's care shall determine 
whether to proceed with the transplant. In the event that an organ is 
not transplanted into the potential recipient, the OPO which has a 
written agreement with the transplant hospital must offer the organ for 
another potential recipient in accordance with paragraph (b)(2) of this 
section.
    (e) Blood vessels considered part of an organ. A blood vessel that 
is considered part of an organ under this part shall be subject to the 
allocation requirements and policies pertaining to the organ with which 
the blood vessel is procured until and unless the transplant center 
receiving the organ determines that the blood vessel is not needed for 
the transplantation of that organ.
    (f) Wastage. Nothing in this section shall prohibit a transplant 
program from transplanting an organ into any medically suitable 
candidate if to do otherwise would result in the organ not being used 
for transplantation. The transplant program shall notify the OPTN and 
the OPO which made the organ offer of the circumstances justifying each 
such action within such time as the OPTN may prescribe.

[63 FR 16332, Apr. 2, 1998, as amended at 64 FR 56659, Oct. 20, 1999; 72 
FR 10925, Mar. 12, 2007]



Sec. 121.8  Allocation of organs.

    (a) Policy development. The Board of Directors established under 
Sec. 121.3 shall develop, in accordance with the policy development 
process described in Sec. 121.4, policies for the equitable allocation 
of cadaveric organs among potential recipients. Such allocation 
policies:
    (1) Shall be based on sound medical judgment;
    (2) Shall seek to achieve the best use of donated organs;
    (3) Shall preserve the ability of a transplant program to decline an 
offer of an organ or not to use the organ for the potential recipient in 
accordance with Sec. 121.7(b)(4)(d) and (e);
    (4) Shall be specific for each organ type or combination of organ 
types to be transplanted into a transplant candidate;
    (5) Shall be designed to avoid wasting organs, to avoid futile 
transplants, to promote patient access to transplantation, and to 
promote the efficient management of organ placement;
    (6) Shall be reviewed periodically and revised as appropriate;
    (7) Shall include appropriate procedures to promote and review 
compliance including, to the extent appropriate, prospective and 
retrospective reviews of each transplant program's application of the 
policies to patients listed or proposed to be listed at the program; and
    (8) Shall not be based on the candidate's place of residence or 
place of listing, except to the extent required by paragraphs (a)(1)-(5) 
of this section.
    (b) Allocation performance goals. Allocation policies shall be 
designed to achieve equitable allocation of organs among patients 
consistent with paragraph (a) of this section through the following 
performance goals:
    (1) Standardizing the criteria for determining suitable transplant 
candidates through the use of minimum criteria (expressed, to the extent 
possible, through objective and measurable medical criteria) for adding 
individuals to, and removing candidates from, organ transplant waiting 
lists;
    (2) Setting priority rankings expressed, to the extent possible, 
through objective and measurable medical criteria, for patients or 
categories of patients who are medically suitable candidates for 
transplantation to receive transplants. These rankings shall be ordered 
from most to least medically urgent (taking into account, in accordance 
with paragraph (a) of this section, and in particular in accordance with 
sound medical judgment, that life sustaining technology allows 
alternative approaches to setting priority ranking for patients). There 
shall be a sufficient number of categories (if categories are used) to 
avoid grouping together patients with substantially different medical 
urgency;

[[Page 651]]

    (3) Distributing organs over as broad a geographic area as feasible 
under paragraphs (a)(1)-(5) of this section, and in order of decreasing 
medical urgency; and
    (4) Applying appropriate performance indicators to assess transplant 
program performance under paragraphs (c)(2)(i) and (c)(2)(ii) of this 
section and reducing the inter-transplant program variance to as small 
as can reasonably be achieved in any performance indicator under 
paragraph (c)(2)(iii) of this section as the Board determines 
appropriate, and under paragraph (c)(2)(iv) of this section. If the 
performance indicator ``waiting time in status'' is used for allocation 
purposes, the OPTN shall seek to reduce the inter-transplant program 
variance in this indicator, as well as in other selected performance 
indicators, to as small as can reasonably be achieved, unless to do so 
would result in transplanting less medically urgent patients or less 
medically urgent patients within a category of patients.
    (c) Allocation performance indicators. (1) Each organ-specific 
allocation policy shall include performance indicators. These indicators 
must measure how well each policy is:
    (i) Achieving the performance goals set out in paragraph (b) of this 
section; and
    (ii) Giving patients, their families, their physicians, and others 
timely and accurate information to assess the performance of transplant 
programs.
    (2) Performance indicators shall include:
    (i) Baseline data on how closely the results of current allocation 
policies approach the performance goals established under paragraph (b) 
of this section;
    (ii) With respect to any proposed change, the amount of projected 
improvement in approaching the performance goals established under 
paragraph (b) of this section;
    (iii) Such other indicators as the Board may propose and the 
Secretary approves; and
    (iv) Such other indicators as the Secretary may require.
    (3) For each organ-specific allocation policy, the OPTN shall 
provide to the Secretary data to assist the Secretary in assessing organ 
procurement and allocation, access to transplantation, the effect of 
allocation policies on programs performing different volumes of 
transplants, and the performance of OPOs and the OPTN contractor. Such 
data shall be required on performance by organ and status category, 
including program-specific data, OPO-specific data, data by program 
size, and data aggregated by organ procurement area, OPTN region, the 
Nation as a whole, and such other geographic areas as the Secretary may 
designate. Such data shall include the following measures of inter-
transplant program variation: risk-adjusted total life-years pre-and 
post-transplant, risk-adjusted patient and graft survival rates 
following transplantation, risk-adjusted waiting time and risk-adjusted 
transplantation rates, as well as data regarding patients whose status 
or medical urgency was misclassified and patients who were 
inappropriately kept off a waiting list or retained on a waiting list. 
Such data shall cover such intervals of time, and be presented using 
confidence intervals or other measures of variance, as may be required 
to avoid spurious results or erroneous interpretation due to small 
numbers of patients covered.
    (d) Transition patient protections--(1) General. When the OPTN 
revises organ allocation policies under this section, it shall consider 
whether to adopt transition procedures that would treat people on the 
waiting list and awaiting transplantation prior to the adoption or 
effective date of the revised policies no less favorably than they would 
have been treated under the previous policies. The transition procedures 
shall be transmitted to the Secretary for review together with the 
revised allocation policies.
    (2) Special rule for initial revision of liver allocation policies. 
When the OPTN transmits to the Secretary its initial revision of the 
liver allocation policies, as directed by paragraph (e)(1) of this 
section, it shall include transition procedures that, to the extent 
feasible, treat each individual on the waiting list and awaiting 
transplantation on October 20, 1999 no less favorably than he or she 
would have been treated had the revised liver allocation policies not

[[Page 652]]

become effective. These transition procedures may be limited in duration 
or applied only to individuals with greater than average medical urgency 
if this would significantly improve administration of the list or if 
such limitations would be applied only after accommodating a substantial 
preponderance of those disadvantaged by the change in the policies.
    (e) Deadlines for initial reviews. (1) The OPTN shall conduct an 
initial review of existing allocation policies and, except as provided 
in paragraph (e)(2) of this section, no later than November 16, 2000 
shall transmit initial revised policies to meet the requirements of 
paragraphs (a) and (b) of this section, together with supporting 
documentation to the Secretary for review in accordance with Sec. 
121.4.
    (2) No later than March 16, 2000 the OPTN shall transmit revised 
policies and supporting documentation for liver allocation to meet the 
requirements of paragraphs (a) and (b) of this section to the Secretary 
for review in accordance with Sec. 121.4. The OPTN may transmit these 
materials without seeking further public comment under Sec. 121.4(b).
    (f) Secretarial review of policies, performance indicators, and 
transition patient protections. The OPTN's transmittal to the Secretary 
of proposed allocation policies and performance indicators shall include 
such supporting material, including the results of model-based computer 
simulations, as the Secretary may require to assess the likely effects 
of policy changes and as are necessary to demonstrate that the proposed 
policies comply with the performance indicators and transition 
procedures of paragraphs (c) and (d) of this section.
    (g) Variances. The OPTN may develop, in accordance with Sec. 121.4, 
experimental policies that test methods of improving allocation. All 
such experimental policies shall be accompanied by a research design and 
include data collection and analysis plans. Such variances shall be time 
limited. Entities or individuals objecting to variances may appeal to 
the Secretary under the procedures of Sec. 121.4.
    (h) Directed donation. Nothing in this section shall prohibit the 
allocation of an organ to a recipient named by those authorized to make 
the donation.

[64 FR 56659, Oct. 20, 1999, as amended at 64 FR 71626, Dec. 21, 1999]



Sec. 121.9  Designated transplant program requirements.

    (a) To receive organs for transplantation, a transplant program in a 
hospital that is a member of the OPTN shall abide by these rules and 
shall:
    (1) Be a transplant program approved by the Secretary for 
reimbursement under Medicare; or
    (2) Be an organ transplant program which has adequate resources to 
provide transplant services to its patients and agrees promptly to 
notify the OPTN and patients awaiting transplants if it becomes inactive 
and which:
    (i) Has letters of agreement or contracts with an OPO;
    (ii) Has on site a transplant surgeon qualified in accordance with 
policies developed under Sec. 121.4;
    (iii) Has on site a transplant physician qualified in accordance 
with policies developed under Sec. 121.4;
    (iv) Has available operating and recovery room resources, intensive 
care resources and surgical beds and transplant program personnel;
    (v) Shows evidence of collaborative involvement with experts in the 
fields of radiology, infectious disease, pathology, immunology, 
anesthesiology, physical therapy and rehabilitation medicine, 
histocompatibility, and immunogenetics and, as appropriate, hepatology, 
pediatrics, nephrology with dialysis capability, and pulmonary medicine 
with respiratory therapy support;
    (vi) Has immediate access to microbiology, clinical chemistry, 
histocompatibility testing, radiology, and blood banking services, as 
well as the capacity to monitor treatment with immunosuppressive drugs; 
and
    (vii) Makes available psychiatric and social support services for 
transplant candidates, transplant recipients, and their families; or
    (3) Be a transplant program in a Department of Veterans Affairs, 
Department of Defense, or other Federal hospital.

[[Page 653]]

    (b) To apply to be a designated transplant program, transplant 
programs shall provide to the OPTN such documents as the OPTN may 
require which show that they meet the requirements of Sec. 121.9(a) 
(1), (2), or (3).
    (c) The OPTN shall, within 90 days, accept or reject applications to 
be a designated transplant program.
    (d) Applicants rejected for designation may appeal to the Secretary. 
Appeals shall be submitted in writing within 30 days of rejection of the 
application. The Secretary may:
    (1) Deny the appeal; or
    (2) Direct the OPTN to take action consistent with the Secretary's 
response to the appeal.

[63 FR 16332, Apr. 2, 1998, as amended at 64 FR 56660, Oct. 20, 1999]



Sec. 121.10  Reviews, evaluation, and enforcement.

    (a) Review and evaluation by the Secretary. The Secretary or her/his 
designee may perform any reviews and evaluations of member OPOs and 
transplant programs which the Secretary deems necessary to carry out 
her/his responsibilities under the Public Health Service Act and the 
Social Security Act.
    (b) Review and evaluation by the OPTN. (1) The OPTN shall design 
appropriate plans and procedures, including survey instruments, a peer 
review process, and data systems, for purposes of:
    (i) Reviewing applications submitted under Sec. 121.3(c) for 
membership in the OPTN;
    (ii) Reviewing applications submitted under Sec. 121.9(b) to be a 
designated transplant program; and
    (iii) Conducting ongoing and periodic reviews and evaluations of 
each member OPO and transplant hospital for compliance with these rules 
and OPTN policies.
    (2) Upon the approval of the Secretary, the OPTN shall furnish 
review plans and procedures, including survey instruments and a 
description of data systems, to each member OPO and transplant hospital. 
The OPTN shall furnish any revisions of these documents to member OPOs 
and hospitals, after approval by the Secretary, prior to their 
implementation.
    (3) At the request of the Secretary, the OPTN shall conduct special 
reviews of OPOs and transplant programs, where the Secretary has reason 
to believe that such entities may not be in compliance with these rules 
or OPTN policies or may be acting in a manner which poses a risk to the 
health of patients or to public safety. The OPTN shall conduct these 
reviews in accordance with such schedules as the Secretary specifies and 
shall make periodic reports to the Secretary of progress on such reviews 
and on other reviews conducted under the requirements of this paragraph.
    (4) The OPTN shall notify the Secretary in a manner prescribed by 
the Secretary within 3 days of all committee and Board of Directors 
meetings in which transplant hospital and OPO compliance with these 
regulations or OPTN policies is considered.
    (c) Enforcement of OPTN rules--(1) OPTN recommendations. The Board 
of Directors shall advise the Secretary of the results of any reviews 
and evaluations conducted under paragraph (b)(1)(iii) or paragraph 
(b)(3) of this section which, in the opinion of the Board, indicate 
noncompliance with these rules or OPTN policies, or indicate a risk to 
the health of patients or to the public safety, and shall provide any 
recommendations for appropriate action by the Secretary. Appropriate 
action may include removal of designation as a transplant program under 
Sec. 121.9, termination of a transplant hospital's participation in 
Medicare or Medicaid, termination of a transplant hospital's 
reimbursement under Medicare and Medicaid, termination of an OPO's 
reimbursement under Medicare and Medicaid, if the noncompliance is with 
a policy designated by the Secretary as covered by section 1138 of the 
Social Security Act, or such other compliance or enforcement measures 
contained in policies developed under Sec. 121.4.
    (2) Secretary's action on recommendations. Upon the Secretary's 
review of the Board of Directors' recommendations, the Secretary may:
    (i) Request further information from the Board of Directors or the 
alleged violator, or both;

[[Page 654]]

    (ii) Decline to accept the recommendation;
    (iii) Accept the recommendation, and notify the alleged violator of 
the Secretary's decision; or
    (iv) Take such other action as the Secretary deems necessary.

[63 FR 16332, Apr. 2, 1998, as amended at 64 FR 56661, Oct. 20, 1999]



Sec. 121.11  Record maintenance and reporting requirements.

