$23.28 What events constitute default? The following events will constitute defaults of the loan agreement:

(a) Failure to make full payment of principal and/or interest when due, and continuance of that failure for a period of sixty (60) days, or a lesser period of time if the Secretary determines that more immediate action is necessary in order to protect the interests of the Government.

(b) Failure to perform or observe any of the terms and conditions of the loan agreement and continuance of that failure for a period of sixty (60) days.

(c) The institution of bankruptcy proceedings, either voluntary or involuntary, under any State or Federal statute, which may adversely affect the borrower's ability to comply with the terms and conditions of the agreement or the promissory note.

$23.29 What happens in the case of a default?

(a) In the event of default, the Secretary may declare the entire amount owed (including principal, accrued interest and any applicable charges) immediately due and payable. Collection of the amount owed will be made in accordance with 45 CFR part 30.

(b) The borrower is not entitled to written notice of any default and the failure to deliver written notice of default in no way affects the Secretary's right to declare the loan in default and take any appropriate action under the loan agreement or the promissory note.

(c) The failure of the Secretary to exercise any remedy available under law or regulation shall in no event be construed as a waiver of his or her right to exercise that remedy if any subsequent or continued default or breach occurs.

§ 23.30 May the loan be prepaid?

The borrower shall have the option to prepay the balance of any part of the loan, together with accrued interest, at any time without prepayment penalty.

§ 23.31 May loan payments be postponed or waived?

(a) Whenever health, economic, or other personal problems affect the borrower's ability to make scheduled payments on the loan, the Secretary may

allow the borrower an extension of time or allow the borrower to make smaller payments than were previously scheduled; however, interest will continue to accrue at the rate specified in the promissory note until the loan is repaid in full. The loan must be fully repaid within 10 years after it was made.

(b) No waiver, full or partial, of repayment of the loan will be granted; except that the obligation of a borrower to repay a loan shall be cancelled upon the death or total and permanent disability of the borrower, as determined by the Secretary.

(c) In order to make a determination under paragraph (a) or (b) of this section, the Secretary may require supporting medical, financial, or other documentation.

$23.32 What conditions are imposed on the use of the loan funds?

(a) The borrower must use the total amount of the loan to purchase or lease, or both, equipment and supplies, to hire authorized personnel to assist in providing health services and/or to renovate facilities for use in providing health services in his or her private practice. Equipment and supplies purchased and/or leased, personnel hired and facilities renovated shall be limited to the items requested in the loan application and approved by the Secretary.

(b) The borrower must expend the loan funds within 6 months from the date of the loan or within such other time as the Secretary may approve. Documentation of the expenditure of funds must be furnished to the Secretary upon request.

§ 23.33 What security must be given for these loans?

The Secretary may require the borrower to pledge to the Secretary a security interest in specified collateral.

§ 23.34 What other conditions are imposed?

(a) The borrower must sign a loan agreement describing the loan and practice conditions, and a promissory note agreeing to repay the loan plus interest.

(b) The borrower must agree to enter into private full-time clinical practice in a HMSA for the time period specified in the loan agreement.

(c) The borrower must accept assignment, for the time period specified in the loan agreement, under section 1842(b)(3)(B)(ii) of the Social Security Act as full payment for all services for which payment may be made under part B of title XVIII of that Act.

(d) The borrower must enter into an appropriate agreement, for the time period specified in the loan agreement, with the State agency which administers the State plan for medical assistance under title XIX of the Social Security Act to provide services to individuals entitled to medical assistance under the plan.

(e) During the time period specified in the loan agreement, the borrower must provide health services to individuals at the usual and customary rate prevailing in the HMSA in which services are provided; however, services must be provided at no charge or at a nominal charge to those persons unable to pay for these services.

(f) The borrower must keep and preserve all documents, including bills, receipts, checks, and correspondence which affect the operation of the private practice and the expenditure of loan funds for the period of the practice obligation specified in the loan agreement plus 3 years. Accounts will be maintained under one of the accounting principles identified by the Secretary in the loan agreement.

