(a) The HMO may not seek inclusion in employees' health benefits plans under §§ 417.150 through 417.159 of this subpart.

(b) With respect to employers including the HMO in the health benefits plan offered their employees, the HMO is not a qualified HMO for purposes of §§ 417.150 through 417.159 subpart. Following the effective date of revocation, the inclusion of the health maintenance organization in an employees' health benefits plan will be disregarded for purposes of determining whether, and to what extent, the employer is subject to §§ 417.150 through 417.159 of this subpart, and will not constitute compliance with the requirement of §§ 417.150 through 417.159 of this subpart.

(c) The HMO is not a qualified HMO for purposes of the financial assistance programs under §§ 417.120 through 417.126 and 417.130 through 417.137 of this subpart until it is, in accordance with § 417.165, again qualified under §§ 417.140 through 417.144 of this subpart.

(Sec. 215 of the Public Health Service Act, as amended, 58 Stat. 690, 67 Stat. 631 (42 U.S.C. 216); secs. 1301-1318, as amended, Pub. L. 97-35, 95 Stat. 572-578 (42 U.S.C. 300e-300e-17)

[43 FR 32255, July 25, 1978, as amended at 50 FR 6176, Feb. 14, 1985. Redesignated at 52 FR 36746, Sept. 30, 1987]

8417.165 Reapplication for qualification.

An entity whose qualification as an HMO has been revoked by the Secretary for purposes of section 1310 of the Public Health Service Act may, after completing the corrective action required under § 417.163(c)(2), reapply for a determination of qualification in accordance with the procedures specified in §§ 417.140 through 417.144 of this subpart.

8417.166 Waiver of assurances.

The Secretary may release an entity from compliance with any assurances given under this subpart for good cause shown, consistant with the purpose of title XIII of the Public Health Service Act, except that upon the waiver of any assurance regarding the HMO's compliance with section 1301 of the Public Health Service Act, the

cated in several buildings, each building in which the HMO provides diagnostic, treatment, and prevention services to ambulatory patients is a facility.

Construction means (a) the construction of new facilities; (b) the alteration, expansion, remodeling, replacement, and renovation of existing facilities; (c) off-site improvements in connection with an activity described in clause (a) or (b); and (d) the acquisition of land in connection with an activity described in clause (a), (b), or (c).

Equipment means those items which are necessary for the functioning of a facility acquired or constructed with a loan or loan guarantee awarded under §§ 417.170 through 417.180, but does not include items of current operating expense such as food, fuel, pharmaceuticals, dressings, paper, printed forms and housekeeping supplies.

Net assignable square footage means the sum of all useable floor space measured on a floor plan to the inside faces of all enclosing walls or to lines denoting functional separations. Net assignable square footage includes all rooms to which a specific use can be assigned and excludes corridors, lobbies, toilets, mechanical shafts, ducts, electrical shafts or closets, elevators or elevators shafts, columns, exterior walls or partitions, service rooms, custodial supplies and general storage

areas.

Title when used with reference to a facility which is proposed to be acquired or constructed with assistance under §§ 417.170 through 417.180, means a fee simple or any other estate or interest (including a leasehold) which the Secretary finds sufficient to assure, for a period of not less than the repayment period of the loan to be made or guaranteed by the Secretary, undisturbed use and possession for the purposes of acquisition, or construction, and operation of the project.

8 417.172 What organizations are eligible for loans and loan guarantees? (a) Any public health maintenance organization which is qualified under §§ 417.140 through 417.144 of this subpart is eligible to apply for a loan under §§ 417.170 through 417.180.

(b) Any private health maintenance organization which is qualified under §§ 417.140 through 417.144 of this subpart is eligible to apply for a loan or a loan guarantee under 88 417.170 through 417.180.

[45 FR 24353, Apr. 9, 1980, as amended at 47 FR 19341, May 5, 1982. Redesignated at 52 FR 36746, Sept. 30, 1987]

§ 417.173 What are the requirements for an application?

(a) An applicant shall submit an application for a loan or loan guarantee to the Secretary at the time and in the form and manner that the Secretary prescribes.

(b) An application must contain an appraisal of the property to be acquired with a loan made or guaranteed under §§ 417.170 through 417.180. The appraisal must be prepared by an independent appraiser approved in advance by the Secretary.

(c)(1) An application must identify any party in interest (as defined in § 417.100 of this subpart) with whom a transaction is proposed and for which transaction assistance is being requested under §§ 417.170 through 417.180. The application must also identify any individual who would become a party in interest as a consequence of a proposed transaction.

(2) Where a party in interest is so identified, the application must include:

(i) An explanation of the involvement of the party in interest;

(ii) A combined financial statement for the HMO and the party in interest. This statement must be prepared by an independent auditor in accordance with generally accepted accounting principles with appropriate opinions and notes, and in the form and manner prescribed by the Secretary;

(iii) A second appraisal of property to be acquired from the party in interest. This second appraisal is in addition to that required under paragraph (b) of this section and must be prepared by another independent appraiser approved in advance by the Secretary;

(iv) Evidence that the cost of each proposed transaction with a party in interest is consistent with prudent

management and the fiscal soundness requirements in § 417.107(a)(1); and

(v) Evidence that the transaction will not adversely affect the management decisions or the fiscal soundness of the HMO. For example, a description of procedures which will prevent the party in interest from controlling decisions by the HMO will respect to the facility to be constructed or acquired under §§ 417.170 through

417.180 would meet this requirement.