    (a) Record maintenance. Records shall be maintained and made 
available subject to OPTN policies and applicable limitations based on 
personal privacy as follows:
    (1) The OPTN and the Scientific Registry, as appropriate, shall:
    (i) Maintain and operate an automated system for managing 
information about transplant candidates, transplant recipients, and 
organ donors, including a computerized list of individuals waiting for 
transplants;
    (ii) Maintain records of all transplant candidates, all organ donors 
and all transplant recipients;
    (iii) Operate, maintain, receive, publish, and transmit such records 
and information electronically, to the extent feasible, except when hard 
copy is requested; and
    (iv) In making information available, provide manuals, forms, flow 
charts, operating instructions, or other explanatory materials as 
necessary to understand, interpret, and use the information accurately 
and efficiently.
    (2) Organ procurement organizations and transplant programs--(i) 
Maintenance of records. All OPOs and transplant programs shall maintain 
such records pertaining to each potential donor identified, each organ 
retrieved, each recipient transplanted and such other transplantation-
related matters as the Secretary deems necessary to carry out her/his 
responsibilities under the Act. The OPO or transplant program shall 
maintain these records for seven years.
    (ii) Access to facilities and records. OPOs and transplant hospitals 
shall permit the Secretary and the Comptroller General, or their 
designees, to inspect facilities and records pertaining to any aspect of 
services performed related to organ donation and transplantation.
    (b) Reporting requirements. (1) The OPTN and the Scientific 
Registry, as appropriate, shall:
    (i) In addition to special reports which the Secretary may require, 
submit to the Secretary a report not less than once every fiscal year on 
a schedule prescribed by the Secretary. The report shall include the 
following information in a form prescribed by the Secretary:
    (A) Information that the Secretary prescribes as necessary to assess 
the effectiveness of the Nation's organ donation, procurement and 
transplantation system;
    (B) Information that the Secretary deems necessary for the report to 
Congress required by Section 376 of the Act; and,
    (C) Any other information that the Secretary prescribes.
    (ii) Provide to the Scientific Registry data on transplant 
candidates and recipients, and other information that the Secretary 
deems appropriate. The information shall be provided in the form and on 
the schedule prescribed by the Secretary;
    (iii) Provide to the Secretary any data that the Secretary requests;
    (iv) Make available to the public timely and accurate program-
specific information on the performance of transplant programs. This 
shall include free dissemination over the Internet, and shall be 
presented, explained, and organized as necessary to understand, 
interpret, and use the information accurately and efficiently. These 
data shall be updated no less frequently than every six months (or such 
longer period as the Secretary determines would provide more useful 
information to patients, their families, and their physicians), and 
shall include risk-adjusted probabilities of receiving a transplant or 
dying while awaiting a transplant, risk-adjusted graft and patient 
survival following the transplant, and risk-adjusted overall survival 
following listing for such intervals as the Secretary shall prescribe. 
These data shall include confidence intervals or other measures that 
provide information on the extent to which chance

[[Page 655]]

may influence transplant program-specific results. Such data shall also 
include such other cost or performance information as the Secretary may 
specify, including but not limited to transplant program-specific 
information on waiting time within medical status, organ wastage, and 
refusal of organ offers. These data shall also be presented no more than 
six months later than the period to which they apply;
    (v) Respond to reasonable requests from the public for data needed 
for bona fide research or analysis purposes, to the extent that the 
OPTN's or Scientific Registry's resources permit, or as directed by the 
Secretary. The OPTN or the Scientific Registry may impose reasonable 
charges for the separable costs of responding to such requests. Patient-
identified data may be made available to bona fide researchers upon a 
showing that the research design requires such data for matching or 
other purposes, and that appropriate confidentiality protections, 
including destruction of patient identifiers upon completion of 
matching, will be followed. All requests shall be processed 
expeditiously, with data normally made available within 30 days from the 
date of request;
    (vi) Respond to reasonable requests from the public for data needed 
to assess the performance of the OPTN or Scientific Registry, to assess 
individual transplant programs, or for other purposes. The OPTN or 
Scientific Registry may impose charges for the separable costs of 
responding to such requests. An estimate of such charges shall be 
provided to the requester before processing the request. All requests 
should be processed expeditiously, with data normally made available 
within 30 days from the date of request; and
    (vii) Provide data to an OPTN member, without charge, that has been 
assembled, stored, or transformed from data originally supplied by that 
member.
    (2) An organ procurement organization or transplant hospital shall, 
as specified from time to time by the Secretary, submit to the OPTN, to 
the Scientific Registry, as appropriate, and to the Secretary 
information regarding transplantation candidates, transplant recipients, 
donors of organs, transplant program costs and performance, and other 
information that the Secretary deems appropriate. Such information shall 
be in the form required and shall be submitted in accordance with the 
schedule prescribed. No restrictions on subsequent redisclosure may be 
imposed by any organ procurement organization or transplant hospital.
    (c) Public access to data. The Secretary may release to the public 
information collected under this section when the Secretary determines 
that the public interest will be served by such release. The information 
which may be released includes, but is not limited to, information on 
the comparative costs and patient outcomes at each transplant program 
affiliated with the OPTN, transplant program personnel, information 
regarding instances in which transplant programs refuse offers of organs 
to their patients, information regarding characteristics of individual 
transplant programs, information regarding waiting time at individual 
transplant programs, and such other data as the Secretary determines 
will provide information to patients, their families, and their 
physicians that will assist them in making decisions regarding 
transplantation.

[63 FR 16332, Apr. 2, 1998, as amended at 64 FR 56661, Oct. 20, 1999]



Sec. 121.12  Advisory Committee on Organ Transplantation.

    The Secretary will establish, consistent with the Federal Advisory 
Committee Act, the Advisory Committee on Organ Transplantation. The 
Secretary may seek the comments of the Advisory Committee on proposed 
OPTN policies and such other matters as the Secretary determines.

[64 FR 56661, Oct. 20, 1999]



Sec. 121.13  Definition of Human Organ Under section 301 of the National Organ 

Transplant Act, as amended.

    ``Human organ,'' as covered by section 301 of the National Organ 
Transplant Act, as amended, means the human (including fetal) kidney, 
liver, heart, lung, pancreas, bone marrow, cornea, eye, bone, skin, and 
intestine,

[[Page 656]]

including the esophagus, stomach, small and/or large intestine, or any 
portion of the gastrointestinal tract.

[72 FR 10619, Mar. 9, 2007]



PART 124_MEDICAL FACILITY CONSTRUCTION AND MODERNIZATION--Table of Contents




 Subpart A_Project Grants for Public Medical Facility Construction and 
                              Modernization

Sec.
124.1 Applicability.
124.2 Definitions.
124.3 Eligibility.
124.4 Application.
124.5 Grant evaluation and award.
124.6 Grant payments.
124.7 Use of grant funds.
124.8 Grantee accountability.
124.9 Nondiscrimination.
124.10 Additional conditions.
124.11 Applicability of 45 CFR part 74.

Subparts B-E [Reserved]

Subpart F_Reasonable Volume of Uncompensated Services To Persons Unable 
                                 to Pay

124.501 Applicability.
124.502 Definitions.
124.503 Compliance level.
124.504 Notice of availability of uncompensated services.
124.505 Eligibility criteria.
124.506 Allocation of services; plan requirement.
124.507 Written determinations of eligibility.
124.508 Cessation of uncompensated services.
124.509 Reporting requirements.
124.510 Record maintenance requirements.
124.511 Investigation and determination of compliance.
124.512 Enforcement.
124.513 Public facility compliance alternative.
124.514 Compliance alternative for facilities with small annual 
          obligations.
124.515 Compliance alternative for community health centers, migrant 
          health centers and certain National Health Service Corps 
          sites.
124.516 Charitable facility compliance alternative.
124.517 Unrestricted availability compliance alternative for Title VI-
          assisted facilities.
124.518 Agreements with State agencies.

                       Subpart G_Community Service

124.601 Applicability.
124.602 Definitions.
124.603 Provision of services.
124.604 Posted notice.
124.605 Reporting and record maintenance requirements.
124.606 Investigation and enforcement.
124.607 Agreements with State agencies.

Appendix to Subpart G--Interim Procedures and Criteria for Review by 
          Health Systems Agencies of Applications Under Section 1625 of 
          the Public Health Service Act

                    Subpart H_Recovery of Grant Funds

124.701 Applicability.
124.702 Definitions.
124.703 Federal right of recovery.
124.704 Notification of sale, transfer, or change of use.
124.705 Amount of recovery.
124.706 Calculation of interest.
124.707 Waiver of recovery where facility is sold or transferred to a 
          proprietary entity.
124.708 Waiver of recovery--good cause for other use of facility.
124.709 Withdrawal of waiver.

    Authority: Secs. 215, 1602, 1625, Public Health Service Act (42 
U.S.C. 216, 300o-1, 300r), unless otherwise noted.

    Source: 42 FR 62270, Dec. 9, 1977, unless otherwise noted.



 Subpart A_Project Grants for Public Medical Facility Construction and 
                              Modernization



Sec. 124.1  Applicability.

    The regulations of this subpart are applicable to grants under 
section 1625 of the Public Health Service Act for construction and 
modernization projects designed to:
    (a) Eliminate or prevent imminent safety hazards as defined by 
Federal, State or local fire, building, or life safety codes or 
regulations, or
    (b) Avoid noncompliance with State or voluntary licensure or 
accreditation standards.



Sec. 124.2  Definitions.

    As used in this subpart:
    (a) Act means the Public Health Service Act, as amended.
    (b) Construction means construction of new buildings and initial 
equipment of such buildings and, in any case in

[[Page 657]]

which it will help to provide a service not previously provided in the 
community, equipment of any buildings. It includes architect's fees, but 
excludes the cost of off-site improvements and, except with respect to 
public health centers, the cost of the acquistion of land.
    (c) Cost means the amount found by the Secretary to be necessary for 
construction or modernization under a project, except that such term 
does not include any amount found by the Secretary to be attributable to 
expansion of the bed capacity of any facility.
    (d) Equipment means those items which are necessary for the 
functioning of the facility but does not include items of current 
operating expense such as food, fuel, pharmaceuticals, dressings, paper, 
printed forms, and housekeeping supplies.
    (e) Facility for long-term care means a facility (including a 
skilled nursing care or intermediate care facility), providing inpatient 
care for convalescent or chronic disease patients who require skilled 
nursing or intermediate care and related medical services:
    (1) Which is a hospital (other than a hospital primarily for the 
care and treatment of mentally ill or tuberculosis patients) or is 
operated in connection with a hospital, or
    (2) In which such care and medical services are prescribed by, or 
are performed under the general direction of, persons licensed to 
practice medicine or surgery in the State.
    (f) Health systems agency means an agency which has been 
conditionally or fully designated pursuant to section 1515 of the Act 
and 42 CFR part 122.
    (g) Hospital includes general, tuberculosis, and other types of 
hospitals, and related facilities such as laboratories, outpatient 
departments, nurses' home facilities, extended care facilities, 
facilities related to programs for home health services, self-care 
units, and central service facilities, operated in connection with 
hospitals, and education or training facilities for health professional 
personnel operated as an integral part of a hospital, but does not 
include any facility furnishing primarily domiciliary care.
    (h) Major repair means those repairs to an existing building, 
excluding routine maintenance, which restore the building to a sound 
state, the cost of which is a least 10 percent of plant value or 
$200,000, whichever is greater. Plant value means the historic book 
value of the building at the time of application for assistance under 
this subpart.
    (i) Medical facility means a hospital, public health center, 
outpatient medical facility, rehabilitation facility, or a facility for 
long-term care.
    (j) Modernization means the alteration, expansion (excluding 
expansion which increases bed capacity), major repair, remodeling, 
replacement, and renovation of existing buildings (including initial 
equipment thereof), and the replacement of obsolete equipment of 
existing buildings, including energy conservation projects.
    (k) Outpatient medical facility means a facility, located in or 
apart from a hospital, for the diagnosis or diagnosis and treatment of 
ambulatory patients (including ambulatory inpatients):
    (1) Which is operated in connection with a hospital, or
    (2) In which patient care of a specialized nature (such as in an eye 
clinic, dental clinic, or ambulatory surgical center) is provided under 
the professional supervision of persons licensed to practice medicine or 
surgery in the State, or in the case of dental diagnosis or treatment, 
under the professional supervision of persons licensed to practice 
dentistry in the State, or
    (3) Which offers to patients not requiring hospitalization the 
services of licensed physicians in various medical specialties, and 
which provides to its patients a reasonably full range of diagnostic and 
treatment services.
    (l) Public health center means a publicly owned facility for the 
provision of public health services, including related facilities such 
as laboratories, clinics, and administrative offices operated in 
connection with such a facility.
    (m) Quasi-public corporation means a private, nonprofit corporation 
which has been formally given one or more governmental powers by a 
general-purpose unit of government to enable it to carry out its work.

[[Page 658]]

    (n) Rehabilitation facility means a facility which is operated for 
the primary purpose of assisting in the rehabilitation of disabled 
persons through an integrated program of medical evaluation and 
services, and psychological, social, or vocational evaluation and 
services, under competent professional supervision, and in the case of 
which the major portion of the required evaluation and services is 
furnished within the facility; and either the facility is operated in 
connection with a hospital, or all medical and related health services 
are prescribed by, or are under the general direction of persons 
licensed to practice medicine or surgery in the State.
    (o) Secretary means the Secretary of Health and Human Services and 
any other officer or employee of the Department of Health and Human 
Services to whom the authority involved has been delegated.
    (p) State means any one of the several States, the Commonwealth of 
Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific 
Islands, the Virgin Islands, and the District of Columbia.
    (q) State health planning and development agency or State Agency 
means the agency of a State government which has been conditionally or 
fully designated under section 1521 of the Act and 42 CFR part 123.
    (r) Title means a fee simple, or such other estate or interest in 
the project site (including a leasehold on which the rental does not 
exceed 4 percent of the value of the land) as the Secretary finds 
sufficient to assure undisturbed use and possession for the purpose of 
construction or modernization and operation of the project for a period 
of not less than twenty years.
    (s) Urban or rural poverty area means a census tract, census county 
division, or minor civil division, as applicable, in which the 
percentage of the residents with incomes below the poverty level, as 
defined by the Secretary of Commerce is not less than the percentage 
derived in accordance with the following sentence. This percentage shall 
be derived so that the percentage of the total population of the United 
States residing in all such areas is equal to the percentage of the 
total population of the United States with incomes below such poverty 
level, plus five percent.



Sec. 124.3  Eligibility.

    (a) Eligible applicants. A grant under section 1625 may only be made 
to a State or political subdivision of a State, including any city, 
town, county, borough, hospital district authority, or public or quasi-
public corporation for a project described in paragraph (b) of this 
section for a medical facility owned, operated, or owned and operated by 
the State or political subdivision.
    (b) Eligible project. A grant under section 1625 may be made only 
for a construction and/or modernization project designed to:
    (1) Eliminate or prevent safety hazards which under Federal, State, 
and/or local fire, building or life safety codes or regulations, will, 
in the judgment of the Secretary result in one or more of the following:
    (i) Loss of licensure for the facility.
    (ii) Closing of all or a substantial part of the facility,
    (iii) Loss of eligibility for reimbursement under title XVIII or 
title XIX of the Social Security Act; or
    (2) Avoid noncompliance with State licensure or voluntary 
accreditation standards where noncompliance will, in the judgment of the 
Secretary, result in one or both of the following:
    (i) Loss of licensure for the facility,
    (ii) Loss of accreditation resulting in loss of eligibility for 
reimbursement under title XVIII or title XIX of the Social Security Act.



