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

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Public Health Service

42 CFR Part 124

RIN 0905-AE06

Medical Facility Construction and Modernization; Requirements for

Uncompensated Services for Persons Unable to Pay

AGENCY: Public Health Service, DHHS.

ACTION: Final rule.

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SUMMARY: The rules below revise the rules currently governing how

certain health care facilities, assisted under Titles VI and XVI of the

Public Health Service Act, fulfill the assurance given in their

applications for assistance that they would provide a reasonable volume

of services to persons unable to pay for such services. The revisions

below amend the rules to permit facilities that provide substantial

free or below cost medical services but nonetheless cannot receive

credit for such services under current requirements with an alternative

method of compliance that will enable them to fulfill their

uncompensated services obligations.

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

FOR FURTHER INFORMATION CONTACT:

Mr. Eulas Dortch, 301-443-5656.

SUPPLEMENTARY INFORMATION: On November 4, 1993, the Secretary of Health

and Human Services published a Notice of Proposed Rulemaking (NPRM)

proposing to revise the rules governing what is popularly known as the

Hill-Burton uncompensated services program. 58 FR 58828. Health care

facilities covered by the program received construction assistance

under two titles of the Public Health Service Act, Title VI (the

``Hill-Burton Act'', 42 U.S.C. 291, et seq.) and Title XVI (42 U.S.C.

300q, et seq.). Under both titles, facilities receiving construction

assistance have been required, as a condition of receiving the

construction assistance, to provide an assurance that ``there will be

available in the facility or portion thereof to be constructed or

modernized a reasonable volume of services to persons unable to pay

therefor * * *.'' 42 U.S.C. 291c(e)(2). See also 42 U.S.C. 300s-

1(b)(1)(K)(ii). This assurance is known as the ``uncompensated services

assurance.''

Background of the Regulations

The groundwork of the present uncompensated services compliance

requirements was laid by comprehensive regulations that were issued in

1979. 44 FR 29372 (May 18, 1979). The 1979 regulations established

numerous compliance requirements for uncompensated services programs.

These included requirements for a minimum level of uncompensated

services to be provided by facilities, an annual compliance level (ACL)

of uncompensated services to be provided, make-up of any deficit in

meeting the ACL, national eligibility criteria for determining who is

unable to pay, notice requirements, requirements regarding the timing

and documentation of eligibility determinations, reporting and

recordkeeping requirements, and so on.

When experience with the 1979 regulations showed that they created

substantial compliance problems for a number of public facilities,

which were amassing large deficits despite serving large numbers of

indigent patients on a free or below cost basis, the regulations were

amended. A compliance alternative for public facilities, which is

codified at 42 CFR 124.513, was created. 51 FR 33208 (Sept. 18, 1986).

The public facility compliance alternative provides that a publicly

owned and operated facility or quasi-public facility may be certified

if it provides health services to eligible persons under a program of

discounted health services and either received for the past three

fiscal years at least 10 percent of its total operating revenue from

state and/or local sources to cover operating deficits attributable to

the provision of discounted health services, or provided in those

fiscal years uncompensated services or free or discounted health

services in an amount equal to or greater than twice the facility's

annual compliance level. The facility must comply with separate

reporting and recordkeeping requirements and is required only to comply

with the requirements relating to certified facilities. A facility may

make up previously assessed deficits by showing that it met the

conditions for certification in the deficit period; a Title VI facility

may also make up a previously assessed deficit by remaining certified

after its original period of obligation for a period equal to the

deficit period, while a Title XVI facility that cannot show that it met

the conditions of certification in the deficit period must make up any

remaining deficit whenever its certification is withdrawn. A facility

with an unassessed deficit may submit an independent certified audit to

establish that no, or a lesser, deficit exists.

In 1987, the Secretary again revised the 1979 regulations. 52 FR

46022 (Dec. 3, 1987). As pertinent here, an additional compliance

alternative for facilities with annual obligations of $10,000 or less

was created. See Sec. 124.514. This alternative was adopted to bring

the administrative costs of compliance for such facilities more into

line with the actual level of uncompensated services available, with

the requirements applicable under Sec. 124.514 resembling those

applicable under the public facility compliance alternative.