(g) The borrower must provide the Secretary and the Controller General of the United States, or their representatives, access during normal working hours to accounts, documents, and records for the purposes of audit or evaluation; and must permit the Secretary or his or her representative to inspect the private practice at reasonable times during the period of the practice obligation specified in the loan agreement plus 3 years. All information as to personal facts and circumstances about recipients of services shall be held confidential, and shall not be divulged without the individual's consent except as may be required by law or as may be necessary to provide medical service to the individual or to

provide for medical or fiscal audits by the Secretary or his or her designee with appropriate safeguards for confidentiality of records.

(h) For the entire period of loan repayment, the borrower must acquire, maintain, and when requested, must provide the Secretary with copies of policies of insurance on equipment and supplies in amounts adequate to reasonably protect the borrower from risk, including public liability, fire, theft, and worker's compensation.

(i) If the Secretary retains a security interest pursuant to §23.33, the borrower must keep and preserve all documents which affect that security interest for the period of the loan repayment and allow the Secretary or his or her designee access, during normal working hours, to those documents.

(j) The borrower must maintain the loan proceeds in a separate account from his or her other transactions and must agree to draw upon this account and expend the loan proceeds in accordance with § 23.32.

(k) The Secretary may impose other conditions which he or she deems appropriate under law or regulation to protect the Government's interests.

EFFECTIVE DATE NOTE: At 51 FR 31948, Sept. 8, 1986, § 23.34 was added. Paragraphs (f), (h), and (1) contain information collection requirements which will not be effective until approval has been obtained from the Office of Management and Budget. A notice will be published in the FEDERAL REGISTER.

§ 23.35 What criteria are used in making loans?

Approval of loan applications will be based on the criteria set forth below:

(a) The need in the HMSA for the applicant's health profession as determined under section 332 of the Act;

(b) The applicant's need for the loan funds; and

(c) The comments from State or local health professional societies on the ap propriateness of the applicant's intended private practice; and

(d) The applicant's credit worthiness and projected financial ability to repay the loan.

Subpart C-Private Startup Loans

§ 23.41 What conditions are applicable to loans under this subpart?

The regulations set out in subpart B of this part are fully applicable to loans awarded under section 338C(e)(1) of the Public Health Service Act, except as noted below;

(a) Eligibility. (1) In lieu of §23.23(a), the following applies to loans made under this subpart:

(i) Eligibility for loans is limited to NHSC scholarship recipients who plan to enter private practice and have not begun fulfilling their scholarship service obligation or are currently fulfilling their scholarship service obligation under section 338B of the Act and have completed less than 2 years of this obligation.

(2) In lieu of §23.23(c), the following applies to loans made under this subpart:

(1) NHSC scholarship recipients who have received loans under either this subpart or subpart B of this part are ineligible for loans under this subpart.

(b) Loan amounts. (1) In lieu of § 23.24, the following applies to loans made under this subpart:

(i) The Secretary may make loans in the amount of $12,500 if the recipient agrees to practice in accordance with the loan agreement for a period of at least 1 year but less than 2 years or the remaining period of the borrower's NHSC scholarship service obligation, whichever is shorter.

(ii) The Secretary may make loans in the amount of $25,000 if the recipient agrees to practice in accordance with the loan agreement for a period of at least 2 years or the remaining period of the borrower's NHSC scholarship service obligation, whichever is shorter.

(c) Use of funds. (1) In lieu of § 23.32(a), the following applies to loans made under this subpart:

(1) The borrower must use the total amount of the loan only to purchase or lease, or both, the equipment and supplies needed for providing health services in his or her private practice. Equipment and supplies purchased and/ or leased shall be limited to the items requested in the loan application and approved by the Secretary.

[51 FR 31950, Sept. 8, 1986]

(e) First-class stations means a hospital operated by the Service.

(f) Second-class station means a medical relief facility, other than a hospital of the Service, under the charge of a commissioned officer.

(g) Third-class station means a medical relief facility, other than a hospital of the Service, under the charge of a medical officer or employee of the Service other than a commissioned officer.

(h) Fourth-class station means a medical relief facility designated by the Surgeon General, other than a first-, second-, or third-class station.

(i) Designated physician means a physician holding an appointment to act regularly for the Service for a class or classes of specified beneficiaries at a place where there is no medical relief station.