Sec. 124.4  Application.

    An application for a grant under this subpart must be submitted 
directly to the Secretary at such time and in such form and manner as 
the Secretary may prescribe. The application must be executed by an 
individual authorized to act for the applicant and assume on behalf of 
the applicant the obligations imposed by the Act, this subpart, and the 
terms and conditions of the grant. The application must contain the 
following:
    (a) A description of the site of the project.

[[Page 659]]

    (b) A full description, with all appropriate documentation, of:
    (1) The imminent safety hazards, licensure and/or accreditation 
problems of the facility;
    (2) The type and amount of assistance sought under this subpart;
    (3) The construction of modernization project for which funds are 
sought, describing how it will remedy the problems described pursuant to 
paragraph (b)(1) of this section, with a complete schedule for the 
proposed construction or modernization; and
    (4) How failure to remedy the problems described pursuant to 
paragraph (b) (1) of this section will affect the population served by 
the facility.
    (c) In the case of a modernization project for continuation of 
existing health services, a finding by the State Agency of the continued 
need for such services. In the case of a construction or modernization 
project for new health services, a finding by the State Agency of the 
need for such services. The finding of need shall be based on the 
following criteria:
    (1) In a State which has a program approved by the Secretary under 
section 1523(a)(4)(B) of the Act, a State certificate of need program, 
or a program under section 1122 of the Social Security Act, the State 
Agency shall use the criteria used in conducting reviews under such 
program. In a State which has more than one such program, the State 
Agency shall use the criteria of one of the programs and notify the 
Secretary of the program criteria used.
    (2) In a State which does not have a program approved by the 
Secretary under section 1523(a)(4)(B) of the Act, a State certificate of 
need program or a program under section 1122 of the Social Security Act, 
the State Agency shall base its finding of need on the following 
criteria:
    (i) Whether the proposed project is needed or projected as necessary 
to meet the needs in the community in terms of health services required; 
Provided, That projects for highly specialized services (such as open-
heart surgery, renal transplantation, or radiation therapy) which will 
draw from patient populations outside the community in which the project 
is situated will receive appropriate consideration;
    (ii) Whether the proposed project can be adquately staffed and 
operated when completed;
    (iii) Whether the proposed capital expenditure is economically 
feasible and can be accommodated in the patient charge structure of the 
health facility without unreasonable increases; and
    (iv) Whether the project will foster cost containment or improved 
quality of care through improved efficiency and productivity, including 
promotion of cost-effective factors such as ambulatory care, preventive 
health care services, home health care, and design and construction 
economies, or through increased competition between different health 
services delivery systems.
    (d) [Reserved]
    (e) An assurance that adequate financial support will be available 
for completion of the project, supported by a detailed project budget 
satisfactory to the Secretary which includes all existing and 
anticipated sources of funds for the project.
    (f) An assurance that adequate financial support will be available 
for maintenance and operation of the project when completed, supported 
by budgets and detailed expenditure and revenue information satisfactory 
to the Secretary for both the facility and the applicant for the past 
three fiscal years and budget and projections of expenditures and 
revenue for the future three fiscal years. Where a certificate of need 
or a favorable finding under section 1122 of the Social Security Act is 
required in order for the project to operate and/or receive 
reimbursement from governmental programs for health services provided, 
assurance from the applicant satisfactory to the Secretary that the 
applicant will submit, consistent with the provisions of Sec. 124.5(d), 
any such required certificates of need and/or section 1122 finding.
    (g) An assurance that the applicant would not be able to complete 
the project without the grant applied for, supported by a description of 
all efforts to obtain funds needed to complete the project and the 
results of such efforts.
    (h) An assurance that all times after the application is approved 
there will

[[Page 660]]

be made available in the facility or portion thereof to be constructed 
or modernized, a reasonable volume of services to persons unable to pay 
therefor. The applicant shall comply with the standards and procedures 
of 42 CFR 53.111, except as the Secretary may prescribe pursuant to 
section 1602(6) of the Act. The functions of the State Agency designated 
under section 604 of the Act under 42 CFR 53.111 will be performed by 
the Secretary, except to the extent they are otherwise assigned.
    (i) An assurance that at all times after the application is approved 
the facility or portion thereof to be constructed or modernized will be 
made available to all persons residing or employed in the area served by 
the facility. The applicant shall comply with the standards and 
procedures of 42 CFR 53.113, except as the Secretary may prescribe 
pursuant to section 1602(6) of the Act. The functions of the State 
Agency designated under section 604 of the Act under 42 CFR 53.113 will 
be performed by the Secretary, except to the extent they are otherwise 
assigned.
    (j) An assurance that title to the project site is or will be vested 
in one or more of the entities filing the application or in a public or 
other nonprofit entity which is to operate the facility on completion of 
the project, with such documentation as the Secretary may require.
    (k) In the case of an application for construction or modernization 
of an outpatient medical facility, an assurance, supported by a written 
transfer agreement (or written documentation that such agreement will be 
obtained) with identified hospitals, that the services of a general 
hospital will be available to patients at such facility who are in need 
of hospital care.
    (l) Evidence that: (1) The appropriate health systems agency has 
been given the opportunity to review the application in accordance with 
section 1513(e) of the Act and the requirements of the appendix to this 
subpart, with the result of any such review.
    (2) The application has been reviewed in accordance with the 
applicable requirements of OMB Circular A-95.
    (m) An analysis satisfactory to the Secretary and such other 
information and materials as the Secretary may require concerning the 
environmental impact of the proposed construction or modernization 
project.
    (n) An assessment satisfactory to the Secretary of the project site 
in light of the considerations set forth in Executive Order 11296 (31 FR 
10663, August 10, 1966) concerning the evaluation of flood hazards in 
locating Federally supported facilities.
    (o) In the case of a project which involves the displacement of 
persons or businesses, an assurance that the applicant will comply with 
the applicable provisions of the Uniform Relocation Assistance and Real 
Property Acquisition Policies Act of 1970 (42 U.S.C. 4601 et seq.).
    (p)(1) An assurance that all laborers and mechanics employed by 
contractors or subcontractors in the performance of work on a project 
will be paid wages at rates not less than those prevailing on similar 
construction in the locality as determined by the Secretary of Labor in 
accordance with the Act of March 3, 1931 (40 U.S.C. 276a-276a-5, known 
as the Davis-Bacon Act); and
    (2) An assurance that the following conditions and provisions will 
be included in all construction contracts:
    (i) The provisions of ``DHHS Requirements for Federally Assisted 
Construction Contracts Regarding Labor Standards and Equal Employment 
Opportunity,'' Form DHHS 514 (rev. July 1976) (issued by the Office of 
Grants and Procurement Management, U.S. Department of Health and Human 
Services) pertaining to the Davis-Bacon Act, the Contract Work Hours 
Standards Act, and the Copeland Act (Anti-Kickback) regulations except 
in the case of contracts in the amount of $2,000 or less; and pertaining 
to Executive Order 11246, September 24, 1965 (30 FR 12319), relating to 
nondiscrimination in construction contract employment except in the case 
of contracts in the amount of $10,000 or less, and
    (ii) Representatives of the Secretary will have access at all 
reasonable times to work wherever it is in preparation or progress, and 
the contractor shall provide proper facilities for such access and 
inspection.

[[Page 661]]

    (q) Such other information as the Secretary may require.

[42 FR 62270, Dec. 9, 1977, as amended at 49 FR 33021, Aug. 20, 1984]



Sec. 124.5  Grant evaluation and award.

    (a)(1) Within the limits of funds available for such purpose, the 
Secretary may award grants under this subpart for project costs to 
applicants with approvable applications therefor which will, in his 
judgment, best promote the purposes of section 1625 of the Act, taking 
into consideration:
    (i) The severity and seriousness of the safety hazard, licensure or 
accreditation problem or problems.
    (ii) The relative need of the population to be served for the 
services to be provided, including the availability of alternatives for 
meeting the need.
    (iii) The financial need of the applicant.
    (iv) The extent to which the facility will serve persons below the 
poverty level, as determined by the Secretary of Commerce.
    (v) The extent to which the project will foster cost containment or 
improve the quality of care through enhanced efficiency and 
productivity.
    (2) Priority for funding shall be based on the extent to which 
services will be made available relative to the cost of the project.
    (b) The amount of any grant under this subpart may not exceed 75 
percent of the cost of the project for which the grant is made unless 
the project is located in an area determined by the Secretary to be an 
urban or rural poverty area, in which case the grant may, as determined 
by the Secretary, cover up to 100 percent of such costs.
    (c) If an applicant has not entered into a legally enforceable fixed 
price contract for the project for which funds are awarded under this 
subpart within 180 days of the date of the grant award, the grant award 
will automatically become null and void.
    (d) Where a grant has been awarded to an applicant under this 
subpart on the condition that any applicable certificates of need and 
section 1122 finding required under Sec. 124.4(f) will be provided, if 
such certificates and finding have not been received by the Secretary 
within 180 days of the grant award, the grant award will automatically 
become null and void.



Sec. 124.6  Grant payments.

    Grant payments shall be made to the applicant in accordance with the 
requirements of subpart K of 45 CFR part 74.



Sec. 124.7  Use of grant funds.

    Any funds granted pursuant to this subpart, as well as funds assured 
by the applicant for the project, shall be expended solely for carrying 
out the approved project in accordance with section 1625 of the Act, the 
regulations of this subpart, the terms and conditions of the grant 
award, and the applicable cost principles prescribed by subpart Q of 45 
CFR part 74.



Sec. 124.8  Grantee accountability.

    (a) Records requirements. (1) Applicants who have received Federal 
assistance under this subpart shall maintain, in accounting records 
which are separate from the records of all other funds, records which 
fully disclose the following:
    (i) The amount of all payments received from the Secretary under 
this subpart,
    (ii) Amounts and sources of all funds, in addition to funds received 
under this subpart, applied to the construction or modernization project 
funded under this subpart,
    (iii) Disposition of all funds for the construction or modernization 
project funded under this subpart,
    (iv) Total cost of the project approved under this subpart, and
    (2) Upon request, applicants shall make such records, books, papers, 
or other documents available to the Secretary and the Comptroller 
General of the United States or any of their duly authorized 
representatives which, in their opinion, may be related or pertinent to 
the grant under this subpart.
    (b) Annual financial statement. An applicant who receives grant 
assistance under this subpart shall, not later than 120 days after the 
end of its fiscal year, unless a longer period is approved by the 
Secretary for good cause shown, file an annual financial statement which 
meets the requirements of section 1634 of the Act.

[[Page 662]]



Sec. 124.9  Nondiscrimination.

    (a) Attention is called to the requirements of title VI of the Civil 
Rights Act of 1964 (78 Stat. 252, 42 U.S.C. 2000d et seq.) and in that 
particular section 601 of such Act which provides that no person in the 
United States shall, on the grounds of race, color or national origin be 
excluded from participation in, be denied the benefits of, or be 
subjected to discrimination under any program or activity receiving 
Federal financial assistance. A regulation implementing such title VI, 
which is applicable to grants made under this subpart, has been issued 
by the Secretary with the approval of the President (45 CFR part 80).
    (b) Attention is called to the requirements of section 504 of the 
Rehabilitation Act of 1973, as amended, which provides that no otherwise 
qualified handicapped individual in the United States shall, solely by 
reason of the handicap, be excluded from participation in, be denied the 
benefits of, or be subjected to discrimination under any program or 
activity receiving Federal financial assistance. A regulation 
implementing section 504 has been issued (45 CFR part 84 (42 FR 22676, 
May 4, 1977)).
    (c) All portions and services of the entire facility for the 
construction or modernization of which, or in connection with which aid 
under the Act is sought must be made available without discrimination on 
account of creed and the applicant may not discriminate against any 
qualified person on account of creed with respect to the privilege of 
professional practice in the facility.
    (d) Attention is also called to the requirements of title IX of the 
Education amendments of 1972 and in particular to section 901 of such 
Act (20 U.S.C. 1681) which provides that no person in the United States 
shall, on the basis of sex be excluded from participation in, be denied 
the benefits of, or be subjected to discrimination under any education 
program or activity receiving Federal financial assistance (45 CFR part 
86).
    (e) Each construction contract is subject to the condition that the 
applicant shall comply with the requirements of section 321 of the 
Comprehensive Alcohol Abuse and Alcoholism Prevention, Treatment, and 
Rehabilitation Act of 1970, as amended, which provides that alcohol 
abusers and alcoholics who are suffering from medical conditions shall 
not be discriminated against in admission or treatment, solely because 
of their alcohol abuse or alcoholism by any private or public general 
hospital that receives support in any form from any federally funded 
program.
    (f) Each construction contract is subject to the condition that the 
applicant shall comply with the requirements of section 407 of the Drug 
Abuse Office and Treatment Act of 1972, as amended, which provides that 
drug abusers who are suffering from medical conditions shall not be 
discriminated against because of their drug abuse or drug dependence, by 
any private or public general hospital that receives support in any form 
from any federally funded program.



Sec. 124.10  Additional conditions.

    The Secretary may impose additional conditions prior to or at the 
time of any grant award when in the Secretary's judgment such conditions 
are necessary to assure or protect advancement of the project in 
accordance with the purposes of the Act and the regulations of this 
subpart or the conservation of grant funds.



Sec. 124.11  Applicability of 45 CFR part 74.

    The provisions of 45 CFR part 74, establishing uniform 
administrative requirements and cost principles, shall apply to all 
grants under this subpart to State and local governments as those terms 
are defined in subpart A of that part 74, except to the extent 
inconsistent with this subpart. The relevant provisions of the following 
subparts of part 74 shall also apply to grants to all other grantee 
organizations under this subpart.

                             45 CFR Part 74

Subpart:
A General.
B Cash depositories.
C Bonding and insurance.
F Grant-related income.
G Matching and cost sharing.
L Budget revision procedures.

[[Page 663]]

M Grant closeout, suspension, and termination.
O Property.
P Procurement standards.
Q Cost principles.

Subparts B-E [Reserved]



Subpart F_Reasonable Volume of Uncompensated Services to Persons Unable 
                                 To Pay

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

    Source: 52 FR 46031, Dec. 3, 1987, unless otherwise noted.



Sec. 124.501  Applicability.