Proposed Rules

In the NPRM, the Secretary proposed an additional compliance

alternative designed to address the compliance problems of another

class of facilities whose operational characteristics have created

intractable compliance problems, but which cannot qualify for the

existing compliance alternatives. Many of these facilities provide

substantial amounts of free or below cost services, generally because

they were created to provide services at no or a nominal charge to all

persons, or they serve an indigent population that is entirely covered

by third-party programs such as Medicaid. These facilities, which are

generally private, nonprofit organizations, include facilities such as

sheltered workshops, crippled children rehabilitation facilities,

cerebral palsy centers, chronic disease hospitals, Goodwill Centers,

facilities for the blind, mental health centers, and Easter Seal

Centers. Based on experience monitoring such facilities' compliance

with the uncompensated services regulations since 1979, the Department

determined that many such facilities have accumulated large

uncompensated services deficits, typically because their policies of

not charging or of serving populations covered under governmental

indigent care programs preclude receiving credit under the

uncompensated services regulations for the free and below cost care

they in fact provide.

The Department identified 180 private, nonprofit outpatient,

rehabilitation, and community mental health center facilities with

outstanding uncompensated services obligations which were likely to

have provided a large volume of free or below cost care while receiving

little or no uncompensated services credit. A survey of 28 of these

confirmed that there are a number of facilities for which compliance

with the uncompensated services requirements is difficult or

impossible, given their charging policies, legal requirements

applicable to their operations, characteristics of their patient

populations, or some combination of these factors, but which clearly

provide health services without regard to ability to pay.

Accordingly, the Secretary proposed to adopt a compliance

alternative for private, nonprofit facilities which provide a

substantial amount of services without regard to ability to pay, but

which find it difficult, if not impossible, to comply with the present

uncompensated services requirements. The proposed compliance

alternative was substantially similar to the public facility compliance

alternative with respect to requirements for reporting, recordkeeping,

and the make-up of deficits. However, the eligibility criteria differed

somewhat. Under the proposed rule, a facility could qualify for the

compliance alternative if it was a private, nonprofit entity falling

into one of two categories: either (1) it received no monies directly

from patients with incomes up to twice the poverty level (exclusive of

certain deductible and coinsurance amounts and other required

collections), or (2) it received for the three most recent fiscal years

at least 10 percent of its non-Medicaid and non-Medicare operating

revenue from philanthropic sources to cover operating deficits and

either provided services under a ``program of discounted health

services'' or provided all services to all persons at no or a nominal

charge (exclusive of certain deductible and coinsurance amounts and

other required collections). With respect to the first category, the

NPRM stated that in the Department's view those facilities that collect

no monies from patients with incomes up to twice the poverty level are

meeting the statute's objectives. Similarly, with respect to the second

category, the proposed percentage of private philanthropic support was

considered to be a proxy for tax support in the public facility

context, as such monies are generally contributed to fund services

which are deemed essential or worthwhile, but which are not self-

supporting. The ``program of discounted health services'' criterion is

analogous to a similar criterion in the public facility compliance

alternative, and reflects a recognition that many such facilities have

in place a mechanism for determining eligibility for such services by

screening for ability to pay. The rationale for the other criterion is

self-evident: Clearly, facilities that provide all services at no or a

nominal charge are adequately serving those in their patient population

who are unable to pay. The NPRM also solicited comment on whether the

compliance alternative should be expanded to cover public facilities

that do not qualify for the public facility compliance alternative but

whose operational characteristics are similar to the private, nonprofit

entities the alternative would cover.

Public Comment and the Department's Responses

The Department received 23 comments on the proposed rules,

principally from rehabilitation and other facilities and provider

associations. While most of the comments received were in favor of the

proposed compliance alternative in principle, many suggested specific

changes to the proposed policies. The comments and the Department's

responses thereto are summarized below.

1. Criteria for Certification.

a. Inclusion of Public Facilities

A number of commenters recommended that the criteria for

certification be changed to permit the inclusion of public facilities

that otherwise meet the criteria for certification. They argued that

there is operationally no difference between such facilities and non-

profit facilities that meet the criteria, and that it is unreasonable

to penalize public facilities just because they are public. The

Department agrees with these comments and has changed the rules

accordingly, by eliminating proposed Sec. 124.516(b)(1), which would

have restricted the compliance alternative to private, nonprofit

facilities.