(3) The Secretary will disapprove an application where he or she determines that the participation of a party in interest is likely to affect adversely the administration and fiscal soundness of the HMO or its delivery of health services.

(d) An application must include ar assurance satisfactory to the Secretary that the HMO will have title (as defined in § 417.171) to the facility.

(e) An application must include an assurance satisfactory to the Secretary that the HMO will continue to comply with the restrictions on capacity set out in § 417.176(b) for the five years following completion of acquisition or construction.

(f) An application must include line drawings of the proposed facility demonstrating that the allocation of square footage complies with the requirements of § 417.176.

(g) The application must be executed by an individual authorized to act for the applicant and to assume on behalf of the applicant the obligations imposed by the statute, the regulations of this subpart, and the terms of the loan documents and the loan guarantee, if any.

[45 FR 24353, Apr. 9, 1990. Redesignated at 52 FR 36746, Sept. 30, 1987]

EFFECTIVE DATE NOTE: At 47 FR 19342, May 5, 1982, § 110.1004, was revised pending OMB approval. A document will be published in the Federal Register announcing the effective date of this section if approved. At 52 FR 36746, Sept. 30, 1987, § 110.1004 was redesignated as § 417.173 with the May 5, 1982 revision still pending for OMB approval. Therefore, § 417.173 set forth above remains in effect until further notice. For the convenience of the user, the pending § 417.1004 is set forth as follows:

§ 417.173 What requirements must an applicant meet?

(a) An applicant shall provide an appraisal of the property to be acquired with a loan made or guaranteed under §§ 417.170 through 417.180. The appraisal must be prepared by an independent appraiser approved in advance by the Secretary.

(b)(1) An applicant shall identify any party in interest (as defined in § 417.100 of this subpart) with whom a transaction is proposed and for which transaction assistance is being requested under §§ 417.170 through 417.180. The applicant must also identify any individual who would become a party in interest as a consequence of a proposed transaction.

(2) Where a party in interest is so identified, the applicant shall provide:

(i) An explanation of the involvement of the party in interest;

(ii) A combined financial statement for the HMO and the party in interest. This statement must be examined by an independent auditor in accordance with generally accepted accounting principles with appropriate opinions and notes;

(iii) Evidence that the proposed transaction with a party in interest will be consistent with the requirements of §§ 417.100 through 417.109 of this subpart (for example, the fiscal soundness requirements in § 417.107(a)(1)).

(c) The applicant shall provide an assurance satisfactory to the Secretary that the HMO will have title (as defined in § 417.171) to the facility.

(d) The applicant shall include line drawings of the proposed facility demonstrating that the allocation of square footage complies with the requirements of § 417.176.

(e) The applicant shall provide assurances satisfactory to the Secretary that:

(1) At the time the application is made the HMO is fiscally sound;

(2) If the application is for a loan, the HMO is unable to secure a loan, at the rate of interest prevailing in the area in which the organization is located, from non-Federal lenders for the project with respect to which the application is submitted, or, if the application is for a loan guarantee, the HMO would be unable to secure a loan from such lenders for the project without the loan guarantee; and

(3) During the period of the loan or loan guarantee, the HMO will remain fiscally sound.

[47 FR 19342, May 5, 1982. Redesignated at 52 FR 36746, Sept. 30, 1987]

§ 417.174 What information must be submitted by an applicant which has received a commitment for a loan to be made or guaranteed under 88 417.170 through 417.180 before the closing of the loan?

(a) Design, bid, and contract documents for each project must be prepared in accordance with all of Part 2.1 (except sections 5.4, 8.8, 11.2, 11.3, 11.4, Chapter 12, sections 13.2, 13.3 and Exhibits 9 and 10) of DHHS Technical Handbook for Facilities Engineering and Construction Manual, Federally Assisted Construction, entitled "2.1 Information for Project Applicants and State Agencies on Design and Construction Related Activities." With these exceptions, Part 2.1 is incorporated into §§ 417.170 through 417.180 by reference. This part of the Handbook will be provided to all applicants and is available at cost to any interested person upon request to the Office of Health Maintenance Organizations in any of the Department's Regional Offices. The addresses of Regional Offices are listed in 45 CFR 5.31(b). This part of the Handbook is also available for inspection without charge at these offices. If this handbook is amended, a notice of the amendments will be published in the FEDERAL REGISTER and a copy of the amendments will be on file at the Office of the Federal Register. The design, bid, and contract documents must be submitted to the Secretary for approval before the closing of a loan to be made or guaranteed under §§ 417.170 through 417.180.