    (a) The provisions of this subpart apply to any recipient of Federal 
assistance under title VI or XVI of the Public Health Service Act that 
gave an assurance that it would make available, in the facility or 
portion of the facility constructed, modernized or converted with that 
assistance, a reasonable volume of services to persons unable to pay for 
the services.
    (b) The provisions of this subpart apply to facilities for the 
following periods:
    (1) Facilities assisted under title VI. Except as otherwise herein 
provided, a facility assisted under title VI of the Act shall provide 
uncompensated services at the annual compliance level required by Sec. 
124.503(a) for:
    (i) Twenty years after the completion of construction, in the case 
of a facility for which the Secretary provided grant assistance under 
section 606 of the Act; or
    (ii) The period from completion of construction until the amount of 
a direct loan under sections 610 and 623 of the Act, or the amount of a 
loan with respect to which the Secretary provided a guarantee and 
interest subsidy under section 623 of the Act, is repaid, in the case of 
a facility for which such a loan was made.
    (iii) ``Completion of construction'' means:
    (A) The date on which the Secretary determines the facility was 
opened for service;
    (B) If the opening date is not available, it means the date on which 
the Secretary approved the final part of the facility's application for 
assistance under title VI of the Act;
    (C) If the date of final approval is not available, it means 
whatever date the Secretary determines most reasonably approximates the 
date of final approval.
    (2) Facilities assisted under title XVI. The provisions of this 
subpart apply to a facility assisted under title XVI of the Act at all 
times following the Secretary's approval of the facility's application 
for assistance under title XVI, except that if the facility does not at 
the time of that approval provide health services, the assurance applies 
at all times following the facility's initial provision of health 
services to patients, as determined by the Secretary.



Sec. 124.502  Definitions.

    As used in this subpart--
    (a) Act means the Public Health Service Act, as amended.
    (b) Allowable credit for services provided to a specific patient 
means the lesser of the facility's usual charge for those services, or 
the usual charge multiplied by the percentage which the total allowable 
cost as reported by the facility in the facility's preceding fiscal year 
under title XVIII of the Social Security Act (42 U.S.C. 1395, et seq.) 
and the implementing regulations (42 CFR part 413) bears to the 
facility's total patient revenues for the year.
    (c) Applicant means a person who requests uncompensated services or 
on whose behalf uncompensated services are requested.
    (d) CPI means the National Consumer Price Index for medical care.
    (e) Facility means an entity that received assistance under title VI 
or XVI of the Act and provided an assurance that it would provide a 
reasonable volume of services to persons unable to pay for the services.
    (f) Federal assistance means assistance received by the facility 
under title VI or title XVI of the Act and any assistance supplementary 
to that title VI or title XVI assistance received by the facility under 
any of the following acts: the District of Columbia Medical Facilities 
Construction Act of 1968, 82 Stat. 631 (Pub. L. 90-457); the Public 
Works Acceleration Act of 1962 (42 U.S.C. 2641, et seq.); the Public 
Works

[[Page 664]]

and Economic Development Act of 1965 (42 U.S.C. 3121, et seq.); the 
Appalachian Regional Development Act of 1965, as amended (40 U.S.C. 
App.); the Local Public Works Capital Development and Investment Act of 
1976 (Pub. L. 94-369). In the case of a loan guaranteed by the Secretary 
with an interest subsidy, the amount of Federal assistance under title 
VI or title XVI for a fiscal year is the total amount of the interest 
subsidy that the Secretary will have paid by the close of that fiscal 
year, as well as any other payments which the Secretary has made as of 
the beginning of the fiscal year on behalf of the facility in connection 
with the loan guarantee or the direct loan which has been sold.
    (g) Fiscal year means the facility's fiscal year.
    (h) Nursing home means a facility which received Federal assistance 
for and operates as a facility for long-term care as defined at, as 
applicable, section 645(h) or section 1624(6) of the Act.
    (i) Operating costs for any fiscal year means the total operating 
expenses of a facility as set forth in an audited financial statement, 
minus the amount of reimbursement, if any, received (or if not received, 
claimed) in that year under titles XVIII and XIX of the Social Security 
Act.
    (j) Persons unable to pay means persons who meet the eligibility 
criteria set out in Sec. 124.505.
    (k) Request for uncompensated services means any indication by or on 
behalf of an individual seeking services of the facility of the 
individual's inability to pay for services. A request for uncompensated 
services may be made at any time, including following institution of a 
collection action against the individual.
    (l) Secretary means the Secretary of Health and Human Services or 
[his or her] delegatee.
    (m) Uncompensated services means:
    (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. The 
amount of uncompensated services provided in a fiscal year is the total 
allowable credit for services less the amount charged for the services 
following an eligibility determination. Excluded are services provided 
more than 96 hours following notification to the facility by a quality 
improvement organization that it disapproved the services under section 
1155(a)(1) or section 1154(a)(1) of the Social Security Act.
    (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 quality improvement 
organization that it disapproved the services under section 1155(a)(1) 
or section 1154(a)(1) of the Social Security Act.

[52 FR 46031, Dec. 3, 1987, as amended at 59 FR 44639, Aug. 30, 1994]



Sec. 124.503  Compliance level.

    (a) Annual compliance level. Subject to the provisions of this 
subpart, a facility is in compliance with its assurance to provide a 
reasonable volume of services to persons unable to pay if it provides 
for the fiscal year uncompensated services at a level not less than the 
lesser of--
    (1) Three percent of its operating costs for the most recent fiscal 
year for which an audited financial statement is available;
    (2) Ten percent of all Federal assistance provided to or on behalf 
of the facility, adjusted by a percentage equal to the percentage change 
in the CPI between the year in which the facility received assistance or 
1979, whichever is later, and the most recent year for which a published 
index is available.
    (b) Deficits. If in any fiscal year a facility fails to meet its 
annual compliance level, it shall provide uncompensated services in an 
amount sufficient to make up that deficit in subsequent

[[Page 665]]

years, and its period of obligation shall be extended until the deficit 
is made up.
    (1) Types of deficits. For purposes of determining the timing and 
amount of any deficit make-up, there are two types of deficits:
    (i) Justifiable deficits. A justifiable deficit is one in which the 
facility did not meet its annual compliance level due to either 
financial inability (as determined under Sec. 124.511(c)) or, although 
otherwise in compliance with this subpart, a lack of eligible applicants 
for uncompensated services during the fiscal year.
    (ii) Noncompliance deficits. A noncompliance deficit is one in which 
the facility failed to meet its annual compliance level due to 
noncompliance with this subpart.
    (2) Timing of deficit make-up--(i) Justifiable deficits. (A) A 
facility assisted under title VI of the Act may make up a justifiable 
deficit at any time during its period of obligation or in the year (or 
years, if necessary) immediately following its period of obligation.
    (B) A facility assisted under title XVI of the Act is not required 
to make up a justifiable deficit.
    (ii) Noncompliance deficits. (A) A facility must begin to make up a 
noncompliance deficit in the fiscal year following the finding of 
noncompliance by the Secretary.
    (B) A facility which claimed financial inability under Sec. 
124.509(a)(2)(iii) and is found by the Secretary, pursuant to Sec. 
124.511(c), to have been financially able to provide uncompensated 
services in the year in which the deficit was incurred shall begin to 
make up the deficit beginning in the fiscal year following the 
Secretary's finding.
    (C) A facility required to make up a noncompliance deficit but which 
is determined by the Secretary, pursuant to Sec. 124.511(c), to be 
financially unable to do so in the year following the Secretary's 
finding of noncompliance shall make up the deficit in accordance with a 
schedule set by the Secretary.
    (3) Deficit make-up amount. (i) The amount of a deficit in any 
fiscal year is the difference between the facility's annual compliance 
level for that year and the amount of uncompensated services provided in 
that year.
    (ii) The amount of a justifiable deficit must be adjusted by a 
percentage equal to the percentage change in the CPI between the CPI 
available in the fiscal year in which the deficit was incurred and the 
CPI available in the fiscal year in which it was made up.
    (iii) An amount equal to the result of dividing the amount of any 
noncompliance deficit for a fiscal year by the number of years of 
obligation remaining and adjusting it by a percentage equal to the 
percentage change in the CPI between the CPI available in the fiscal 
year in which the deficit was incurred and the CPI available in the 
fiscal year in which it was made up shall be added to a facility's 
annual compliance level for each fiscal year following the fiscal year 
of the finding of noncompliance.
    (4) Affirmative action plan for precluding future deficits. Except 
where a facility reports to the Secretary in accordance with Sec. 
124.509(a)(2)(iii) that it was financially unable to provide 
uncompensated services at the annual compliance level, a facility that 
fails to meet its annual compliance level in any fiscal year shall, in 
the following year, develop and implement a plan of action that can 
reasonably be expected to enable the facility to meet its annual 
compliance level. Such actions may include special notice to the 
community through newspaper, radio, and television, or expansion of 
service to Category B, or, with respect to nursing homes, Category C, 
persons. The Secretary may require changes to the plan. Where a facility 
fails to comply with this section, the Secretary may require it to make 
up the deficit in the fiscal year following the year in which it was 
required to institute the plan.
    (c) Excesses. (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. The facility may use any excess amount to reduce its annual 
compliance level only if the services in excess of the annual compliance 
level are provided in accordance with the requirements of this subpart.

[[Page 666]]

    (2) Calculation and adjustment of excess. (i) The amount of an 
excess in uncompensated services in any fiscal year is the difference 
between the amount of uncompensated services the facility provided in 
that year and the facility's annual compliance level for that year.
    (ii) The amount of any excess compliance applied to reduce a 
facility's annual compliance level must be adjusted by a percentage 
equal to the percentage change in the CPI between the CPI available in 
the fiscal year in which the facility provided the excess, and the CPI 
available in the fiscal year in which the facility applies the excess to 
reduce its annual compliance level or satisfy its remaining obligation.
    (3) Except as provided in subparagraph (1) of this paragraph, a 
facility assisted under title VI may in any fiscal year apply the amount 
of excess credited under this paragraph to satisfy the remainder of its 
obligation to provide uncompensated services. A facility's remaining 
obligation is determined as follows:
    (i) Where the annual compliance level in such fiscal year is 
established under paragraph (a)(2) of this section, the remaining 
obligation is:
    (A) For grant assistance, 10 percent of each grant under obligation, 
multiplied by the number of years remaining in its period of obligation, 
adjusted as provided for in paragraph (a)(2) of this section, plus any 
deficits required to be made up and less any unused excesses accrued in 
prior years; and
    (B) For loan assistance, the facility's annual compliance level 
multiplied by the number of years remaining in the scheduled life of the 
loan, plus the sum of 10 percent of each yearly cumulative total of 
additional interest subsidy or other payments (which the Secretary will 
have made in connection with the guaranteed loan or a direct loan which 
has been sold) in each subsequent year remaining in the scheduled life 
of the loan, plus any deficits required to be made up, and less any 
unused excesses accrued in prior years; or
    (ii) Where the annual compliance level in such fiscal year is 
established under paragraph (a)(1) of this section, the remaining 
obligation is the average of the facility's annual compliance levels in 
the previous three years, multiplied by the number of years remaining in 
its period of obligation, plus any deficits required to be made up under 
this section, and less any unused excesses accrued in prior years.

[52 FR 46031, Dec. 3, 1987; 52 FR 48362, Dec. 21, 1987, as amended at 60 
FR 16756, Mar. 31, 1995; 66 FR 49266, Sept. 26, 2001]



Sec. 124.504  Notice of availability of uncompensated services.

    (a) Published notice. A facility shall publish in a newspaper of 
general circulation in its area notice of its uncompensated services 
obligation before the beginning of its fiscal year. The notice shall 
include:
    (1) The plan of allocation the facility proposes to adopt;
    (2) The amount of uncompensated services the facility intends to 
make available in the fiscal year or a statement that the facility will 
provide uncompensated services to all persons unable to pay who request 
uncompensated services;
    (3) An explanation, if the amount of uncompensated services the 
facility intends to make available in a fiscal year is less than the 
annual compliance level. If a facility has satisfied its remaining 
uncompensated services obligation since the last published notice under 
this paragraph, or will satisfy the remaining obligation during the 
fiscal year, the explanation must include this information; and
    (4) A statement inviting interested parties to comment on the 
allocation plan.
    (b) Posted notice. (1) The facility shall post notices, which the 
Secretary supplies in English and Spanish, in appropriate areas in the 
facility, including but not limited to the admissions areas, the 
business office, and the emergency room.
    (2) If in the service area of the facility the ``usual language of 
households'' of ten percent or more of the population according to the 
most recent figures published by the Bureau of the Census is other than 
English or Spanish, the facility shall translate the notice into that 
language and post the translated notice on signs substantially similar 
in size and legibility to and posted with those supplied under paragraph 
(b)(1) of this section.

[[Page 667]]

    (3) The facility shall make reasonable efforts to communicate the 
contents of the posted notice to persons who it has reason to believe 
cannot read the notice.
    (c) Individual written notice. (1) In any period during a fiscal 
year in which uncompensated services are available in the facility, the 
facility shall provide individual written notice of the availability of 
uncompensated services to each person who seeks services in the facility 
on behalf of himself or another. The individual written notice must:
    (i) State that the facility is required by law to provide a 
reasonable amount of care without or below charge to people who cannot 
afford care;
    (ii) Set forth the criteria the facility uses for determining 
eligibility for uncompensated services (in accordance with the financial 
eligibility criteria and the allocation plan);
    (iii) State the location in the facility where anyone seeking 
uncompensated services may request them; and
    (iv) State that the facility will make a written determination of 
whether the person will receive uncompensated services, and the date by 
or period within which the determination will be made.
    (2) The facility shall provide the individual written notice before 
providing services, except where the emergency nature of the services 
provided makes prior notice impractical. If this exception applies, the 
facility shall provide the individual written notice to the next of kin 
or to the patient as soon as practical, but not later than when first 
presenting a bill for services.
    (3) The facility shall make reasonable efforts to communicate the 
contents of the individual written notice to persons who it has reason 
to believe cannot read the notice.



Sec. 124.505  Eligibility criteria.

    (a) A person unable to pay for health services is a person who--
    (1) Is not covered, or receives services not covered, under a third-
party insurer or governmental program, except where the person is not 
covered because the facility fails to participate in a program in which 
it is required to participate by Sec. 124.603(c);
    (2) Falls into one of the following categories:
    (i) Category A--A person whose annual individual or family income, 
as applicable, is not greater than the current poverty line issued by 
the Secretary pursuant to 42 U.S.C. 9902 that applies to the individual 
or family. The facility shall provide uncompensated services to persons 
in Category A without charge.
    (ii) Category B--A person whose annual individual or family income, 
as applicable, is greater than but not more than twice the poverty line 
issued by the Secretary pursuant to 42 U.S.C. 9902 that applies to the 
individual or family. If persons in Category B are included in the 
allocation plan, the facility shall provide uncompensated services to 
these persons without charge, or in accordance with a schedule of 
charges as specified in the allocation plan.
    (iii) Category C--With respect only to persons seeking or receiving 
nursing home services, a person whose annual or family income, as 
applicable, is more than twice but not greater than three times the 
poverty line issued by the Secretary pursuant to 42 U.S.C. 9902 that 
applies to the individual or family. If persons in Category C are 
included in the allocation plan, the facility shall provide 
uncompensated services to these persons without charge, or in accordance 
with a schedule of charges as specified in the allocation plan; and
    (3) Requests services within the facility's allocation plan in 
effect at the time of the request.
    (b) For purposes of determining eligibility for uncompensated 
services, revisions of the poverty line are effective 60 days from the 
date of their publication in the Federal Register.
    (c) A person is eligible for uncompensated services if the person's 
individual or family annual income, as applicable, is at or below the 
level established under paragraph (a)(2) of this section, when 
calculated by either of the following methods:
    (1) Multiplying by four the person's or family's income, as 
applicable, for the three months preceding the request for uncompensated 
services;

[[Page 668]]

    (2) Using the person's or family's income, as applicable, for the 
twelve months preceding the request for uncompensated services.

