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State are lower than would otherwise be payable under

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title XVIII and title XIX.

3 If the Secretary finds that any of the above conditions 4 in a State which previously met them have not been met 5 for a year the Secretary shall, after due notice, reimburse 6 hospitals in that State according to the provisions of this

7 Act unless he finds that unusual, justifiable and non

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8 recurring circumstances led to the failure to comply.

(f) (1) Section 1866 (a) (1) of the Social Security 10 Act is amended by inserting “, and” in place of the period

at the end of subparagraph (C), and by adding a subpara12 graph: “(D) not to increase amounts due from any indi13 vidual, organization, or agency in order to offset reductions 14 made under section 1861 (aa) in the amount paid, or ex15 pected to be paid, under title XVIII.”. 16 (2) Section 1902 (a) (27) of the Social Security Act is 17 amended by deleting “and” at the end of subparagraph 18 (A), by inserting", and” in place of the semicolon at the 19 end of subparagraph (B) and by adding a new subpara

20 graph:

21 “(C) not to increase amounts due from any individual 22 organization, or agency in order to offset reductions made 23 under section 1902 (a) (13) (D) in the amount paid, or ex24 pected to be paid under title XIX;"

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(h) Section 1902 (a) (13) (D) is amended to read as 2 follows:

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“(D) for payment of the reasonable cost of inpa

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tient hospital services provided under the plan, applying the methods specified in section 1861 (v) and section

1861 (aa), which are consistent with section 1122; · and”.

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8 PAYMENTS TO PROMOTE CLOSING AND CONVERSION OF

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UNDERUTILIZED FACILITIES

10 SEC. 3. (a) Part A of title XI of the Social Security 11 Act is amended by adding at the end the following new

12; section:

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"PAYMENTS TO PROMOTE CLOSING AND CONVERSION OF

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UNDERUTILIZED FACILITIES

15 “SEC. 1132. (a) (1) (A) Before the end of the third 16 full month following the month in which this section is en17 acted, the Secretary shall establish a Hospital Transitional 18 Allowance Board (referred to in this section as the 'Board'). 19 The Board shall have five members, appointed by the Sec20 retary without regard to the provisions of title 5, United 21

States Code, goverņing appointments in the competitive 22 service, who are knowledgeable about hospital planning and 23 hospital operations. 24 “ (B) Members of the Board shall be appointed for 25 three-year terms, except some initial members shall be ap

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1 pointed for shorter terms to permit staggered terms of office.

“(C) Members shall be entitled to per diem compen3 sation at rates fixed by the Secretary, but not more than

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4 the current per diem equivalent at the time the service in

5 volved is rendered for grade GS-18 in section 5332 of title

6 5, United States Code.

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“(D) The Secretary shall provide technical, secretarial, 8 clerical, and other assistance as the Board may need.

“(2) The Board shall receive, and act upon applications 10 by hospitals certified for participation (other than as 'emer11 gency hospitals') under titles XVIII and XIX for transi

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"(1) The term 'transitional allowance' means an amount

15 which

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“(A) shall, solely by reason of this section, be in

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cluded in a hospital's reasonable cost for purposes of cal

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culating payments under the programs authorized by

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titles V, XVIII, and XIX, of this Act; and

"(B) in accordance with this section, it is established by the Secretary for a hospital in recognition of a reimbursement detriment (as defined in paragraph (3)) experienced because of a qualified facility conversion (as defined in paragraph (2)'). “(2) · The term 'qualified facility conversion' 'meang

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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 4 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.

" (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

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16 for payment purposes under title XVIII or title XIX to the

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17 hospital the reasonable cost (as the term is used for purposes 18 of those titles) incurred by the hospital; (B) if the conver

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

case of complete closure of a nonprofit, nongovernmental

(except local governmental) hospital, other than for ro: 24 placement of the hospital to the extent of actual debt 25 obligations previously recognized as reasonable for reim

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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 10 means of which a finding of a reimbursement detriment may

11 be made prior to the actual conversion.

12 “(2) The Board shall consider any application filed 13 by a hospital, and if the Board finds that14

“(A) the facility conversion is a qualified facility conversion, and

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“ (B) the hospital is experiencing a reimbursement

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detriment because it carried out the qualified facility

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conversion,

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 prospec22 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 estab

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