mated cost shall be determined by the employer or its designee based on consideration of the following factors:

(i) The employer's or designee's cost experience for non-health maintenance organization alternative with respect to the most recent benefit period for which such experience is available at the time when the employer's prospective contribution or designee's obligation to the health maintenance organization is to be determined;

(ii) A reasonable allowance for inflation based on historical cost trends and anticipated future cost increases;

(iii) Where applicable and consistently applied, cost differences experienced in the provision of health benefits for separate regional or local areas of employment;

(iv) Anticipated changes in the composition and experience of the covered population actually being served by the non-health maintenance organization alternative attributable to the shift of enrollment to the health maintenance organization;

(v) Any changes in health benefits to be provided by non-health maintenance alternatives during the period for which the estimated contribution is to be determined; and

(vi) Any other anticipated material change in the experience rating basis under any health benefits contract for the benefit period.

(g) An employer or its designee shall retain for at least three years the data used to compute its level of contribution to the alternatives included in the health benefits plan. Such data may be reviewed by the Secretary either on his own initiative or in response to a request which sets forth reasonable grounds supporting such a request, to determine whether the level of contributions determined by the employer complies with this subpart.

§ 110.808 Relationship of section 1310 (a) of the Public Health Service Act to the National Labor Relations Act as amended and the Railway Labor Act, as amended.

The obligation of an employer subject to this subpart to include the option of membership in a qualified health maintenance organization in any health benefits plan offered to its eligible employees shall be carried out consistently with the obligations imposed on such employer under the National Labor Relations Act and the Railway Labor Act.

Any terms not defined herein shall have the same meaning as given them in Title XV of the Act.

(a) "Act" means the Public Health Service Act, as amended.

(b) "A-95 Agency" means an areawide planning and development clearinghouse established under Title IV of the Intergovernmental Cooperation Act of 1968.

(c) "Conditionally designated health systems agency" means an entity which has been designated as a health systems agency on a conditional basis pursuant to section 1515(b) (1) of the Act.

(d) "Designation agreement" means an agreement entered into or renewed pursuant to section 1515 of the Act.

(e) "Fully designated health systems agency" means an entity which has been designated as a health systems agency pursuant to section 1515(c)(1) of the Act.

(f) "Governing body" means, in the case of a nonprofit private entity or similar legal mechanism, the governing body of such entity or mechanism and, in the case of a public regional planning body or single unit of general local government, the governing body for health planning of such body or single unit as required by section 1512(b) (3) of the Act which is responsible for the health planning and development functions of such body or single unit.

(g) "Governor" means the chief executive officer of a State or his designee.

(h) "Grant period" means the period with respect to which assistance is provided under Subpart C of this part.

(i) "Health service area” means an area designated by the Secretary pursuant to section 1511 of the Act as a health service area.

(j) "Health systems agency" or "agency" means a conditionally or fully designated health systems agency as defined in paragraphs (c) and (e) of this section.

(k) "Health resources" includes health services, health professions personnel, and health facilities, except that such term does not include Christian Science sanitoriums operated, or listed and certified, by the First Church of Christ Scientist, Boston, Massachusetts. For purposes of this subpart, "health pro

fessions personnel" means individuals whose main occupation is the delivery of health services.

(1) "Non-metropolitan area" means an area no part of which is within an area designated as a standard metropolitan statistical area by the Office of Management and Budget.

(m) "PSRO" means an entity designated as a Professional Standards Review Organization under section 1152 of the Social Security Act.

(n) "Nonprofit”, as applied to any entity, means that no part of the net earnings of such entity inures or may lawfully inure to the benefit of any private shareholder or individual.

(o) "Provider of health care" means an individual:

(1) Who is a direct provider of health care (including, but not limited to, a physician (doctor of medicine or doctor of osteopathy, dentist, nurse, podiatrist, or physician assistant in that the individuals' primary current activity is the provision of health care to individuals or the administration of facilities or institutions (including, but not limited to, hospitals, long-term care facilities, outpatient facilities, and health maintenance organizations) in which such care is provided and, when required by State law, the individual has received professional training in the provision of such care or in such administration and is licensed or certified for such provision or administration, or

(2) Who is an indirect provider of health care in that the individual:

(i) Holds a fiduciary position with or has a fiduciary interest in, any entity described in paragraph (o) (2) (ii) (B) or (D) of this section; (for purposes of this paragraph, a "fiduciary position or interest" as applied to any entity means a position or interest with respect to such entity affected with the character of a trust, including members of boards of directors and officers, majority shareholders, agents and attorneys); or (ii) receives (either directly or through his spouse) more than one-tenth of his gross annual income from any one or a combination of the following:

(A) Fees or other compensation for research into or instruction in the provision of health care;

(B) Entities or associations or organizations composed of entities or individuals engaged in the provision of

health care or in such research or instruction;

(C) Producing or supplying drugs or other articles for individuals or entities for use in the provision of or in research into or instruction in the provision of health care; and

(D) Entities or associations or organizations composed of entities or individuals engaged in producing drugs or such other articles;

(iii) Is a member of the immediate family of an individual described in paragraph (o) (1) or paragraph (0) (2) (i), (ii), or (iv) of this section (for purposes of this paragraph, "immediate family" as applied to any individual includes only his parents, spouse, children, brothers and sisters who reside in the same household); or

(iv) Is engaged in issuing any policy or contract of individual or group health insurance or hospital or medical service benefits.