[52 FR 46031, Dec. 3, 1987, as amended at 60 FR 16756, Mar. 31, 1995]



Sec. 124.506  Allocation of services; plan requirement.

    (a)(1) A facility shall provide its uncompensated services in 
accordance with a plan that sets out the method by which the facility 
will distribute its uncompensated services among persons unable to pay. 
The plan must:
    (i) State the type of services that will be made available;
    (ii) Specify the method, if any, for distributing those services in 
different periods of the year;
    (iii) State whether Category B or, in the case of nursing homes 
only, Category C persons will be provided uncompensated services, and if 
so, whether the services will be available without charge or at a 
reduced charge;
    (iv) If services will be made available to Category B persons at a 
reduced charge, specify the method used for reducing charges, and 
provide that the method is applicable to all persons in Category B;
    (v) With respect to nursing homes only, if services will be made 
available to Category C persons at a reduced charge, specify the method 
used for reducing charges, provided that such method may not result in 
greater reductions than those afforded to Category B persons, and 
provide that this method is applicable to all persons in Category C; and
    (vi) Provide that the facility provides uncompensated services to 
all persons eligible under the plan who request uncompensated services.
    (2) A facility must adopt an allocation plan that meets the 
requirements of paragraph (a) by publishing the plan in a newspaper of 
general circulation in its area. The plan may take effect no earlier 
than 60 days following the date of publication.
    (b)(1) If in any fiscal year a facility fails to adopt and publish a 
plan in accordance with paragraph (a) of this section, it shall provide 
uncompensated services in accordance with the last plan it published in 
a newspaper of general circulation in its area.
    (2) If no plan was previously published in accordance with paragraph 
(a)(2) of this section, the facility must provide uncompensated services 
without charge to all applicants in Category A and Category B, and, with 
respect to nursing homes, Category C, who request service in the 
facility. This requirement applies until the facility ceases to provide 
uncompensated services under Sec. 124.508 or until an allocation plan 
published in accordance with paragraph (a)(2) of this section becomes 
effective.
    (c) A facility may revise its allocation plan during the fiscal year 
by publishing the revised plan in a newspaper of general circulation in 
the area it serves. A revised plan may take effect no earlier than 60 
days following the date of publication.

[52 FR 46031, Dec. 3, 1987, as amended at 60 FR 16756, Mar. 31, 1995]



Sec. 124.507  Written determinations of eligibility.

    (a) Determinations of eligibility must be in writing, be made in 
accordance with this section, and a copy of the determination must be 
provided to the applicant promptly.
    (b) Content of determinations--(1) Favorable determinations. A 
determination that an applicant is eligible must indicate:
    (i) That the facility will provide uncompensated services at no 
charge or at a specified charge less than the allowable credit for the 
services;
    (ii) The date on which services were requested;
    (iii) The date on which the determination was made;
    (iv) The applicant's individual or family income, as applicable, and 
family size; and
    (v) The date on which services were or will be first provided to the 
applicant.
    (2) Conditional determinations. (i) As a condition to providing 
uncompensated services, a facility may:
    (A) Require the applicant to furnish any information that is 
reasonably necessary to substantiate eligibility; and

[[Page 669]]

    (B) Require the applicant to apply for any benefits under third 
party insurer or governmental programs to which he/she is or could be 
entitled upon proper application.
    (ii) A conditional determination must:
    (A) Comply with paragraph (b)(1) of this section; and
    (B) State the condition(s) under which the applicant will be found 
eligible.
    (iii) When a facility determines that the condition(s) upon which a 
conditional determination was made has been met, or will not be met, it 
shall make a favorable determination or denial on the request, as 
appropriate, in accordance with this section.
    (3) Denials. A facility must provide to each applicant denied the 
uncompensated services requested, in whole or in part, a dated statement 
of the reasons for the denial.
    (c) Timing of determinations--(1) Preservice determinations. (i) 
Facilities other than nursing homes shall make a determination of 
eligibility within two working days following a request for 
uncompensated services which is made before receipt of outpatient 
services or before discharge for inpatient services;
    (ii) Nursing homes shall make a determination of eligibility within 
ten working days, but no later than two working days following the date 
of admission, following a request for uncompensated services made prior 
to admission.
    (2) Postservice determinations. All facilities shall make a 
determination of eligibility not later than the end of the first full 
billing cycle following a request for uncompensated services which is 
made after receipt of outpatient services, discharge for inpatient 
services, or admission for nursing home services.

[52 FR 46031, Dec. 3, 1987; 52 FR 48362, Dec. 21, 1987]



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:
    (1) Cease providing uncompensated services;
    (2) Cease providing individual notices in accordance with Sec. 
124.504(c);
    (3) Remove the posted notices required by Sec. 124.504(b); and
    (4) Post an additional notice stating that it has satisfied its 
obligation for the fiscal year or appropriate period and when additional 
uncompensated services will be available.
    (b) Facilities certified under Sec. 124.514. Where a facility 
certified under Sec. 124.514 has maintained the records required by 
Sec. 124.510(c) and determines based thereon that it has met its 
compliance level, under Sec. 124.514(d), for the fiscal year, it may, 
for the remainder of the fiscal year:
    (1) Cease providing uncompensated services; and
    (2) Discontinue providing notice pursuant to Sec. 124.514(b)(2).

[52 FR 46031, Dec. 3, 1987, as amended at 59 FR 44639, Aug. 30, 1994; 66 
FR 49266, Sept. 26, 2001]



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.--(1) Timing of reports. 
(i) A facility shall submit to the Secretary a report to assist the 
Secretary in determining compliance with this subpart once every three 
fiscal years, on a schedule to be prescribed by the Secretary.
    (ii) A facility shall submit the required report more frequently 
than once every three years under the following circumstances:
    (A) If the facility determines that in the preceding fiscal year it 
did not provide uncompensated services at the annual compliance level, 
it shall submit a report.
    (B) If the Secretary determines, and notifies the facility in 
writing that a report is needed for proper administration of the 
program, the facility shall submit a report within 90 days after 
receiving notice from the Secretary, or

[[Page 670]]

within 90 days after the close of the fiscal year, whichever is later.
    (iii) Except as specified in paragraph (a)(1)(ii)(B) of this 
section, the reports required by this section shall be submitted within 
90 days after the close of the fiscal year, unless a longer period is 
approved by the Secretary for good cause.
    (2) Content of report. The report must include the following 
information in a form prescribed by the Secretary:
    (i) Information that the Secretary prescribes to permit a 
determination of whether a facility has met the annual compliance level 
for the fiscal years covered by the report;
    (ii) The date on which the notice required by Sec. 124.504(a) was 
published, and the name of the newspaper that printed the notice;
    (iii) If the amount of uncompensated services provided by the 
facility in the preceding fiscal year was lower than the annual 
compliance level, an explanation of why the facility did not meet the 
required level. If the facility claims that it failed to meet the 
required compliance level because it was financially unable to do so, it 
shall explain and provide documentation prescribed by the Secretary;
    (iv) If the facility is required to submit an affirmative action 
plan, a copy of the plan.
    (v) Other information that the Secretary prescribes.
    (3) Institution of suit. Not later than 10 days after being served 
with a summons or complaint the facility shall notify the HHS Regional 
Health Administrator \1\ for the Region in which it is located of any 
legal action brought against it alleging that it has failed to comply 
with the requirements of this subpart.
---------------------------------------------------------------------------

    \1\ The addresses of the HHS Regional Offices are set out in 45 CFR 
5.31.
---------------------------------------------------------------------------

    (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:
    (1) A certification, signed by the responsible official of the 
facility, that there has been no material change in the factors upon 
which the certification was based; or
    (2) A certification, signed by the responsible official of the 
facility and supported by appropriate documentation, that there has been 
a material change in the factors upon which the certification was based.
    (c) Facilities certified under Sec. 124.514. A facility certified 
under Sec. 124.514 shall comply with paragraph (a)(3) of this section 
and shall submit within 90 days after the close of its fiscal year, as 
appropriate:
    (1)(i) A certification, signed by the responsible official of the 
facility, that there has been no material change in the factors upon 
which the certification was based; or
    (ii) A certification, signed by the responsible official of the 
facility and supported by appropriate documentation, that there has been 
a material change in the factors upon which the certification was based; 
and
    (2) A certification, signed by the responsible official of the 
facility, of the amount of uncompensated services provided in the 
previous fiscal year.
    (d) Facilities certified under Sec. 124.515. A facility certified 
under Sec. 124.515 shall submit such reports as are required by the 
terms of its grant under section 329 or 330 or by its agreement under 
section 334 of the Act, as applicable, at such intervals as the 
Secretary may require.
    (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.

(Approved by the Office of Management and Budget under control number 
0915-0077)

[52 FR 46031, Dec. 3, 1987, as amended at 52 FR 48362, Dec. 21, 1987; 54 
FR 52939, Dec. 26, 1989; 59 FR 44639, Aug. 30, 1994; 66 FR 49266, Sept. 
26, 2001]

[[Page 671]]



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. (1) A facility 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 requirements of this subpart in any 
fiscal year, including:
    (i) Any documents from which the information required to be reported 
under Sec. 124.509(a) was obtained;
    (ii) Accounts which clearly segregate uncompensated services from 
other accounts; and
    (iii) Copies of written determinations of eligibility under Sec. 
124.507.
    (2) A facility shall retain the records maintained pursuant to 
paragraph (a)(1) for three years after submission of the report required 
by Sec. 124.509(a)(1), except where a longer period is required by the 
Secretary, or until 180 days following the close of the Secretary's 
assessment investigation under Sec. 124.511(b), whichever is less.
    (3) A facility shall, within 60 days of the end of each fiscal year, 
determine the amount of uncompensated services it provided in that 
fiscal year. Documents that support the facility's determination shall 
be made available to the public on request. If a report is or will be 
filed under Sec. 124.509(a)(1), a facility may respond to a request by 
providing a copy of the report to the requester.
    (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. A facility shall maintain these records for 
three years, except where a longer period is required as a result of an 
investigation by the Secretary. In such cases, records must be kept 
until 180 days following the close of the Secretary's assessment 
investigation under Sec. 124.511(b).
    (c) Facilities certified under Sec. 124.515. A facility certified 
under Sec. 124.515 shall maintain the records required by its grant 
under section 329 or section 330 or its agreement under section 334 of 
the Act, as applicable, for such period of time as the grant agreement 
may require.

(Information collection requirements in paragraphs (a) and (b) approved 
by the Office of Management and Budget under control number 0915-0103)

[52 FR 46031, Dec. 3, 1987; 52 FR 48362, Dec. 21, 1987; 59 FR 44639, 
Aug. 30, 1994; 66 FR 49266, Sept. 26, 2001]



Sec. 124.511  Investigation and determination of compliance.

    (a) Complaints. A complaint that a facility is out of compliance 
with the requirements of this subpart may be filed with the Secretary by 
any person.
    (1) A complaint is considered to be filed with the Secretary on the 
date the following information is received in the Office of the HHS 
Regional Health Administrator for the Region in which the facility is 
located:
    (i) The name and address of the person making the complaint or on 
whose behalf the complaint is made;
    (ii) The name and location of the facility;
    (iii) The date or approximate date on which the event occurred; and
    (iv) A statement of what actions the complainant considers to 
violate the requirements of this subpart.
    (2) The Secretary promptly provides a copy of the complaint to the 
facility named in the complaint.
    (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. A facility 
will be presumed to be out of compliance with its assurance unless it 
supplies documentation sufficient to show compliance with the applicable 
provisions of this subpart.
    (4) Section 1627 of the Act provides that if the Secretary dimisses 
a complaint or the Attorney General has not

[[Page 672]]

brought an action for compliance within six months from the date on 
which the compliant is filed, the person filing it may bring a private 
action to effectuate compliance with the assurance. If the Secretary 
determines that he/she will be unable to issue a decision on a complaint 
or otherwise take appropriate action within the six month period, the 
Secretary may, based on priorities for the disposition of complaints 
that are established to promote the most effective use of enforcement 
resources, or on the request of the applicant, dismiss the complaint 
without a finding as to compliance prior to the end of the six month 
period, but no earlier than 45 days after the complaint is filed.
    (b) Assessments. The Secretary periodically investigates and 
assesses facilities to ascertain compliance with the requirements of 
this subpart, including certification of the amount of uncompensated 
services provided in a fiscal year or years, and provides guidance and 
prescribes corrective action to correct noncompliance.
    (1) Compliance after February 1, 1988. (i) The Secretary may certify 
that a facility has substantially complied with its assurance for a 
fiscal year or years, and such certification shall establish that the 
facility provided the amount of uncompensated services certified for the 
period covered by the certification.
    (ii) A certification of substantial compliance shall be based on the 
amount properly claimed by the facility pursuant to Sec. 124.509(a), 
utilizing procedures determined by the Secretary to be sufficient to 
establish that the facility has substantially complied with its 
assurance for the period covered by the certification. The procedures 
will include examination of individual account data to the extent deemed 
necessary by the Secretary.
    (iii) A certification of substantial compliance will be made where 
the Secretary determines that, for the period covered by the 
certification, the facility provided uncompensated services to eligible 
persons who had equal opportunity to apply therefor. In making this 
determination, the Secretary will consider, in descending order of 
importance, whether--
    (A) Corrective action prescribed pursuant to Sec. 124.512(b) has 
been taken by the facility;
    (B) Any noncompliance with the requirements of this subpart may be 
remedied by corrective action under Sec. 124.512(b);
    (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.
    (2) Compliance prior to February 1, 1988. The Secretary will 
determine the amount of creditable services provided prior to the 
effective date of these rules using the compliance standards applicable 
under the rules as promulgated on May 18, 1979, based on procedures 
determined by the Secretary to be sufficient to establish that the 
facility provided such amounts of uncompensated services in the 
period(s) being assessed.
    (c) Determinations of financial inability. In determining whether a 
facility was or is financially able to meet its annual compliance level, 
the Secretary will consider any comments submitted by interested 
parties. In making this determination, the Secretary will consider 
factors such as:
    (1) The ratio of revenues to expenses;
    (2) The occupancy rate;
    (3) The ratio of current assets to current liabilities;
    (4) The average cost per patient day;
    (5) The number of days of operating expenses in accounts payable;
    (6) The number of days of revenues in accounts receivable;
    (7) The sinking fund (or depreciation fund) balance;
    (8) The debt coverage ratio; and
    (9) The availability of restricted or unrestricted funds (such as an 
endowment) available for charitable use.