b. No Monies Received From the Indigent

Proposed Sec. 124.516(b)(2) would have established, as one

alternative criterion for certification, that a facility received no

monies directly from persons with incomes up to twice the poverty

level, exclusive of amounts charged or received for purposes of

obtaining reimbursement under third party programs. Several commenters

urged that this criterion be revised to permit receipt of funds from

such persons, on the grounds that it is unrealistic to expect a

facility to receive no money from such persons. It was suggested that

the criterion be revised to permit receipt of funds up to some amount,

such as 10 percent of operating revenues. The Department has not

accepted this suggestion. This criterion was intended to accommodate

those exceptional facilities which routinely provide all services at no

charge to persons unable to pay or which entirely serve populations

ineligible for uncompensated services and are thus unable to comply

with the regulations. Facilities that collect monies from patients with

incomes below twice the poverty level do not come within the intent of

this criterion. It should be noted, however, that such facilities may

nonetheless be able to qualify for the compliance alternative under a

different criterion of the regulation, if they have a ``program of

discounted health services'' and receive the requisite amount of

philanthropy. See Sec. 124.516(b)(2) below.

Another suggestion made with respect to this criterion was that

amounts collected from patients as part of their Medicaid ``spenddown''

be considered to be included under the exclusionary language of this

section, so that collection of such monies by a facility would not

render it ineligible under this criterion. This suggestion has likewise

not been accepted. Spenddown amounts are clearly not within the scope

of the exclusionary language as written, as Medicaid eligibility does

not exist until the patient has spent down the requisite amount, and

therefore they are not amounts charged that are reimbursable. Nor do we

think the language should be revised to permit inclusion of spenddown

amounts in the amounts permitted to be charged or claimed. As stated

above, this criterion is intended to cover a narrow class of

facilities--ones which can be considered to be meeting their Hill-

Burton obligation because they are in fact not receiving monies

directly from any patients who would otherwise be eligible for Hill-

Burton uncompensated services. Permitting collection of spenddown

amounts would thus not be consistent with the intended scope of this

criterion.

This criterion has been revised, however, to require that the

facility demonstrate that it met the criterion for the preceding three

fiscal years. This revision brings this criterion into line with the 10

percent philanthropy criterion of Sec. 124.516(b)(2), which also

requires a demonstration of compliance over the preceding three years.

The purpose of the three-year demonstration in both cases is to give

the Secretary a basis for the conclusion that a facility applying for

certification in fact comes within the intended scope of the compliance

alternative because of its characteristics and problems, and that

certification is not made based on what may be a one-time aberration in

the facility's circumstances. See Sec. 124.516(b)(1) below.

Another commenter suggested that, in view of the difficulty many

nursing homes have in finding individuals who are eligible for

uncompensated services and not also eligible for Medicaid, the

Department create a new eligibility category for persons in nursing

homes with incomes up to four times the poverty level. In fact, the

Secretary is considering such a change to the regulations; an NPRM

proposing to establish a new ``Category C,'' consisting of persons with

incomes up to three times the poverty level was recently published. 59

FR 15693 (April 4, 1994). It should be noted that, should this latter

policy subsequently be adopted, the Secretary would expect to revise

Sec. 124.516(b)(1) below to be consistent with the revision in the

underlying regulations.

c. Definition of ``Philanthropy''

Consistent with the elimination of the restriction of the

compliance alternative to private facilities, the Department has also

broadened the examples of ``philanthropy'' in the new

Sec. 124.516(b)(2)(i). As revised, the term ``philanthropy'' includes

state and/or local funding, as it is anticipated that most

philanthropic funding for public facilities will originate from such

sources.

The term ``philanthropy'' has also been clarified by the addition

of the phrase ``to cover operating deficits attributable to the

provision of discounted services.'' The added words, among other

things, make clear that philanthropic state or local funding within the

scope of this section is different than state or local funds received

under entitlement programs, which have long been considered not to be

``uncompensated services''; see Sec. 124.505(a). The additional

language imposes a similar restriction on other forms of philanthropy.

Several commenters suggested that the term ``philanthropy'' be

further revised to include interest earned on donated funds. However,

since it is the Department's view that interest on donated funds is

clearly from a ``philanthropic source,'' further clarification of the

regulation in this respect is not needed.

d. Program of Discounted Services

One provider group opposed the eligibility criterion permitting

certification where a facility has a ``program of discounted

services.'' The group argued that this provision would create a problem

under Medicaid and Medicare, the rules of which prohibit those programs

from subsidizing other patients. The Department does not believe that

this is a problem, since the discounts made to patients under a

facility's discounted health services program are not required to be

reflected in charges to those programs. Certainly, this has not proved

to be a problem with facilities operating under the general compliance

requirements or with facilities certified under the public facility

compliance alternative, which contains the same eligibility criterion.

