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ilish 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 find7 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 allow14 ance or, if later, within thirty days after a hearing the Sec15 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.


"(B) The Secretary shall notify a hospital and any other 20 appropriate parties of the determination.


"(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

24 sitional allowance shall be included as an allowable cost item

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. 19

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 allow4 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 (f) (3) of this Act.".


"(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.


"(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."

22 (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 sec

9 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 Insurance Trust Fund, and

“(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 22 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:



1 “(d) (1) Except as provided in paragraph (2), if the

2 Secretary determines that











"(A) neither the Health Systems Agency nor the designated planning agency had been notified of any proposed capital expenditure at least sixty days prior to obligation for the expenditure; or

"(B) (i) the designated planning agency had not approved the proposed expenditure; and

"(i) the designated planning agency had granted

to the person proposing the capital expenditure an opportunity for a fair hearing with respect to the findings;

12 then, in determining Federal payments under titles V, 13 XVIII, and XIX for services furnished in the health care 14 facility for which the capital expenditure is made, the Secre15 tary shall not include any amount attributable to deprecia16 tion, interest on borrowed funds, a return on equity capital 17 (in the case of proprietary facilities), other expenses related 18 to the capital expenditure, or for direct operating costs, to 19 the extent that they can be directly associated with the 20 capital expenditure. In the case of a proposed capital ex21 penditure in a standard metropolitan statistical area which

22 23

encompasses more than one jurisdiction, that expenditure 23 shall require approval of the designated planning agency of 24 each jurisdiction who shall jointly review the proposal.


1 Where the designated planning agencies do not unanimously 2 agree, the proposed expenditure shall be deemed disapproved; 3 where the designated planning agencies do not act to approve 4 or disapprove the proposed expenditure within one hundred 5 and eighty days of submission of request for approval the 6 proposed expenditure shall be deemed approved; any deemed 7 approval or disapproval shall be subject to review and 8 reversal by the Secretary following a request submitted to 9 him within sixty days of the deemed approval or disapproval, 10 for a review and reconsideration based upon the record. With 11 respect to any organization which is reimbursed on a per 12 capita, fixed fee, or negotiated rate basis, in determining the 13 Federal payments to be made under titles V, XVIII, and 14 XIX, the Secretary shall exclude an amount reasonably 15 equivalent to the amount which would otherwise be excluded 16 under this subsection if payment were made on other than a 17 per capita, fixed fee, or negotiated rate basis.


"(2) If the Secretary, after submitting the matters in19 volved to the advisory council, determines that an exclusion 20 of expenses related to any capital expenditure would dis21 courage the operation or expansion of any health care facility or health maintenance organization which has demonstrated 23 to his satisfaction proof of its capability to provide compre24 hensive health care services (including institutional services) 25 effectively and economically, or would be inconsistent with


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