[52 FR 46031, Dec. 3, 1987; 52 FR 48362, Dec. 21, 1987; 53 FR 5576, Feb. 
25, 1988; 59 FR 44639, Aug. 30, 1994; 66 FR 49266, Sept. 26, 2001]



Sec. 124.512  Enforcement.

    (a) If the Secretary finds, based on his/her investigation under 
Sec. 124.511, that a facility did not comply with the

[[Page 673]]

requirements of this subpart, the Secretary may take any action 
authorized by law to secure compliance, including but not limited to, 
voluntary agreement or a request to the Attorney General to bring an 
action against the facility for specific performance.
    (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 remedy fully 
the noncompliance, including:
    (1) Provision of uncompensated services to applicants improperly 
denied;
    (2) Repayment of amounts improperly collected from persons eligible 
to receive uncompensated services; and
    (3) Other corrective actions prescribed by the Secretary.
    (c) The Secretary may disallow all of the uncompensated services 
claimed in a fiscal year where the Secretary finds that the facility was 
in substantial noncompliance with its assurance because it failed to:
    (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;
    (2) Comply with the applicable reporting requirements of Sec. 
124.509;
    (3) Have a system for maintaining records of uncompensated services 
provided in accordance with Sec. 124.510; or
    (4) Take corrective action prescribed pursuant to paragraph (b) of 
this section.
    (d) In the absence of a finding of substantial compliance or 
substantial noncompliance in a fiscal year, the Secretary may disallow 
uncompensated services claimed by a facility in that fiscal year to the 
extent that the Secretary finds that such services are not documented as 
uncompensated services under Sec. 124.510 or are subject to 
disallowance under Sec. 124.513(d) or Sec. 124.514(d), as applicable.

[52 FR 46031, Dec. 3, 1987, as amended at 59 FR 44639, Aug. 30, 1994; 66 
FR 49266, Sept. 26, 2001]



Sec. 124.513  Public 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 ``public 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 public facility may qualify for 
certification under this section if all of the following criteria are 
met:
    (1) It is a facility which is owned and operated by a unit of State 
or local government or a quasi-public corporation as defined at 42 CFR 
124.2(m).
    (2) It provides health services without charge or at a substantially 
reduced rate 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; 
provided that, such criteria and procedures are not required where the 
facility makes all services available to all persons at no or nominal 
charge.
    (3)(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 State and local tax appropriations or other 
State and local government revenues, or from a quasi-public corporation 
as defined at 42 CFR 124.2(m), to cover operating deficits attributable 
to the provision of discounted services; or
    (ii) If provided, in each of the three most recent fiscal years, 
uncompensated services under this subpart or under programs described by 
the documentation provided under Sec. 124.513(c)(2) in an amount not 
less than twice the annual compliance level computed under Sec. 
124.503(a).

[[Page 674]]

    (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 or official State or local 
government documents (such as annual reports or budget documents), for 
the three most recent fiscal years, sufficient to show that the facility 
meets the criteria in paragraph (b)(3)(i) or (ii) of this section.
    (2) A complete description of its program(s) 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 services.
    (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 adequately remedied or otherwise continues.
    (2) Deficits--(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 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 
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 (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 which have not been assessed. 
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 subparagraph (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 
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)(iii)(A) of this 
section.

(Approved by the Office of Management and Budget under control number 
0915-0103)

[52 FR 46031, Dec. 3, 1987; 52 FR 48362, Dec. 21, 1987]

[[Page 675]]



Sec. 124.514  Compliance alternative for facilities with small annual 

obligations.

    (a) Effect of certification. The Secretary may certify a facility 
which meets the requirements of paragraphs (b) and (c) of this section 
as a ``facility with a small annual obligation.'' 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 all of the following criteria are 
met:
    (1)(i) Title VI-assisted facilities. (A) For the facility's fiscal 
year in which this section becomes effective, the level, computed under 
Sec. 124.503(c) (3), divided by the number of years remaining in its 
period of obligation (including an additional year or portion of a year 
for each year or portion of a year in which a deficit was incurred and 
has not been made up), is not more than $10,000;
    (B) For a subsequent fiscal year, the level computed under paragraph 
(A) of this paragraph (b)(1)(i), is at or less than $10,000, adjusted by 
a percentage equal to the percentage change in the CPI available in the 
year in which this section becomes effective and the most recent year 
for which a published index is available.
    (ii) Title XVI-assisted facilities. (A) For the facility's fiscal 
year in which this section becomes effective, the level under Sec. 
124.503(a), plus the amount of any noncompliance deficits which have not 
been made up, is at or less than $10,000.
    (B) For a subsequent fiscal year, the level, computed under 
paragraph (A) of this paragraph (b)(1)(ii), is at or less than $10,000, 
adjusted as provided in paragraph (b)(1)(i)(B) of this section.
    (2) It provides health services without charge or at a substantially 
reduced rate to persons who are determined by the facility to qualify 
threrefor 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; 
Provided that, such criteria and procedures are not required where the 
facility makes all services available to all persons at no or nominal 
charge.
    (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, a complete 
description of its program(s) of discounted health services, including 
charging and collection policies of the facility, and eligibility 
criteria and notice and determination precedures used under its 
program(s) of discounted services.
    (d) Period of effectiveness. A certification by the Secretary under 
this section remains in effect until withdrawn. During the period in 
which such certification is in effect, the facility must provide 
uncompensated services in an amount not less than the level applicable 
under paragraph (b)(1) of this section for each fiscal year. 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 cannot be or has not been adequately remedied or 
noncompliance otherwise continues.
    (e) Deficits. (1) Where the compliance level of a facility assisted 
under title VI of the Act is computed under paragraph (b)(1)(i)(A) of 
this section as including additional year(s) or a portion of a year, the 
facility's period of obligation under this subpart shall be extended by 
such additional period, until certification is withdrawn.
    (2) Where a facility has been assessed as having a deficit under 
Sec. 124.503(b) that has not been made up prior to withdrawal of 
certification under this section or fails to provide services as 
required by paragraph (d) of this section, the facility must make up the

[[Page 676]]

deficit in accordance with Sec. 124.503(b) following withdrawal of 
certification.

(Approved by the Office of Management and Budget under control number 
0915-0077)

[52 FR 46031, Dec. 3, 1987, as amended at 52 FR 48362, Dec. 21, 1987; 54 
FR 52939, Dec. 26, 1989]



Sec. 124.515  Compliance alternative for community health centers, migrant 


health centers and certain National Health Service Corps sites.

    (a) Period of effectiveness. For each fiscal year for which a 
facility that receives a grant to operate a community health center 
under section 330 of the Act or a migrant health center under section 
329 of the Act is in substantial compliance with the terms and 
conditions of such grant relating to the provision of services at a 
discount, the facility shall be certified as having met its annual 
compliance level in accordance with the requirements of this subpart and 
shall not be required otherwise to comply with the requirements of this 
subpart for that fiscal year. This provision also applies to any 
facility that has signed a memorandum of agreement with the Secretary 
under section 334 of the Act if the services provided by the National 
Health Service Corps professional(s) assigned pursuant to that agreement 
constitute all of the medical services provided by the facility.
    (b) 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--
    (i) Demonstrating to the Secretary's satisfaction that it met the 
requirements of paragraph (a) of this section for each year in which a 
deficit was assessed; or
    (ii) Providing an additional period of service under this section on 
the basis of one (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.
    (2) Title VI-assisted facilities which have not been assessed. 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--
    (i) Make up such deficit in accordance with paragraph (b)(1) of this 
section; or
    (ii) 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 (b)(1) of this section.
    (3) Title XVI-assisted facilities. (i) 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 (b)(1)(i) of this section. If it cannot make 
the showing required by that paragraph, it shall make up the deficit 
when it is no longer certified under this section.
    (ii) 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--
    (A) Following the procedure of paragraph (b)(3)(i) of this section; 
or
    (B) 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 
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

[[Page 677]]

up in accordance with paragraph (b)(3)(i) of this section.

(Approved by the Office of Management and Budget under control number 
0915-0077)

[52 FR 46031, Dec. 3, 1987, as amended at 52 FR 48362, Dec. 21, 1987; 54 
FR 52939, Dec. 26, 1989]



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

[[Page 678]]

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 
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

[[Page 679]]

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.

[66 FR 49267, Sept. 26, 2001]



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 
Sec. Sec. 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.

[[Page 680]]

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 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.

[66 FR 49268, Sept. 26, 2001]



Sec. 124.518  Agreements with State agencies.

    (a) Where the Secretary finds that it will promote the purposes of 
this subpart and the State agency is able and willing to do so, the 
Secretary may enter into an agreement with an agency of a State to 
assist in administering this subpart in the State. An agreement may be 
terminated by the Secretary or the State agency on 60 days notice.
    (b) Under an agreement the State agency will provide any assistance 
the Secretary requests in any one or more of the following areas, as set 
out in the agreement:
    (1) Investigation of complaints regarding noncompliance;
    (2) Monitoring compliance of facilities with the requirements of 
this subpart;
    (3) Review of reports submitted under Sec. 124.509, including 
affirmative action plans;
    (4) Making initial decisions for the Secretary with respect to 
compliance, subject to appeal by any party to the Secretary, or review 
by the Secretary on the Secretary's initiative; and
    (5) Application of any sanctions available to it under State law 
(such as license revocation or termination of State assistance) against 
facilities determined to be out of compliance with the requirements of 
this subpart.
    (c) Nothing in this subpart precludes any State from taking any 
action authorized by State law regarding the provision of uncompensated 
services by facilities in the State as long as the action taken does not 
prevent the Secretary from enforcing the requirements of this subpart.

[52 FR 46031, Dec. 3, 1987. Redesignated at 59 FR 44639, Aug. 30, 1994]

[[Page 681]]



                       Subpart G_Community Service

    Authority: Secs. 215, 1525, 1602(6), Public Health Service Act as 
amended; 58 Stat 690, 88 Stat. 2249, 2259; 42 U.S.C. 216, 300m-4, 300o-
1(6).

    Source: 44 FR 29379, May 18, 1979, unless otherwise noted.



Sec. 124.601  Applicability.

    The provisions of this subpart apply to any recipient of Federal 
assistance under title VI or XVI of the Public Health Service Act that 
has given an assurance that it would make the facility or portion 
thereof assisted available to all persons residing (and, in the case of 
title XVI assisted applicants, employed), in the territorial area it 
serves. This assurance is referred to in this subpart as the ``community 
service assurance.''



Sec. 124.602  Definitions.

    As used in this subpart:
    Act means the Public Health Service Act, as amended.
    Facility means the an entity that received assistance under title VI 
or title XVI of the Act and provided a community service assurance.
    Fiscal year means facility's fiscal year.
    Secretary means the Secretary of Health and Human Services or his 
delegatee.
    Service area means the geographic area designated as the area served 
by the facility in the most recent State plan approved by the Secretary 
under title VI, except that, at the request of the facility, the 
Secretary may designate a different area proposed by the facility when 
he determines that a different area is appropriate based on the criteria 
in 42 CFR 53.1(d).
    State agency means the agency of a state fully or conditionally 
designated by the Secretary as the State health planning and development 
agency of the State under section 1521 of the Act.



Sec. 124.603  Provision of services.

    (a) General. (1) In order to comply with its community service 
assurance, a facility shall make the services provided in the facility 
or portion thereof constructed, modernized, or converted with Federal 
assistance under title VI or XVI of the Act available to all persons 
residing (and, in the case of facilities assisted under title XVI of the 
Act, employed) in the facility's service area without discrimination on 
the ground of race, color, national origin, creed, or any other ground 
unrelated to an individual's need for the service or the availability of 
the needed service in the facility. Subject to paragraph (b) (concerning 
emergency services) a facility may deny services to persons who are 
unable to pay for them unless those persons are required to be provided 
uncompensated services under the provisions of Subpart F.
    (2) A person is residing in the facility's service area for purposes 
of this section if the person:
    (i) Is living in the service area with the intention to remain there 
permanently or for an indefinite period;
    (ii) Is living in the service area for purposes of employment; or
    (iii) Is living with a family member who resides in the service 
area.
    (b) Emergency services. (1) A facility may not deny emergency 
services to any person who resides (or, in the case of facilities 
assisted under title XVI of the Act, is employed) in the facility's 
service area on the ground that the person is unable to pay for those 
services.
    (2) A facility may discharge a person that has received emergency 
services, or may transfer the person to another facility able to provide 
necessary services, when the appropriate medical personnel determine 
that discharge or transfer will not subject the person to a substantial 
risk of deterioration in medical condition.
    (c) Third party payor programs. (1) The facility shall make 
arrangements, if eligible to do so, for reimbursement for services with:
    (i) Those principal State and local governmental third-party payors 
that provide reimbursement for services that is not less than the actual 
costs, as determined in accordance with accepted cost accounting 
principles; and
    (ii) Federal governmental third-party programs, such as medicare and 
medicaid.
    (2) The facility shall take any necessary steps to insure that 
admission

[[Page 682]]

to and services of the facility are available to beneficiaries of the 
governmental programs specified in paragraph (c)(1) of this section 
without discrimination or preference because they are beneficiaries of 
those programs.
    (d) Exclusionary admissions policies. A facility is out of 
compliance with its community service assurance if it uses an admission 
policy that has the effect of excluding persons on a ground other than 
those permitted under paragraph (a) of this section. Illustrative 
applications of this requirement are described in the following 
paragraphs:
    (1) A facility has a policy or practice of admitting only those 
patients who are referred by physicians with staff privileges at the 
facility. If this policy or practice has the effect of excluding persons 
who reside (or for title XVI facilities, are employed) in the community 
from the facility because they do not have a private family doctor with 
staff privileges at the facility, the facility would not be in 
compliance with its assurance. The facility is not required to abolish 
its staff physician admissions policy as a usual method for admission. 
However, to be in compliance with its community service assurance it 
must make alternative arrangements to assist area residents who would 
otherwise be unable to gain admission to obtain services available in 
the facility. Examples of alternative arrangements a facility might use 
include:
    (i) Authorizing the individual's physician, if licensed and 
otherwise qualified, to treat the patient at the facility even though 
the physician does not have staff privileges at the facility;
    (ii) For those patients who have no physician, obtaining the 
voluntary agreement of physicians with staff privileges at the facility 
to accept referrals of such patients, perhaps on a rotating basis;
    (iii) If an insufficient number of physicians with staff privileges 
agree to participate in a referral arrangement, requiring acceptance of 
referrals as a condition to obtaining or renewing staff privileges;
    (iv) Establishing a hospital-based primary care clinic through which 
patients needing hospitalization may be admitted; or
    (v) Hiring or contracting with qualified physicians to treat 
patients who do not have private physicians.
    (2) A facility, as required, is a qualified provider under the title 
XIX medicaid program, but few or none of the physicians with staff 
privileges at the facility or in a particular department or sub-
department of the facility will treat medicaid patients. If the effect 
is that some medicaid patients are excluded from the facility or from 
any service provided in the facility, the facility is not in compliance 
with its community service assurance. To be in compliance a facility 
does not have to require all of its staff physicians to accept medicaid. 
However, it must take steps to ensure that medicaid beneficiaries have 
full access to all of its available services. Examples of steps that may 
be taken include:
    (i) Obtaining the voluntary agreement of a reasonable number of 
physicians with staff privileges at the facility and in each department 
or sub-department to accept referral of medicaid patients, perhaps on a 
rotating basis;
    (ii) If an insufficient number of physicians with staff privileges 
agree to participate in a referral arrangement, requiring acceptance of 
referrals as a condition to obtaining or renewing staff privileges;
    (iii) Establishing a clinic through which medicaid beneficiaries 
needing hospitalization may be admitted; or
    (iv) Hiring or contracting with physicians to treat medicaid 
patients.
    (3) A facility requires advance deposits (pre-admission or pre-
service deposits) before admitting or serving patients. If the effect of 
this practice is that some persons are denied admission or service or 
face substantial delays in gaining admission or service solely because 
they do not have the necessary cash on hand, this would constitute a 
violation of the community service assurance. While the facility is not 
required to forego the use of a deposit policy in all situations, it is 
required to make alternative arrangements to ensure that persons who 
probably can pay for the services are not denied them simply because 
they do not have the available cash at the time services are requested. 
For example, many employed persons and persons with other

[[Page 683]]

collateral do not have savings, but can pay hospital bills on an 
installment basis, or can pay a small deposit. Such persons may not be 
excluded from admission or denied services because of their inability to 
pay a deposit.