The definition of ``program of discounted health services'' has

been revised, however, by the addition of language making clear that

charges may be made under such a program for the purpose of obtaining

third party reimbursements. This policy was discussed in the preamble

to the proposed rule, but was omitted from the proposed rule itself.

The change simply makes the policy of this section consistent with the

policy throughout the remainder of the subpart that third party

collections are to be encouraged. See Sec. 124.505(a).

e. No or Nominal Charge Policies

This section has likewise been revised by the addition of the

language discussed in the preceding paragraph. One comment questioned

the criterion set out in the proposed rules pertaining to making ``all

services of the facility available to all persons at no or a nominal

charge.'' It expressed the concern that a hospital could qualify for

the compliance alternative under this criterion simply by designating

some narrow group of services, then making them available for free or

at a nominal charge, while continuing to charge everyone fully for the

facility's other services. We do not share the commenter's concern, as

the rule below expressly states that, in order to come within this

criterion, the facility must ``make[ ] all services of the facility

available to all persons * * *'' See Sec. 124.516(b)(2)(ii)(B) below.

f. Other Eligibility Criteria

Other proposals for eligibility criteria were received. Several

commenters suggested that a facility's Medicaid census be a basis for

eligibility; these commenters suggested that facilities with a 70

percent or greater Medicaid census be eligible for the compliance

alternative. One commenter suggested that long-term care facilities

with characteristics ``similar'' to the proposed eligibility criteria

likewise be considered to be eligible for the compliance alternative.

The Department is not persuaded that it should create a special

eligibility criterion based on a facility's Medicaid/Medicare census.

Clearly, those facilities that serve large numbers of Medicaid or

Medicare recipients are not precluded from qualifying under one of the

criteria below, if they in fact meet those criteria. Indeed, we do not

think it would be consistent with the theory underlying the compliance

alternative to craft such an eligibility criterion. The theory of the

compliance alternative is that the facilities who come within it need

the alternative because compliance with the general compliance

standards is difficult, if not impossible, for them because of their

operational characteristics, even though they are clearly providing

free or below cost services to ``persons unable to pay.'' However,

compliance with the general compliance standards is not impossible for

a facility with a 70 percent Medicaid/Medicare census which charges the

remaining 30 percent of its patient population. After all, if none of

the remaining 30 percent of the facility's patient population meets the

eligibility criteria of Sec. 124.505, the facility will qualify for the

compliance alternative under Sec. 124.516(b)(1) below. Thus, it must be

assumed that the intent of the proposed revision would be to permit

facilities to qualify for the compliance alternative even though they

charge patients who meet the Hill-Burton eligibility criteria and who

thus could be provided uncompensated services.

With respect to the comment regarding long-term care facilities,

the Department has not created a special criterion for such facilities.

If such facilities meet the eligibility criteria below, they may be

certified under the new compliance alternative. We note, moreover, that

the proposed change in eligibility criteria for nursing homes may well

relieve some of the particular difficulties of nursing homes in

complying with the general compliance standards.

2. Documentation

A number of comments expressed support for minimizing the reporting

and recordkeeping required of qualifying facilities under the proposed

compliance alternative. One hospital, however, opposed the proposed

rules on the grounds that they simply created an additional layer of

reporting and recordkeeping requirements, stating that the existing

requirements work well. It should be emphasized that the compliance

alternative is not meant to create an additional set of requirements

for facilities already complying with the general compliance

requirements at Secs. 124.501-124.512; rather, the compliance

alternative below is designed to relieve facilities which qualify for

it from the burden of complying with the general compliance

requirements. Consistent with this approach, the reporting and

recordkeeping required for qualifying facilities is different from that

required of most facilities and should generally be considerably less

than that under the general compliance standards. In any event, a

facility that is not certified under the compliance alternative does

not have to comply with the reporting and recordkeeping requirements

applicable to those facilities which are certified; concommitantly, a

facility that is certified under the compliance alternative is not

required to comply with reporting and recordkeeping requirements other

than those that apply to certified facilities. A facility always has

the option of continuing to comply with the general compliance

requirements; it can thus ignore the compliance alternative completely

if it decides that compliance with the general compliance requirements

makes more sense for it. Thus, we do not think that this particular

concern is justified.