(p) "Jurisdiction", as applied to any unit of general local government, means the geographical area within which such unit exercises general purpose political authority.

(q) "Unit of general local government" means (1) any city, municipality, county, township, town, borough, parish, village or other general purpose subdivision of a State; (2) a recognized Indian tribal government; or (3) an Alaska Native Village as defined in the Alaska Native Claims Settlement Act.

(r) "Secretary" means the Secretary of Health, Education, and Welfare and any other officer or employee of the Department of Health, Education, and Welfare to whom the authority involved has been delegated.

(s) "State" means any one of the several States, the District of Columbia and the Commonwealth of Puerto Rico.

(t) "Statewide health coordinating council" or "SHCC" means the body established pursuant to section 1524 of the Act to advise the State health planning and development agency.

(u) "State health planning and development agency" or "State Agency" means an agency of State government selected by the Governor and designated in an agreement entered into pursuant to section 1521 of the Act to carry out the State's health planning and development program.

Subpart B-Designation of Health Systems Agencies

§ 122.101 Purpose and scope.

(a) Section 1515 of the Public Health Service Act authorizes the Secretary to enter into agreements with eligible entities for the designation of such entities as health systems agencies for health service areas established pursuant to section 1511 of the Act as geographical regions appropriate for the effective planning and development of physical and mental health services. Each such health systems agency shall have as its primary responsibility the provision of effective health planning for its health service area and the promotion of the development within the area of health services, manpower, and facilities which meet identified needs, reduce documented inefficiencies, and implement the health plans of the agency.

(b) The regulations of this subpart are applicable to agreements, pursuant to section 1515 of the Public Health Service Act, under which the Secretary conditionally or fully designates an entity as a health systems agency for a health service area.

To be eligible to enter into an agreement under section 1515 of the Act for designation as a health systems agency for a health service area, an entity must be:

(a) A nonprofit private corporation (or similar legal mechanism such as a public benefit corporation) which is incorporated in the State in which the largest part of the population of the health service area resides. Such corporation may not be a subsidiary of, or be otherwise controlled by, any other private or public corporation or other legal entity. For purposes of this subpart, a corporation or similar legal mechanism is controlled by another private or public corporation or other legal entity where such corporation or entity is legally empowered to exercise authority over its performance of the health planning and development functions. Such corporation or similar legal mechanism must be authorized only to engage in health planning and development functions and may not provide health services except for providing (directly or indirectly) health care for its employees.

(b) A single or multipurpose public regional planning body whose planning area is identical to the health service area, and which (1) has a governing board composed of a majority of elected officials of units of general local government or (2) was, prior to January 4, 1975, in existence and authorized by State law to carry out health planning and review functions such as those described in section 1513 of the Act; Provided however, That such public regional planning body may not be an agency of state government; or

(c) A single unit of general local government if the area of the jurisdiction of that unit is identical to the health service area.

Provided, that a health systems agency may not be an educational institution or operate such an institution. For purposes of this subpart, (1) an educational institution means an institution whose primary purpose is the provision of educational programs, and (2) an entity shall be deemed to operate such an institution where it has the direct responsibility for administering an educational institution or supervising its administration.

§ 122.103 Application.

An application under this subpart shall be submitted at such time and in such form and manner as the Secretary may prescribe, and shall be executed by an individual authorized to act for the applicant and to assume for the applicant the obligations imposed by the Act, the regulations of this subpart, and any additional terms or conditions of the agreement entered into pursuant to § 122.106 or 122.107 of this subpart.1 § 122.104 Contents of applications.