Sec. 124.604  Posted notice.

    (a) The facility shall post notices, which the Secretary supplies in 
English and Spanish, in appropriate areas of the facility, including but 
not limited to the admissions area, the business office and the 
emergency room.
    (b) If in the service area of the facility the ``usual language of 
households'' of ten percent or more of the population, according to the 
most recent figures published by the Bureau of the Census, is other than 
English or Spanish, the facility shall translate the notice into that 
language and post the translated notice on signs substantially similar 
in size and legibility to, and posted with, those supplied under 
paragraph (a) of this section.
    (c) The facility shall make reasonable efforts to communicate the 
contents of the posted notice to persons who it has reason to believe 
cannot read the notice.



Sec. 124.605  Reporting and record maintenance requirements.

    (a) Reporting requirements--(1) Timing of reports.(i) A facility 
shall submit to the Secretary a report to assist the Secretary in 
determining compliance with this subpart once every three fiscal years, 
on a schedule to be prescribed by the Secretary. The report required by 
this section shall be submitted not later than 90 days after the end of 
the fiscal year, unless a longer period is approved by the Secretary for 
good cause shown.
    (ii) A facility shall also submit the required report whenever the 
Secretary determines, and so notifies the facility in writing, that a 
report is needed for proper administration of the program. In this 
situation the facility shall submit the report specified in this section 
for the filing of reports, within 90 days after receiving notice from 
the Secretary, or within 90 days after the close of the fiscal year, 
whichever is later.
    (2) Content of report. The report must be submitted on a form 
prescribed by the Secretary and must include information that the 
Secretary prescribes to permit a determination of whether a facility has 
met its obligations under this subpart.
    (3) The facility shall provide a copy of any report to the HSA for 
the area when submitting it to the Secretary.
    (4) Institution of suit. Not later than 10 days after being served 
with a summons or complaint, the applicant shall notify the Regional 
Health Administrator for the Region of HHS in which it is located of any 
legal action brought against it alleging that it has failed to comply 
with the requirements of this subpart. \1\
---------------------------------------------------------------------------

    \1\ The addresses of the Regional Office of HHS are set out in 45 
CFR 5.31.
---------------------------------------------------------------------------

    (b) Record maintenance requirements. (1) A facility 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 requirements of this subpart in any fiscal year, 
including documents from which information required to be reported under 
paragraph (a) of this section was obtained. A facility shall maintain 
these records until 180 days following the close of the Secretary's 
investigation under Sec. 124.606(a).



Sec. 124.606  Investigation and enforcement.

    (a) Investigations. (1) The Secretary periodically investigates the 
compliance of facilities with the requirements of this subpart, and 
investigates complaints.
    (2)(i) A complaint is filed with the Secretary on the date on which 
the following information is received in the Office of the Regional 
Health Administrator for the Region of HHS in which the facility is 
located:
    (A) The name and address of the person making the complaint or on 
whose behalf the complaint is made;
    (B) The name and location of the facility;
    (C) The date or approximate date on which the event complained of 
occurred, and

[[Page 684]]

    (D) A statement of what actions the complainant considers to violate 
the requirements of this subpart.
    (ii) The Secretary promptly provides a copy of the complaint to each 
facility named in the complaint.
    (3) When the Secretary investigates a facility, the facility shall 
provide to the Secretary on request any documents, records and other 
information concerning its operations that relate to the requirements of 
this subpart.
    (4) The Act provides that if the Secretary dismisses a complaint or 
the Attorney General has not brought an action for compliance within six 
months from the date on which the complaint is filed, the person filing 
it may bring a private action to effectuate compliance with the 
assurance. If the Secretary determines that he will be unable to issue a 
decision on a complaint or otherwise take appropriate action within the 
six month period, he may, based on priorities for the disposition of 
complaints that are established to promote the most effective use of 
enforcement resources, or on the request of the complainant, dismiss the 
complaint without a finding as to compliance prior to the end of the six 
month period, but no earlier than 45 days after the complaint is filed.
    (b) Enforcement. (1) If the Secretary finds, based on his 
investigation under paragraph (a) of this section, that a facility did 
not comply with the requirements of this subpart, he may take any action 
authorized by law to secure compliance, including but not limited to 
voluntary agreement or a request to the Attorney General to bring an 
action against the facility for specific performance.
    (2) If the Secretary finds, based on his investigation under 
paragraph (a) of this section, that a facility has limited the 
availability of its services in a manner proscribed by this subpart, he 
may, in addition to any other action that he is authorized to take in 
accordance with the Act, require the facility to establish an effective 
affirmative action plan that in his judgment is designed to insure that 
its services are made available in accordance with the requirements of 
this subpart.



Sec. 124.607  Agreements with State agencies.

    (a) Where the Secretary finds that it will promote the purposes of 
this subpart, and the State agency is able and willing to do so, he may 
enter into an agreement with the State agency for the State agency to 
assist him in administering this subpart in the State.
    (b) Under an agreement, the State agency will provide the Secretary 
with any assistance he requests in any one or more of the following 
areas, as set out in the agreement:
    (1) Investigation of complaints of noncompliance;
    (2) Monitoring the compliance of facilities with the requirements of 
this subpart;
    (3) Review of affirmative action plans submitted under Sec. 
124.606(b);
    (4) Review of reports submitted under Sec. 124.605;
    (5) Making initial decisions for the Secretary with respect to 
compliance, subject to appeal by any party to the Secretary or review by 
the Secretary on his own initiative; and
    (6) Application of any sanctions available to it under State law 
(such as license revocation or termination of State assistance) against 
facilities determined to be out of compliance with the requirements of 
this subpart.
    (c) A State agency may use funds received under section 1525 of the 
Act to pay for expenses incurred in the course of carrying out this 
agreement.
    (d) Nothing in this subpart precludes any State from taking any 
action authorized by State law regarding the provision of services by 
any facility in the State as long as the action taken does not prevent 
the Secretary from enforcing the requirements of this subpart.



Sec. Appendix to Subpart G of Part 124--Interim Procedures and Criteria 

for Review by Health Systems Agencies of Applications Under Section 1625 

of the Public Health Service Act

    In performing reviews under section 1513 (e) of the Public Health 
Service Act (42 U.S.C. 3001-2(c)) of applications for grants under 
section 1625 of the Act, health systems agencies shall use the 
procedures and criteria stated below. A health systems agency

[[Page 685]]

may not conduct such reviews until the procedures and criteria to be 
used in conducting the reviews have been adopted by the agency and 
published in newspapers of general circulation within the health service 
area or other public information channels.

                               procedures

    The procedures adopted and utilized by a health systems agency for 
conducting reviews of applications for grants under section 1625 of the 
Act shall include at least the following: 1. Except as provided below, 
notification of the beginning of a review within seven days of the 
receipt by the health systems agency of the application. Where the 
application was received by the health systems agency prior to 
publication of this subpart in the Federal Register, notification must 
be made within seven days of the date on which the health systems agency 
adopts its procedures and criteria. The notification shall include the 
proposed schedule for the review, the period within which a public 
hearing during the course of the review may be requested (which must be 
a reasonable period from the transmittal of the written notification 
required above), and the manner in which notification will be provided 
of the time and place of any hearings so requested. Written notification 
to members of the public may be provided through newspapers of general 
circulation in the area and public information channels. Notification to 
the applicant whose application is being reviewed and all other 
applicants for assistance under section 1625 of the Act providing health 
service in the health service area shall be by mail (which may be as 
part of a newsletter). The health systems agency must simultaneously 
notify the Federal funding agency of the beginning of the review.
    2. Schedules for reviews which provide that such reviews shall not 
exceed 60 days from the date of notification made in accordance with 
paragraph 1 of this section to the date of the written findings made in 
accordance with paragraph 4 of this section. This does not preclude a 
health systems agency from conducting its review in less than 60 days.
    3. Provision for applicants to submit to the health systems agency 
(in such form and manner as the agency shall require) such information 
as the agency deems necessary in order to conduct its review.
    4. Written findings which state the basis for the approval or 
disapproval of the application by the health systems agency. Such 
findings shall be sent to the applicant, the State health planning and 
development agency (or agencies), and the Secretary, and shall be 
available to other upon request.
    5. Access by the general public to all such applications reviewed by 
the health systems agency and to all other written materials pertinent 
to the agency review.
    6. Public hearings in the course of agency review, if requested by 
one or more persons directly affected by the review. For purposes of 
this paragraph, a ``person directly affected by the review'' is as 
defined in 42 CFR 122.306 (a)(7).

                                criteria

    The specific criteria adopted and utilized by a health systems of 
this agency to conduct reviews of applications for grants under section 
1625 of the Act shall include at least the following:
    1. The relationship of the health services of the facility to the 
applicable health systems plan and annual implementation plan.
    2. The relationship of the health services of the facility to the 
long-range development plan (if any) of the applicant.
    3. The need that the population served or to be served by the 
facility has for the health services of such facility.
    4. The availability of alternative, less costly, or more effective 
methods of providing the health services which the facility provides.
    5. The relationship of the health services provided by the facility 
to the existing health care system of the area.
    6. The availability of resources (including health manpower, 
management personnel, and funds for capital and operating needs) for the 
provision of services by the facility and the availability of 
alternative uses of such resources for the provision of other health 
services.
    7. The special needs and circumstances of those entities which 
provide a substantial portion of their services or resources, or both, 
to individuals not residing in the health service area in which the 
entities are located or in adjacent health service areas. Such entities 
may include medical and other health professions schools, 
multidisciplinary clinics, and other speciality centers.
    8. The special needs and circumstances of health maintenance 
organizations for which assistance may be provided under title XIII.
    9. The costs and methods of the proposed construction or 
modernization, including the costs and methods of energy provision.
    10. The probable impact of the project reviewed on the applicant's 
costs of providing health services.



                    Subpart H_Recovery of Grant Funds

    Authority: Secs. 609 and 1622 of the Public Health Service Act as 
amended 98 Stat. 112 (42 U.S.C. 291i and 300s-1a).

    Source: 51 FR 7939, Mar. 7, 1986, unless otherwise noted.

[[Page 686]]



Sec. 124.701  Applicability.

    The provisions of this subpart apply to facilities with respect to 
which grant funds were paid for construction or modernization--
    (a) Under title VI or XVI of the Public Health Service Act; or
    (b) Pursuant to the authority of the Secretary under any of the 
following statutes:
    (1) The Public Works Acceleration Act of 1962, Pub. L. 87-658 (42 
U.S.C. 2641 et seq.);
    (2) The District of Columbia Medical Facilities Construction Act of 
1968, 82 Stat. 631 (Pub. L. 90-457);
    (3) The Appalachian Regional Development Act of 1965, as amended (40 
U.S.C. App.).



Sec. 124.702  Definitions.

    As used in this subpart--
    Act means the Public Health Service Act.
    Department means the Department of Health and Human Services.
    Expected useful life means the period of time during which the 
structure may reasonably be expected to perform the function for which 
it was designed or intended.
    Facility means a facility with respect to which grant funds were 
paid under any of the authorizations listed in Sec. 124.701.
    Fiscal year means the facility's fiscal year.
    Nonprofit, as applied to any facility, means a facility that is 
owned and operated by one or more nonprofit corporations or associations 
no part of the net earnings of which inures, or may lawfully inure, to 
the benefit of any private shareholder or individual.
    Secretary means the Secretary of Health and Human Services and any 
other officer or employee of the Department of Health and Human Services 
to whom the authority involved has been delegated.
    State agency means (1) in the case of a facility with respect to 
which a grant was made under title VI of the Public Health Service Act 
or any of the statutes listed in Sec. 124.701(b), the State agency 
designated pursuant to section 604 of the Public Health Service Act or 
its successor agency, and (2) in the case of a facility with respect to 
which a grant was made under title XVI of the Public Health Service Act, 
the State health planning and development agency designated pursuant to 
title XV of the Public Health Service Act.
    Then value means the value of the facility on the date the facility 
is sold, transferred or ceases to be used for a permissible use as 
described in Sec. 124.704.



Sec. 124.703  Federal right of recovery.

    (a) If any facility is at any time within 20 years after the 
completion of the grant-assisted construction or modernization sold or 
transferred to any entity which is either not qualified for a grant 
under the statute pursuant to which the grant was awarded or not 
approved as a transferee by the State agency, the United States shall be 
entitled to recover on the basis of joint and several liability from any 
transferor, transferee, or successive transferee of the facility an 
amount determined in accordance with this subpart.
    (b) If any facility at any time within 20 years after the completion 
of the grant-assisted construction or modernization ceases to be a 
public or other non-profit facility that would have been eligible for a 
grant under the statute pursuant to which the grant was awarded, the 
United States shall be entitled to recover from the owners of the 
facility an amount determined in accordance with this subpart.



Sec. 124.704  Notification of sale, transfer, or change of use.