A couple of commenters pointed out that the proposed means of

demonstrating that a facility meets the eligibility criteria--through

audited financial statements--would not necessarily suffice, depending

on the criterion involved. They pointed out that, for example, audited

financial statements do not necessarily set forth philanthropic sources

in the level of detail required, or establish a facility's charging

policies. They suggested that the rule be amended to require facilities

to contract for such information as part of their audits. The

Department agrees with the observation made about the limitations of

audited financial statements, but does not agree with the remedy

proposed. Rather, it is our view that documentation sufficient to

establish sources of philanthropy, charging practices and so on can be

provided by other means, and we are reluctant to put facilities to the

added expense of contracting for audit services that they would not

otherwise need. Thus, Sec. 124.516(c)(1) below has been revised to add

a requirement for ``other documents'' to cover the concern raised by

the commenters. The Department will issue program instructions

clarifying what other documents may be required in specific instances.

3. Deficits

One commenter suggested that the proposed rules be revised to

permit facilities to treat deficits resulting from Medicaid

underpayments as justifiable deficits. However, we are not accepting

this comment, as it is not pertinent to the compliance alternative. The

rules below do not distinguish between types of deficits for purposes

of deficit make-up under the alternative, unlike the general compliance

requirements, which do draw such a distinction. Compare

Sec. 124.516(d)(2) below with Sec. 124.503(b). Thus, under the

compliance alternative, a certified facility with a noncompliance

deficit may make up the deficit in precisely the same manner as a

certified facility with a justifiable deficit.

4. Other Comments

Several comments questioned whether vocational services could be

counted as uncompensated services under the compliance alternative; the

facilities concerned stated that they have difficulty meeting the ACL

since they do not receive credit for vocational services they provide.

The compliance alternative below should relieve this problem for

facilities that are certified, however. Certified facilities will not

have to provide a set amount of uncompensated services, unlike

facilities operating under the general compliance requirements. Thus,

so long as certified facilities provide some medical services and

otherwise remain in compliance with the requirements for certification,

they will be considered to be in compliance with their uncompensated

services assurance.

In view of the fact that the rules below relieve restrictions on

facilities that apply and are certified for the compliance alternative

and impose no additional duties or obligations on other facilities,

delay in the effective date of these rules is not required under 5

U.S.C. 553. For the same reasons, the Secretary hereby finds that good

cause exists for not delaying the effective date of the rules below.

The rules are accordingly effective upon publication.

Regulatory Flexibility Act and Executive Order 12866

The rule below would generally maintain the existing procedural and

reporting requirements for the majority of obligated facilities, but

significantly lessen them for certain private, nonprofit or public

facilities. The Department has determined that the impact would not

approach the annual $100 million threshold for major economic

consequences as defined in Executive Order 12866. Therefore, a

regulatory impact analysis is not required.

Consistent with the provisions of the Regulatory Flexibility Act (5

U.S.C. 605(b)), the Secretary certifies that this rule will not have a

significant economic impact on a substantial number of small entities.

Paperwork Reduction Act of 1980

This final rule contains information collections which have been

approved by the Office of Management and Budget (OMB) under the

Paperwork Reduction Act of 1980, and assigned control #0915-0171.

The underlying purpose of this rule is to decrease recordkeeping,

reporting, and notification burden for the charitable facilities.

Facilities certified under the charitable facility compliance

alternative will no longer be required to maintain extensive records on

uncompensated services (124.510(a)), but instead will have to maintain

only records which document its eligibility for the compliance

alternative (124.510(b)). We believe this recordkeeping requirement

imposes no additional burden because these documents are ordinarily

retained by facilities. This change is expected to reduce the

recordkeeping burden by 75 hours per facility per year.

Similarly, reporting burden will be reduced. Charitable facilities

will be required to apply once for the certification (124.516(c)), and

thereafter will need only to certify their continued eligibility

annually (124.509(b)). Currently, facilities in deficit status, which

include most of the charitable facilities, must file a report each year

which documents the amount of uncompensated care provided (124.509(a)).

This change in reporting requirements is expected to reduce the

reporting burden by 6 hours per facility in the first year, and by 13.5

hours per facility in subsequent years.

Finally, notification/disclosure burden will be eliminated, because

the facilities will no longer be required to: (1) Publish a notice each

year of the availability of uncompensated services (124.504(a)); (2)

provide individual written notices to each person seeking service in

the facility (124.504(c)); or (3) provide a determination of

eligibility to each person applying for uncompensated services

(124.507). These changes are expected to reduce the notification burden

by 380 hours per facility per year.