(b) The plans and specifications for the design and construction of, and equipment for, a facility submitted to the Secretary must conform with:

(1) State and local codes, laws, and ordinances, and

(2) Chapter 14 of DHHS Publication No. (HRA) 79-14500, Minimum Requirements of Construction and Equipment for Hospitals and Medical Facilities, "Small Primary Health Care Centers," except for the last sentence of paragraph 14.1A, the parenthetical phrase “(usually 4)” in paragraph 14.1B(1) and paragraph 14.1B(3) in its entirety. With these three exceptions, Chapter 14 of this document is incorporated into §§ 417.170 through

417.180 by reference. This publication will be provided to all applicants and is available for the cost of reproduction to any interested person upon request to the Office of Health Maintenance Organizations in any of the Department's Regional Offices. The addresses of Regional Offices are listed in 45 CFR 5.31(b). This publication is also available for inspection without charge at these offices. If this publication is amended, a notice of the amendments will be published in the FEDERAL REGISTER and a copy of the amendments will be on file at the Office of the Federal Register.

§ 417.175 What are the limitations on loans and guaranteed Icans?

(a) The aggregate amount of principal of loans made or guaranteed, or both, for an ambulatory health care facility under §§ 417.170 through

417.180 may not exceed the amount specified by section 1305A(c)(1) of the Public Health Service Act.

(b) The aggregate amount of loans made or guaranteed under §§ 417.170 through 417.180 for a project may not exceed 90 percent of the eligible costs of the project unless the Secretary, for good cause, approves a greater percentage.

(1) In determining whether there is good cause for approving a greater percentage, the Secretary will consid

er:

(i) The availability of other sources of funds to the applicant;

(ii) The effect on the security for the loan of other borrowing by the applicant to pay for the remainder of the project costs; and

(iii) Any other factors the Secretary determines are consistent with the purposes of the Public Health Service Act.

(2) The applicant may not use any funds provided under sections in this subpart other than §§ 417.170 through 417.180 to pay for the applicant's portion of eligible costs for a project assisted under §§ 417.170 through 417.180.

[45 FR 24353, Apr. 9, 1980, as amended at 47 FR 19342, May 5, 1982. Redesignated at 52 FR 36746, Sept. 30, 1987]

§ 417.176 What requirements

apply to projects assisted under 88 417.170 through 417.180?

Projects assisted or to be assisted under §§ 417.170 through 417.180 must comply with the following requirements, unless a requirement is waived or modified by the Secretary for good

cause.

(a) Net assignable square footage limitations applicable to a facility. The following limitations apply to an assisted facility, including any portion of the facility acquired or constructed (or to be acquired or constructed prior to the termination of the 5-year period following acquisition or construction) without Federal assistance under §§ 417.170 through 417.180:

(1) Not more than 25 percent of the net assignable square footage (as defined in § 417.171) may be devoted to administrative functions of the HMO. The remainder must be devoted to clinical use. For the purpose of this paragraph, (i) administrative functions include general administration, marketing, enrollment and claims processing, and (ii) clinical uses of space include medical records storage, clinical administration, and space for the provision of basic health services, health education, and pharmacy, optical, dental, laboratory, X-ray, and other health services.

(2) At least 50 percent of the net assignable square footage must be for the provision of basic health services (as defined in 88 417.100 through 417.109 of this subpart).

(b) Net assignable square footage limitations applicable to an HMO. The following limitations apply to the net assignable square footage of all the facilities to be available to the HMO during the five year period following the completion of the acquisition or construction to be assisted under §§ 417.170 through 417.180. This includes any net assignable square footage available or to be available to the HMO for the purposes specified below, whether or not acquired or constructed with assistance under §§ 417.170 through 417.180:

(1) The net assignable square footage available to the HMO may not exceed that needed to serve 110 percent of the projected number of HMO

§§ 417.170 through 417.180 is used to acquire or construct facilities for the provision of optical, pharmacy or dental services, the total net assignable square footage available to the HMO for the provision of each of these assisted services may not exceed that needed to serve 110 percent of the projected number of HMO members at the end of the five year period after the acquisition or construction is to be completed. Only the HMO members projected to be enrolled to receive these services on a prepaid basis may be counted for purposes of this limitation. The applicant shall calculate the amount of net assignable square footage which is needed in accordance with instructions provided by the Secretary.

(3) Where assistance under §§ 417.170 through 417.180 is used to acquire or construct facilities for the provision of laboratory or X-ray services, the total net assignable square footage available to the HMO for the provision of each of these assisted services may not exceed that needed to serve 110 percent of the projected number of HMO members at the end of the 5 year period after the acquisition or construction is to be completed. The applicant shall calculate the amount of net assignable square footage which is needed in accordance with instructions provided by the Secretary.

[45 FR 24353, Apr. 9, 1980, as amended at 47 FR 19342, May 5, 1982. Redesignated at 52 FR 36746, Sept. 30, 1987]

§ 417.177 What is an eligible cost?

(a) The Secretary will consider only eligible costs in determining the amount of a loan to be made or guaranteed under §§ 417.170 through 417.180. Eligible costs are those which are reasonable and necessary for the acquisition or construction of, or the purchase of equipment for, a facility