(j) Designated dentist means a dentist holding an appointment to perform dental service for the Service for a class or classes of specified bene

ficiaries.

(k) Active duty means active duty status as distinguished from being on inactive status or retired and includes periods of authorized leave or liberty.

(1) Dependent members of families in the case of male personnel means the lawful wife, the unmarried children (including stepchildren or adopted children) under 21 years of age, and the father or mother if in fact dependent upon such son for his or her chief support; and in the case of female personnel, the unmarried children (including stepchildren or adopted children) under 21 years of age if their father is dead or they are in fact dependent on such mother for their chief support, the father or mother if in fact dependent upon such daughter for his or her chief support, and the husband if in fact dependent upon such wife for his chief support: Provided, however, That in the case of members of the Women's Reserve of the Coast Guard the husbands of such members shall not be considered dependents.

(Sec. 215, 58 Stat. 690, as amended; 42 U.S.C. 216)

§31.2 Persons entitled to treatment.

To the extent and under the circumstances prescribed in §§ 31.2 to 31.10, the following persons shall be entitled to medical, surgical, and dental treatment and hospitalization by the Service:

(a) Coast Guard. (1) Commissioned officers, chief warrant officers, warrant officers, cadets, and enlisted personnel of the Regular Coast Guard, including those on shore duty and those on detached duty, whether on active duty or retired;

(2) Regular members of the Coast Guard Reserve when on active duty or when retired for disability;

(3) Temporary members of the Coast Guard Reserve when on active duty or in case of physical injury incurred or sickness or disease contracted while performing active Coast Guard duty;

(4) Members of the Women's Reserve of the Coast Guard when on active duty or when retired for disability;

(5) Members of the Coast Guard Auxiliary in case of physical injury incurred or sickness or disease contracted while performing active Coast Guard duty.

(b) National Ocean Survey. Commissioned officers, ships' officers, and members of the crews of vessels of the National Ocean Survey, including those on shore duty and those on detached duty whether on active duty or retired.

(c) Public Health Service. (1) Commissioned officers of the Regular Corps of the Service, whether on active duty or retired;

(2) Commissioned officers of the Reserve Corps of the Service when on active duty or when retired for disability. (Sec. 326, 58 Stat. 697, as amended 42 U.S.C. 253)

§31.3 Use of Service facilities.

Except as otherwise provided in §§ 31.3 to 31.10, the persons specified in §31.2 shall be entitled to medical, surgical, and dental treatment and hospitalization only at medical relief stations and by designated physicians and designated dentists, and the cost of

services procured elsewhere shall not be borne by the Service.

(Sec. 326, 58 Stat. 697, as amended 42 U.S.C. 253)

§31.4 Use of other than Service facilities.

(a) When a person specified in §31.2 who is on active duty requires immediate medical, surgical, or dental treatment or hospitalization and the urgency of the situation does not permit treatment at a medical relief station or by a designated physician or designated dentist, an officer of the same service as the patient may arrange for treatment or hospitalization at the expense of the Service.

(b) When the circumstances are such that an officer of the same service as the patient is not available to make the necessary arrangements, the treatment or hospitalization may be obtained by or on behalf of the patient at the expense of the Service.

(c) In every case of treatment or hospitalization as defined in paragraph (b) of this section, the responsible superior officer of the patient shall be notified as promptly as possible and a full report shall be submitted by such officer to the Surgeon General through appropriate official channels. As soon as practicable, unless the interests of the patient or the Government require otherwise, treatment or hospitalization shall be continued at a medical relief station or by a designated physician or designated dentist or at another appropriate Federal medical facility.

(d) When the necessary medical relief cannot be obtained from a medical relief station or a designated physician or designated dentist, preference shall be given to other Federal medical facilities when reasonably available and when conditions permit.

(e) Vouchers on proper forms covering expenses for treatment or hospitalization under the circumstances specified in paragraphs (a) and (b) of this section shall be forwarded to the Surgeon General through appropriate official channels. Each such voucher shall be accompanied by or contain a statement of the facts necessitating the treatment or hospitalization. Unreasonable charges for emergency