All sections of the regulations that contain reporting,

recordkeeping, or notification/disclosure requirements have been

approved by OMB under the Paperwork Reduction Act (OMB) #0915-0077 and

#0915-0171. The title, description, and respondent description of the

information collections are shown below with an estimate of the annual

reporting and recordkeeping burden. Included in the estimate is the

time for reviewing instructions, searching existing data sources,

gathering and maintaining the data needed, and completing and reviewing

the collection of information.

The addition of the requirement for ``other documents'' in

Sec. 124.516(c)(1) will not affect the burden because the other

documents are expected to be readily available materials.

The estimate of 150 applicants was based on a review, prior to

development of the NPRM, of data on the kinds of facilities expected to

qualify for the alternative. A recent re-review of the list of

facilities indicated that 30 of the facilities have completed their

obligations. With the addition of public facilities in the qualifying

criteria, we expect approximately 30 additional facilities to apply for

certification.

Title: Charitable Facility Compliance Alternative (42 CFR part 124

subpart F).

Description: Information will be collected from facilities

requesting certification under the compliance alternative for the

purpose of determining whether the required criteria for qualification

have been met.

Description of Respondents: Public and private non-profit

institutions.

Estimated Annual Reporting and Recordkeeping Burden

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

Annual Average Annual

Section Activity number of Annual burden per burden

respondents frequency response hours

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

124.516(c)................... Procedures for 150 1 6.0 900

certification\1\

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\1\Approximately 150 facilities are expected to be certified under the proposed charitable facility compliance

alternative in the first year. We expect no new applications in subsequent years; therefore, there will be no

burden beginning in year 2.

We received no public comments on the estimated public reporting

burden and it remains the same as that contained in the proposed rule.

List of Subjects in 42 CFR Part 124

Grant programs--Health, Health facilities, Loan programs--Health,

Low income persons, Reporting and recordkeeping requirements.

Dated: July 1, 1994.

Philp R. Lee,

Assistant Secretary for Health.

Approved: August 11, 1994.

Donna E. Shalala,

Secretary.

For reasons set out in the preamble, part 124, subpart F, of title

42 of the Code of Federal Regulations is amended to read as follows:

PART 124--[AMENDED]

Subpart F--Reasonable Volume of Uncompensated Services to Persons

Unable to Pay

1. The authority citation for 42 CFR part 124, subpart F, continues

to read as follows:

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

2. Section 124.502 is amended by revising the first sentence of

paragraph (m)(1) and revising paragraph (m)(2) to read as follows:

Sec. 124.502 Definitions.

* * * * *

(m) * * *

(1) For facilities other than those certified under Sec. 124.513,

Sec. 124.514, Sec. 124.515, or Sec. 124.516, health services that are

made available to persons unable to pay for them without charge or at a

charge which is less than the allowable credit for those services. * *

*

(2) For facilities certified under Sec. 124.513, Sec. 124.514,

Sec. 124.515, or Sec. 124.516, services as defined in paragraph (m)(1)

of this section and services that are made available to persons unable

to pay for them under programs described by the documentation provided

under Sec. 124.513(c)(2), Sec. 124.514(c)(2), or Sec. 124.516(c)(2), as

applicable, or pursuant to the terms of the applicable grant or

agreement as provided in Sec. 124.515. Except as provided in

Sec. 124.516, excluded are services reimbursed by Medicare, Medicaid,

or other third party programs, including services for which

reimbursement was provided as payment in full, and services provided

more than 96 hours following notification to the facility by a peer

review organization that it disapproved the services under section

1155(a)(1) or section 1154(a)(1) of the Social Security Act.

3. Section 124.508 is amended by revising the heading and

introductory text of paragraph (a) to read as follows:

Sec. 124.508 Cessation of uncompensated services.

(a) Facilities not certified under Sec. 124.513, Sec. 124.514,

Sec. 124.515 or Sec. 124.516. Where a facility, other than a facility

certified under Sec. 124.513, Sec. 124.514, Sec. 124.515, or

Sec. 124.516, has maintained the records required by Sec. 124.510(a)

and determines based thereon that it has met its annual compliance

level for the fiscal year or the appropriate level for the period

specified in its allocation plan, it may, for the remainder of that

year or period:

* * * * *

4. Section 124.509 is amended by revising the heading of paragraph

(a) and by revising the heading and introductory text of paragraph (b)

to read as follows:

Sec. 124.509 Reporting requirements.