    (a) The transferor of a facility that is sold or transferred as 
described in Sec. 124.703(a), or the owner of a facility which ceases 
to be a public or other nonprofit facility as described in Sec. 
124.703(b), shall provide the Secretary written notice of such sale, 
transfer, or other change not later than 10 days after the date on which 
the sale, transfer, or change occurs.
    (1) Transfer. For purposes of this subpart, a transfer occurs when a 
facility is conveyed to another entity through lease, merger, 
bankruptcy, foreclosure, or other arrangement.
    (2) Cease to be. For purposes of this subpart,
    (i) A facility ``ceases to be'' a facility for which a grant could 
have been made under the statute pursuant to which

[[Page 687]]

the grant was awarded when it is no longer operated as such a facility; 
and
    (ii) A facility ``ceases to be a public or nonprofit facility'' when 
an entity that is not a public or other non-profit corporation or 
association assumes management responsibilities with respect to the 
facility which, in the Secretary's judgment, are so pervasive as to 
constitute operation of the facility. The manager will not be deemed to 
be the operator of the facility if the management agreement contains 
both of the following provisions:

    The Board of Directors of the facility retains authority to 
terminate the agreement at any time upon reasonable notice to the 
contractor.
    No employee of the contractor may be a member of the facility's 
Board of Directors.


In the absence of either of these provisions the Secretary will consider 
the degree of control granted to the managing organization over patient 
admission, determination of what services will be provided, and charges 
for services provided in the facility.
    (b) Content of Notice. The notice required by paragraph (a) of this 
section shall be sent to the Secretary by certified mail, and shall 
contain or be accompanied by
    (1) The date of the sale, transfer, or other event that gives rise 
to the notice;
    (2) Copies of any sales contracts, lease agreements, management 
contracts or other documents pertinent to the event giving rise to the 
notice;
    (3) Estimates of current assets, current liabilities, book value of 
equipment, the expected value of land on the new owner's books, and the 
remaining depreciation for all fixed assets involved in the transaction 
calculated on a straight line basis using commonly adopted expected 
useful lifetimes.
    (c) Failure to provide notice. Failure to provide the information 
required by paragraph (b) of this section, will be considered failure to 
provide the notice required by this section. In any case in which such 
information has not been provided, the Secretary will, promptly upon 
receiving an incomplete notice or otherwise discovering that a sale, 
transfer or other event giving rise to a recovery may have occurred, 
send a letter to the owner of the facility requesting the information 
needed to calculate a recovery amount.

(Approved by the Office of Management and Budget under control number 
0915-0099)



Sec. 124.705  Amount of recovery.

    (a) Except as provided in Sec. 124.706, the amount that the United 
States shall be entitled to recover under this subpart is that amount 
bearing the same ratio to the then value of so much of the facility as 
constituted an approved project (or projects) as the amount of Federal 
participation bore to the cost of the construction or modernization 
under such project (or projects).
    (b) The then value of the facility will be based on:
    (1) The transaction value in the case of an arms-length sale or 
transfer, or
    (2) A depreciated reproduction value in the absence of an arms-
length sale or transfer or if the buyer fails to provide, within 60 days 
after the date of the Secretary's letter described in Sec. 124.704(c), 
the information which, in the judgment of the Secretary, is necessary to 
establish, adjust, and apportion a transaction value. As used in this 
section, ``transaction value'' means in the case of a sale, the sale 
price, and in the case of a lease, the value of the lease plus the 
residual value of the facility at the termination of the lease (i.e., 
the reproduction value or, if appropriate, an alternative use value).
    (c) The transaction value will be adjusted to account for the 
purchase or lease of other assets and the assumption of liabilities 
associated with the transaction. To determine the amount of Federal 
recovery, the adjusted value will be apportioned to the grant-aided 
assets by the ration of the remaining useful lifetime values of those 
assets to the sum of the remaining useful lifetime values of all assets 
not previously accounted for in adjusting the transaction value.
    (d) A depreciated reproduction value will be established by 
calculating a reproduction value using construction cost indexes or 
current costs per square foot for construction, depending on which is 
more relevant to the type of construction associated with the grant. 
This reproduction value will then be adjusted by the ratio of the 
remaining

[[Page 688]]

useful life to the total useful life for the assets involved.
    (e) In calculating the recovery amount, the Secretary will include 
as Federal participation any grant assistance received by the facility 
under an authority listed in Sec. 124.701 and any assistance 
supplementary to that assistance received for the construction or 
modernization of the facility under the Public Works and Economic 
Development Act of 1965 (42 U.S.C. 3121, et seq.) or the Local Public 
Works Capital Development Act of 1976 (Pub. L. 94-369).



Sec. 124.706  Calculation of interest.

    (a) In addition to the amount of recovery calculated under Sec. 
124.705, the United States shall be entitled to recover interest on such 
amount in accordance with this section at the rate determined by the 
Secretary based on the average of the bond equivalent of the weekly 
ninety-day U.S. Treasury bill auction rate for the quarter previous to 
the quarter in which interest begins to accrue under this section.
    (1) Change of status before July 18, 1984. For facilities that were 
sold or transferred or which ceased to be public or other nonprofit 
facilities before July 18, 1984, interest will be charged beginning 
August 17, 1984, or 180 days after the date of such sale, transfer or 
other, whichever is later, and ending on the date the amount the United 
States is entitled to recover is collected.
    (2) Change of status after July 17, 1984. For facilities that are 
sold or transferred or which cease to be public or other nonprofit 
facilities after July 17, 1984, interest will be charged beginning 180 
days after receipt by the Department of the notice required under Sec. 
124.704; Provided, That if such notice is not provided as prescribed, 
interest will be charged beginning on the date of the sale, transfer, or 
change of use, and ending on the date the amount which the United States 
is entitled to recover is collected.
    (b) The Secretary may waive interest charges that result from delays 
caused solely by the Department.



Sec. 124.707  Waiver of recovery where facility is sold or transferred to a 

proprietary entity.

    (a) Conditions of the waiver. The Secretary may waive the recovery 
rights of the United States arising under Sec. 124.703(a) if the entity 
to which the facility was sold or transferred:
    (1) Has filed a written request for the waiver within the time 
limits prescribed by this section;
    (2) Has established an irrevocable trust in accordance with this 
section, in an amount equal to the greater of the amount that would 
otherwise have been recovered pursuant to Sec. 124.705 (including 
accrued interest as calculated under Sec. 124.706) or twice the cost of 
the remaining uncompensated services obligation of the facility as of 
the date of the change of status, that will be used by the entity only 
to provide services to those unable to pay in accordance with the 
requirements of subpart F of this part; and
    (3) Has agreed to comply with the community service regulations set 
out in subpart G of this part.
    (b) Procedures for obtaining waiver. (1) Within 30 days after the 
date of receipt of the information described in Sec. 124.704(b), the 
Secretary will send a letter to the new owner of the facility advising 
of the United States' right of recovery and the opportunity to obtain a 
waiver. For the purpose of advising the new owner of the amount to be 
placed in the irrevocable trust should the owner wish to obtain a 
waiver, the letter will also state the dollar amount of the remaining 
uncompensated care obligation and the amount that would be due under 
Sec. 124.705, computed as follows:
    (i) Computation of uncompensated care obligation. (A) For a facility 
which changes status before the date that subpart F of this part is 
effective for the facility, the remaining uncompensated services 
obligation is zero.
    (B) For a facility which changes status after the date that subpart 
F of this part is effective for the facility, the Secretary will 
multiply the annual compliance level, computed under the 10% method 
specified in 42 CFR 124.503(a)(1)(ii), for the fiscal year in which the 
change of status occurs times the number of years remaining

[[Page 689]]

in the facility's uncompensated services obligation. From this amount, 
the Secretary will subtract amounts of excess or add amounts of deficit 
for each fiscal year prior to the change of status for which the 
Secretary has previously conducted an audit of uncompensated services 
accounts. Excess and deficits will be adjusted by the percent change in 
the National Consumer Price Index for Medical Care between the year in 
which the excess or deficit occurred and the year in which the status 
change occurred. For each fiscal year prior to the change of status 
which the Secretary has not audited, the Secretary will add to the 
remaining obligation an amount equal to the annual compliance level in 
each such year adjusted by the percent change in the National Consumer 
Price Index for Medical Care between that year and the year of the 
status change. The amount computed as the total remaining obligation 
will then be multiplied by two. If the transferee chooses to accept the 
Secretary's calculation, no further assessments will be made of 
uncompensated care provided prior to the change of status date. If the 
transferee does not accept the calculation, the transferor or transferee 
may hire, and may charge against the irrevocable trust established under 
this section, an independent auditor to certify the compliance level and 
any excess or deficit for the period from May 18, 1979, up to and 
including the date of the change of status, using standard Departmental 
procedures supplemented with instructions provided by the Secretary, and 
submit the results in accordance with paragraph (b)(2)(ii) of this 
section. The audit may be conducted for any years not included in a 
previous site assessment conducted by the Department. If the Secretary 
agrees that a change is appropriate, the Secretary will use this 
information to adjust the calculation as set out in paragraph (b)(3) of 
this section. If the independent auditor certifies that qualified care 
was rendered either at the facility or at a replacement facility 
operated by the transferee between the date of the change of status and 
the date of establishment of the trust, and the Secretary agrees, the 
post transfer level of care shall not affect the calculation of the 
total remaining uncompensated care obligation to be doubled, but instead 
shall be recognized as a credit to be drawn from the trust as provided 
in paragraph (c)(1)(ii) of this section. In the case of a facility with 
respect to which a grant was made under title XVI of the Act, the 
remaining period of obligation will be the remainder of the expected 
useful life of the facility, as follows: 40 years for buildings, 30 
years for additions, 20 years for building renovations, 20 years for 
fixed equipment and 12 years for major movable equipment.
    (ii) Computation of recovery amount. The Secretary will determine 
the recovery amount as provided in Sec. 124.705.
    (2) Within 60 days following the date of the Secretary's letter 
provided pursuant to paragraph (b)(1) of this section, the owner of the 
facility shall notify the Secretary in writing that it either:
    (i) Accepts the trust fund amount for the waiver as offered by the 
Secretary;
    (ii) Provides a detailed statement of an alternative determination 
of the recovery amount or an independent audit of the remaining 
uncompensated services obligation as described in paragraph (b)(1)(i) of 
this section; or
    (iii) Does not seek a waiver under Sec. 124.707. Failure to provide 
a timely response to the Secretary under this subparagraph will be 
considered an election not to seek the waiver.
    (3) Within 30 days following the receipt of the owner's views 
concerning the calculation, and after considering those views, the 
Secretary will send a final letter providing the Secretary's 
determination of twice the remaining uncompensated care obligation and 
the recovery amount under Sec. 124.705. The amount to be placed in the 
irrevocable trust will be the higher of those two figures. (See 
paragraph (a)(2) of this section.)
    (4) Within 30 days of the date of the final letter, the owner of the 
facility shall notify the Secretary in writing whether or not it accepts 
the terms of the waiver. Failure to provide timely notice to the 
Secretary under this subparagraph will be considered an election not to 
accept the waiver.
    (c) Establishment of the trust. (1) Within 60 days of the date of 
its acceptance of a waiver under paragraph (b)(2) or

[[Page 690]]

(b)(4) of this section, the owner shall begin delivering services to 
those unable to pay in accordance with subpart F of this part under an 
irrevocable trust established in the amount calculated pursuant to 
paragraph (b) of this section. Provided, That
    (i) The owner shall provide a copy of the trust documents to the 
Secretary and no trust shall be considered established until the trust 
documents have been approved by the Secretary; and
    (ii) The owner may credit against the trust any uncompensated 
services provided in accordance with subpart F of this part between the 
date of the change of status of the facility and the establishment of 
the trust. For an owner to receive the credit before the establishment 
of the trust and deposit of funds therein, the auditor's report covering 
the post-transfer period shall be submitted with the notification of 
acceptance of the waiver, and in any event, not later than 30 days from 
the date of the Secretary's final letter described in paragraph (b)(3) 
of this section. Within 30 days following the receipt of the auditor's 
report, the Secretary will notify the owner of the allowable credit, if 
any. If the auditor's report is not timely submitted, the trust must be 
established and fully funded, in accordance with the time limits imposed 
by paragraph (c)(1) of this section, and the Secretary will notify the 
owner of the allowable credit, if any, within 30 days of the date of the 
establishment of the trust or within 30 days of the receipt of the 
report, whichever is later.
    (2) The trust shall be administered by a Trustee who is neither an 
employee of the transferee nor an employee of a subsidiary or of the 
parent institution of the transferee.
    (3) The trust shall provide that the trust corpus and income may be 
invested only in U.S. Government or U.S. Government insured securities.
    (d) Use of the trust. The corpus and income of the irrevocable trust 
shall be used to pay for the costs of uncompensated services, which may 
include reasonable costs of establishing and administering the trust and 
the cost of the independent audit described in paragraph (b)(1)(i) of 
this section, until the trust is exhausted.

(Approved by the Office of Management and Budget under control number 
0915-0099)



Sec. 124.708  Waiver of recovery--good cause for other use of facility.

    The Secretary may for good cause waive the recovery rights of the 
United States arising under Sec. 124.703(b). In determining whether 
there is good cause under this section for releasing the applicant or 
other owner of the facility from its obligation, the Secretary will take 
into consideration the extent to which:
    (a) The facility will be devoted by the applicant or other owner to 
use for another public or nonprofit purpose whch will promote the 
purpose of the Act;
    (b) There are reasonable assurances that for the remainder of the 
20-year period other public or nonprofit facilities not previously 
utilized for the purpose for which the facility was constructed will be 
so utilized and are substantially equivalent in nature and purpose.
    (c) The facility has been acquired from an agency of the United 
States (e.g., the Federal Housing Administration under its mortgage 
insurance commitment program) which has made a reasonable effort to 
dispose of it for operation as a public or nonprofit health care 
facility.

[51 FR 7939, Mar. 7, 1986, as amended at 57 FR 8272, Mar. 9, 1992]



Sec. 124.709  Withdrawal of waiver.

    (a) Any waiver granted under this subpart is conditioned upon the 
recipient of the waiver carrying out the obligations imposed by Sec. 
124.707 or Sec. 124.708 as applicable.
    (b) The Secretary will monitor compliance with the community service 
and uncompensated care obligations of any entity that receives a waiver.
    (c) Should a recipient of a waiver fail to comply with the 
applicable conditions, the Secretary will withdraw the waiver and seek 
recovery based on the value of the facility on the date the right of 
recovery first arose under Sec. 124.703.

[[Page 691]]

    (d) No waiver will be withdrawn until the recipient has been 
notified in writing by the Secretary of the noncompliance and has failed 
to take corrective action within 90 days after the date of such notice.
    (e) Should the waiver be withdrawn, the amount of the Government's 
recovery will be the amount set out in the Secretary's determination 
letter as described in Sec. 124.707 (b)(1) or (b)(3) as applicable plus 
interest from the date of the notification sent in accordance with 
paragraph (d) of this section.

                        PARTS 125-129 [RESERVED]

[[Page 692]]