In addition to such other information as the Secretary may require, an approvable application shall contain:

(a) In the case of an application for conditional designation pursuant to section 1515(b) of the Act and this subpart:

(1) A copy of the Articles of Incorporation and by-laws of the applicant (or, in the case of a public regional planning body or single unit of general local government, its charter, authorizing statute, ordinance, or executive order and any

1 Applications and instructions may be obtained at the Regional Offices of the Department of Health, Education, and Welfare for the region in which the applicant is located.

internal rules or regulations governing its operations) which must meet the requirements of § 122.104(b)(1) of this subpart or, if the entity is not incorporated (or, in the case of a public regional planning body or single unit of general local government, is not chartered or otherwise authorized by statute, ordinance, or executive order) or does not have by-laws (or, with respect to a public regional planning body or single unit of general local government, has not adopted rules or regulations governing its operations) at the time of application, a description of the proposed articles of incorporation or proposed charter, authorizing statute, ordinance, or executive order and by-laws or proposed rules or regulations and the timetable for obtaining such incorporation or authorization and adopting such by-laws or rules or regulations governing its operations) prior to entering into an agreement pursuant to § 122.106 of this subpart.

(2) A description of the health care needs and resources within the health service area.

(3) A detailed description of the functions which the applicant proposes to carry out during the period of the Conditional Designation Agreement, the manner in which it proposes to carry out such functions, and a time-phased plan for the orderly assumption of all the responsibilities and functions of a health systems agency as set forth in section 1513 of the Act (hereinafter referred to as the "work program").

(4) In the case of an applicant which has decided to establish subarea advisory councils, a detailed description of the need for and proposed use of such subarea advisory councils.

(5) A detailed description of the current and projected staff to be employed by the applicant during the period of the conditional designation agreement, including their qualifications (including proposed qualifications where positions are not filled), authority, functions, numbers, assignments, and the manner in which they will be organized to carry out the agency's work program.

(6) A detailed description of the services and the approximate cost of the services the applicant expects to be provided by contractors and consultants.

(7) A detailed description of the facilities, equipment, financial, and other resources available to the applicant.

(8) A detailed description of the manner in which the residents of the health service area have been involved in the formation of the applicant entity and the submission of the application under this subpart including evidence that the applicant has provided at a minimum an opportunity for members of the public to express their views on the qualifications, proposed governing body composition, and proposed work program of the applicant both in writing and at a public meeting sponsored by the applicant entity. Notice of the time, place, and purpose of such meeting shall be given to members of the public through publication of a notice in at least two newspapers of general circulation throughout the health service area at least two weeks prior to such meeting and at least 30 days prior to the date of submission of the application to the Secretary; Provided, That effective with respect to entities submitting applications after September 30, 1976, such meeting must be held at least 30 days prior to the date of the submission of the application to the Secretary. Such notice shall also provide that a statement of the qualifications and proposed governing body composition of the applicant and a copy of the proposed work program will be available for public inspection and copying at a specified address, and shall invite written comments thereon by members of the public. A summary of the comments made at the public meeting and copies of any written comments of members of the public shall be appended to the application.

(9) In the case of a nonprofit private applicant, a detailed description of the manner in which local public officials, including representatives of units of general local government or groups of such units, have been involved in the formation of the applicant entity and the submission of the application. Copies of any written comments of such officials shall be appended to the application.

(10) A list of the proposed members of the applicant's governing body and executive committee, if any, including their names, occupations, affiliations, the basis for their membership on the governing body in light of the requirements of section 1512(b) (3) (C) of the Act and § 122.109 of this subpart, and the method utilized in selecting such members.

(11) In the case of an applicant entity which is a public regional planning

body or single unit of general local government, a detailed description of the manner in which its governing body will operate, consistent with § 122.109 of this subpart, in carrying out the responsibilities and functions of a health systems agency as set forth in section 1513 of the Act and this subpart.

(12) Assurances satisfactory to the Secretary that upon completion of the period of conditional designation the applicant will meet all the requirements of section 1512(b) of the Act and be qualified to perform all of the functions prescribed by section 1513 of the Act.

(b) in the case of an application for full designation pursuant to section 1515 (c) of the Act and this subpart:

(1) A copy of the Articles of Incorporation and by-laws (or, in the case of a public regional planning body or single unit of general local government, its charter, authorizing statute, ordinance, or executive order, and any internal rules or regulations which govern its operations) of the applicant, which must provide:

(i) That the applicant has the authority to carry out all the responsibilities and functions of a health systems agency as provided in section 1513 of the Act and this subpart;

(ii) That in the case of a private entity, it is nonprofit;

(iii) The manner in which governing body members will be selected and replaced, including provision for:

(A) Removal of governing body members for good cause only; (B) replacement of members in the event of resignation, death, or removal; (C) length of terms of members, which may not exceed three years; and (D) limitations on the number of consecutive years for which any member of the governing body may serve, which may not exceed six years;

(iv) The manner in which the governing body will carry out its responsibilities, including provisions for voting and quorums;

(v) The manner in which the executive committee and subcommittees or advisory groups, if any, will be selected consistent with section 1512(b)(3) of the Act, their responsibilities, and the manner in which they will carry out those responsibilities;

(vi) The manner in which subarea advisory councils, if any, will be established, their members nominated, a description of their functions, and the manner in