(a) Facilities not certified under Sec. 124.513, Sec. 124.514,

Sec. 124.515, or Sec. 124.516. * * *

* * * * *

(b) Facilities certified under Sec. 124.513 or Sec. 124.516. A

facility certified under Sec. 124.513 or Sec. 124.516 shall comply with

paragraph (a)(3) of this section and shall submit within 90 days after

the close of its fiscal year, as appropriate:

* * * * *

5. Section 124.510 is amended by revising the heading of paragraph

(a) and by revising the heading and the first sentence of paragraph (b)

to read as follows:

Sec. 124.510 Record maintenance requirements.

(a) Facilities not certified under Sec. 124.513, Sec. 124.514,

Sec. 124.515, or Sec. 124.516. * * *

* * * * *

(b) Facilities certified under Sec. 124.513, Sec. 124.514, or

Sec. 124.516. A facility certified under Sec. 124.513, Sec. 124.514, or

Sec. 124.516 shall maintain, make available for public inspection

consistent with personal privacy, and provide to the Secretary on

request, any records necessary to document its compliance with the

applicable requirements of this subpart in any fiscal year, including

those documents submitted to the Secretary under Sec. 124.513(c),

Sec. 124.514(c), or Sec. 124.516(c). * * *

* * * * *

6. Section 124.511 is amended by revising the first sentence of

paragraph (a)(3) and by revising paragraph (b)(1)(iii)(C) to read as

follows:

Sec. 124.511 Investigation and determination of compliance.

(a) * * *

(3) When the Secretary investigates a facility, the facility,

including a facility certified under Sec. 124.513, Sec. 124.514,

Sec. 124.515, or Sec. 124.516, shall provide to the Secretary on

request any documents, records and other information concerning its

operation that relate to the requirements of this subpart. * * *

* * * * *

(b) * * *

(1) * * *

(iii) * * *

(C) The facility had procedures in place that complied with the

requirements of Secs. 124.504(c), 124.505, 124.507, 124.509, 124.510,

124.513(b)(2), 124.514(b)(2), 124.515, and 124.516 (b)(1) or (b)(2), as

applicable, and systematically correctly followed such procedures.

* * * * *

7. Section 124.512 is amended by revising the introductory text of

paragraph (b) and by revising paragraph (c)(1) to read as follows:

Sec. 124.512 Enforcement.

* * * * *

(b) A facility, including a facility certified under Sec. 124.513,

Sec. 124.514, or Sec. 124.516, that has denied uncompensated services

to any person because it failed to comply with the requirements of this

subpart will not be in compliance with its assurance until it takes

whatever steps are necessary to remedy fully the noncompliance,

including:

* * * * *

(c) * * *

(1) Have a system for providing notice to eligible persons as

required by Sec. 124.504(c), Sec. 124.513(b)(2), Sec. 124.514(b)(2), or

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

* * * * *

8. In subpart F, Sec. 124.516 is redesignated as Sec. 124.517.

9. A new Sec. 124.516 is added to subpart F, to read as follows:

Sec. 124.516 Charitable facility compliance alternative.

(a) Effect of certification. The Secretary may certify a facility

which meets the requirements of paragraphs (b) and (c) of this section

as a ``charitable facility.'' A facility which is so certified is not

required to comply with this subpart except as otherwise herein

provided.

(b) Criteria for qualification. A facility may qualify for

certification under this section if it meets the criteria of either

paragraph (b)(1) or paragraph (b)(2) of this section:

(1) It received, for the three most recent fiscal years, no monies

directly from patients with incomes up to double the current poverty

line issued by the Secretary pursuant to 42 U.S.C. 9902, exclusive of

amounts charged or received for purposes of claiming reimbursement

under third party insurance or governmental programs, such as Medicaid

or Medicare deductible or coinsurance amounts; or

(2)(i) It received, for the three most recent fiscal years, at

least 10 percent of its total operating revenue (net patient revenue

plus other operating revenue, exclusive of any amounts received, or if

not received, claimed, as reimbursement under titles XVIII and XIX of

the Social Security Act) from philanthropic sources to cover operating

deficits attributable to the provision of discounted services.

