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1 closing, modifying, or charging usage of underutilized hos2 pital facilities which is expected to benefit the programs au3 thorized under title XVIII and title XIX by (i) eliminating

excess bed capacity, (ii) discontinuing an underutilized 5 service for which there are adequate alternative sources, or 6 (iii) substituting for the underutilized service some other

7 service which is needed in the area and which is consistent


8 with the findings of an appropriate health planning agency. 9 "(3) A hospital which has carried out a qualified con10 version and which continues in operation will be regarded

as having experienced a ‘reimbursement detriment (A) 12 to the extent that, solely because of the conversion there is 13 a reduction in the aggregate reimbursement (but only to 14 the extent the capital was accepted as reasonable for pur15 poses of reimbursement) which is considered in determining 16 for payment purposes under title XVIII or title XIX to the 17 hospital the reasonable cost (as the term is used for purposes 18 of those titles) incurred by the hospital; (B) if the conver19 sion results, on an interim basis, in increased operating costs 20 to the extent that operating costs exceed amounts ordinarily 21 reimbursable under titles XVIII and XIX, or (C) in the 22 case of complete closure of a nonprofit, nongovernmental 23 (except local governmental) hospital, other than for re: 24 placement of the hospital to the extent of actual debt 25 obligations previously recognized as reasonable for reim


1 bursement, where the debt remains outstanding, less any

2 salvage value. 3 “(c) (1) Any hospital may file an application with the 4 Board (in a form and including data and information as

5 the Board, with the approval of the Secretary, may require) 6 for a transitional allowance with respect to any qualified

7 conversion which was formally initiated after December 31,

8 1977. The Board, with the approval of the Secretary, may

9 also establish procedures, consistent with this section, by


means of which a finding of a reimbursement detriment may

11 be made prior to the actual conversion.


“(2) The Board shall consider any application filed

13 by a hospital, and if the Board finds that,


“(A) the facility conversion is a qualified facility

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“(B) the hospital is experiencing a reimbursement


detriment because it carried out the qualified facility



19 the Board shall transmit to the Secretary its recommendation

20 that the Secretary establish, a transitional allowance for the

21 hospital in amounts reasonably related to prior or prospec

22 tive use of the facility under titles XVIII and XIX, and for

23 a period, not to exceed twenty years, specified by the Board; 24 and, if the Board finds that the criteria in clauses (A) and

25 (B) are not met, it shall advise the Secretary not to estab18

i lish a transitional allowance for that hospital. For an ap2 proved closure under subsection (b) (3) (C) the Board may 3 recommend or the Secretary may approve a lump-sum 4 payment in lieu of periodic allowances, where such payment 5 would constitute a more efficient and economic alternative.

“(3) (A) The Board shall notify a hospital of its find


7 ings and recommendations.


“(B) A hospital dissatisfied with a recommendation

9 may obtain an informal or formal hearing at the discretion

10 of the Secretary, by filing (in the form and within a time


11 period established by the Secretary) a request for a hearing.

“(4) (A) Within thirty days after receiving a recom13 mendation from the Board respecting a transitional allow

14 ance or, if later, within thirty days after a hearing the Sec

15 retary shall make a final determination whether, and if so 16 in what amount and for what period of time, a transitional 17 allowance will be granted to a hospital. A final determination 18 of the Secretary shall not be subject to judicial review. 19 “(B) The Secretary shall notify a hospital and any other 20 appropriate parties of the determination. 21 “(C) Any transitional allowance shall take effect on a 22 date prescribed by the Secretary, but not earlier than the 23 date of completion of the qualified facility conversion. A tran


sitional allowance shall be included as an allowable cost item i 19

1 in determining the reasonable cost incurred by the hospital 2 in providing services for which payment is authorized under 3 this title”: Provided, however, That the transitional allow

4 ance shall not be considered in applying limits to costs 5 recognized as reasonable pursuant to the third sentence of

6 section 1861 (v) (1) and section 1861 (aa) of this Act

7 or in determining the amount to be paid to a provider 8 pursuant to section 1814 (b), section 1833 (a) (2), section 9 1910 (i) (3), and section 506 (1) (3) of this Act.”. 10 “(d) In determining the reasonable cost incurred by 11 a hospital with respect to which payment is authorized 12 under a State plan approved under title V or title XIX,

13 any transitional allowance shall be included as an allowable

14 cost item.

15 “(e) (1) The Secretary shall not, prior to January 1, 16 1981, establish a transitional allowance for more than a total

17 of fifty hospitals. 18 “(2) On or before January 1, 1980, the Secretary shall

19 report to the Congress evaluating the effectiveness of the

20 program established under this section including appropriate

21 recommendations."


(b) The amendments made by subsection (a) shall

23 apply only to services furnished by a hospital or skilled

24 nursing facility for fiscal years beginning on and after the


1 first day of the first calendar month following enactment

2 of this Act.






SEC. 4. (a) Section 1122 (b) of the Social Security

6 Act is amended to read:

“(b) For purposes of this section, the State Health

8 Planning and Development Agency designated under sec9 tion 1521 of the Public Health Service Act shall serve as

10 the designated planning agency.” 11 (b) Section 1122 (c) is amended to read: 12 “(c) Expenses incurred by planning agencies shall be 13 payable from


“(i) funds in the Federal Hospital Insurance Trust Fund,



“(ii) funds in the Federal Supplementary Medical

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“(iii) funds appropriated to carry out the health care provisions of the several titles of this Act,


20 in amounts as the Secretary finds results in a proper alloca21 tion. The Secretary shall transfer money between the funds


as may be appropriate to settle accounts between them. The

23 Secretary shall pay the planning agencies without requiring 24 contribution of funds by any State or political subdivision.”

(c) Section 1122 (d) is amended to read:


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