Philanthropic sources include private trusts, foundations, churches,

charitable organizations, state and/or local funding, and individual

donors; and either--

(ii) (A) Provides health services without charge or at a

substantially reduced rate (exclusive of amounts charged or received

for purposes of claiming reimbursement under third party insurance or

governmental programs, such as Medicaid or Medicare deductible or

coinsurance amounts) to persons who are determined by the facility to

qualify therefor under a program of discounted health services. A

``program of discounted health services'' must provide for financial

and other objective eligibility criteria and procedures, including

notice prior to nonemergency service, that assure effective opportunity

for all persons to apply for and obtain a determination of eligibility

for such services including a determination prior to service where

requested; or

(B) Makes all services of the facility available to all persons at

no more than a nominal charge, exclusive of amounts charged or received

for purposes of claiming reimbursement under third party insurance or

governmental programs, such as Medicaid or Medicare deductible or

coinsurance amounts.

(c) Procedures for certification. To be certified under this

section, a facility must submit to the Secretary, in addition to other

materials that the Secretary may from time to time require, copies of

the following:

(1) Audited financial statements for the three most recent fiscal

years or other documents prescribed by the Secretary, sufficient to

show that the facility meets the criteria of paragraph (b)(1) or (b)(2)

of this section.

(2)(i) Where the facility claims qualification under paragraph

(b)(2)(ii)(A) of this section, a complete description, and

documentation where requested, of its program of discounted health

services, including charging and collection policies of the facility,

and eligibility criteria and notice and determination procedures used

under its program(s) of discounted health services.

(ii) Where the facility claims qualification under paragraph (b)(1)

or paragraph (b)(2)(ii)(B) of this section, a complete description, and

documentation where requested, of its admission, charging, and

collection policies.

(d) Period of effectiveness. (1) A certification by the Secretary

under this section remains in effect until withdrawn. The Secretary may

disallow credit under this subpart when the Secretary determines that

there has been a material change in any factor upon which certification

was based or substantial noncompliance with this subpart. The Secretary

may withdraw certification where the change or noncompliance has not

been in the Secretary's judgment adequately remedied or otherwise

continues.

(2) Deficits.--(1) Title VI-assisted facilities with assessed

deficits. Where a facility assisted under title VI of the Act has been

assessed as having a deficit under Sec. 124.503(b) that has not been

made up prior to certification under this section, the facility may

make up that deficit by either--

(A) Demonstrating to the Secretary's satisfaction that it met the

applicable requirements of paragraph (b) of this section for each year

in which a deficit was assessed; or

(B) Providing an additional period of service under this section on

the basis of one year (or portion of a year) of certification for each

year (or portion of a year) of deficit assessed. The period of

obligation applicable to the facility under Sec. 124.501(b) shall be

extended until the deficit is made up in accordance with the preceding

sentence.

(ii) Where any period of compliance under this subpart of a

facility assisted under title VI of the Act has not been assessed, the

facility will be presumed to have no allowable credit for such period.

The facility may either--

(A) Make up such deficit in accordance with paragraph (d)(2)(i) of

this section; or

(B) Submit an independent certified audit, conducted in accordance

with procedures specified by the Secretary, of the facility's records

maintained pursuant to Sec. 124.510. If the audit establishes to the

Secretary's satisfaction that no, or a lesser, deficit exists for the

period in question, the facility will receive credit for the period so

justified. Any deficit which the Secretary determines still remains

must be made up in accordance with paragraph (d)(2)(i) of this section.

(iii) Title XVI-assisted facilities. (A) A facility assisted under

title XVI of the Act which has an assessed deficit which was not made

up prior to certification under this section shall make up that deficit

in accordance with paragraph (d)(2)(i)(A) of this section. If it cannot

make the showing required by that paragraph, it shall make up the

deficit when its certification under this section is withdrawn.

(B) A facility assisted under title XVI of the Act whose compliance

with this subpart has not been completely assessed will be presumed to

have no allowable credit for the unassessed period. The facility may

make up the deficit by--

(1) Following the procedure of paragraph (d)(2)(iii)(A) of this

section; or

(2) Submitting an independent certified audit, conducted in

accordance with procedures specified by the Secretary, of the

facility's records maintained pursuant to Sec. 124.510. If the audit

establishes that no, or a lesser, deficit exists for the period in

question, the facility will receive credit for the period so justified.

Any deficit which the Secretary determines still remains must be made

up in accordance with paragraph (d)(2)(iii)(A) of this section.

[FR Doc. 94-21354 Filed 8-29-94; 8:45 am]

BILLING CODE 4160-15-M